BancABC Interim Financial Results 2010 - PowerPoint Presentation

BancABC Interim Financial Results 2010 25 August 2010

HIGHLIGHTS

Financial Highlights Total income up 29% to BWP251 mill (H109: BWP194 mill) Net operating income up 80% to BWP45 mill (H109: BWP25 mill) Attributable profit of BWP28 mill (H109: BWP36 mill)Share of associate lossTax charge in H110 vs. tax credit in H109Impairments down 59% to BWP17 mill (H109: BWP41 mill)Cost : income down from 82% at year end to 77% (H109: 72%)Deposits up 41% and 23% compared to H109 and H209Total assets increased to BWP5.1 billion, 25% and 16% up from H109 and H209Average return on equity positive at 14% (H109: 16%) 3

Operational Highlights Six Retail Banking branches opened in Dar es Salaam, Gaborone, Bulawayo, Harare and Chimoio Looking at opening an additional eight new branches before year endZimbabwe head count right sizedBancABC Zambia now profitable and Microfin merger yielding synergistic benefitsImproved credit risk management reduces impairments4

ECONOMIC OVERVIEW

Economic Overview IMF projects global GDP growth to reach 4.2% in 2010 (09: -0.8%): Growth driven primarily by Asia Western economies remain sluggish Economic and business environment in SADC region has improved, growth mainly driven by recovery in commodity pricesDown-side risks to global economic recovery still exist due to:Sovereign debt crisis in Europe and Middle-EastAusterity measures reducing demand in developed economiesAsset price bubbles in some emerging markets6

Economic Growth Trends 7 Source: IMF

2010 Monthly Inflation Trends 8 Relatively stable inflation other than in Mozambique where rate worsened rapidly from 5% at start of the year to 14.5% by mid-year. Source: Central Banks, Ministries of Finance and Central Statistics Offices

Interest Rate Profiles 9 Botswana Source: Respective Central Banks Mozambique Tanzania Zambia

Exchange Rate Developments 10 Local currencies in our markets have generally depreciated against the USD and BWP during the period Mozambican Meticais had the worst depreciation of 25% against the USD and 19% against the BWP This had some adverse impact on reported results for the subsidiary Against the USD, the Zambian Kwacha depreciated 11%, Tanzanian Shilling depreciated by 5% and the Botswana Pula by 6% Against the BWP, the Tanzanian Shilling marginally appreciated by 1% whilst the Zambian Kwacha depreciated by 5%

Banking Sector Deposits and Loans 11 Banking Sector Total Deposits ( US$m ) Banking Sector Loans to the Private Sector ( US$m ) Bots Moz Tanz Zam Zim Dec-07 5,214 2,460 4,211 2,435 580 Dec-08 5,046 2,835 4,702 2,354 313 Dec-09 5,574 3,418 5,476 2,680 1,381 May-10 5,464 3,024 5,537 2,745 1,832 Bots Moz Tanz Zam Zim Dec-07 2,236 1,306 2,594 1,351 99 Dec-08 2,281 1,795 3,559 1,635 140 Dec-09 2,963 2,597 3,763 1,586 636 May-10 2,908 2,363 3,832 1,524 1,012 Source: Respective Central Banks The markets continue to be attractive and have generally been growing in the recent past Opportunities exist to enter new market segments in each country The Tanzania and Botswana markets continued being the largest Zimbabwe has rapidly grown in the 2009-2010 period

FINANCIAL REVIEW

Income Statement 13 BWP’000s H1-2010% ∆ H1-2009FY-2009 Net interest income 146,815 87% 78,684 178,394 Impairment of loans & advances -16,996 59% -40,969 -51,218 Net interest income after impairments 129,819 244% 37,715 127 176 Non interest income 121,622 -22% 156,542 265,017 Total income 251,441 29% 194,257 392,193 Operating expenditure -205,967 -22% -169,211 -365,694 Net income from operations 45,474 82% 25,046 26,499 Share of (loss)/profits of associates -11,479 -1157% -913 16,164 Profit before tax 33,995 41% 24,133 42,663 Tax -5,269 -141% 12,757 15,768 Profit for the year 28,726 -22% 36,890 58,431 Attributable to: - Ordinary shareholders 28,076 -23% 36,494 58,117 - Minorities 650 64% 396 314 EPS (thebe) 19.5 -23% 25.4 40.4 Performance primarily driven by growth in net interest income and reduction in impairments Opex increased mainly because of Zimbabwe post dollarisation Zimbabwe costs up 138% and accounts for 17% of the 22% YoY increase in expenses

Income Statement (USD) 14 USD’ 000’s H1-2010% ∆ H1-2009FY-2009 Net interest income 21,241 98% 10,703 25,176 Impairment of loans & advances (2,459) 56% (5,573) (7,228) Net interest income after impairments 18,782 266% 5,130 17,948 Non interest income 17,597 -17% 21,294 37,402 Total income 36,379 38% 26,424 55,350 Operating expenditure (29,800) -29% (23,018) (51,610) Net income from operations 6,579 93% 3,406 3,740 Share of (loss)/profits of associates (1,661) -1240% (124) 2,281 Profit before tax 4,918 50% 3,282 6,021 Tax (762) -144% 1,735 2,225 Profit for the year 4,156 -17% 5,017 8,246 Attributable to: - Ordinary shareholders 4,062 -18% 4,964 8,202 - Minorities 94 77% 53 44 EPS (cents) 2.8 -20% 3.5 5.7 Performance primarily driven by growth in net interest income and reduction in impairments Opex increased mainly because of Zimbabwe post dollarisation Zimbabwe costs up 138% and accounts for 17% of the 22% YoY increase in expenses

Attributable Profit Trends Lower profit after tax in current year not reflective of real performance Disposal of profitable investments reduces income from associates Prior year tax credit15

Income Statement – Segmental Analysis 16 Attributable Profit BWP 000’s 2010 % Cont 2009 % Cont % change BancABC Botswana 11,147 40% 5,939 16% 88% BancABC Mozambique 13,350 47% 17,475 48% (24%) BancABC Tanzania 5,893 21% 1,678 5% 251% BancABC Zambia 7,547 27% (12,669) -35% 160% BancABC Zimbabwe 7,374 26% 2,133 6% 246% Banking operations 45,311 161% 14,556 40% 211% Head office (17,235) -61% 21,938 60% (179%) TOTAL 28,076 100% 36,494 100% (23%)

Income Statement – Segmental Analysis (USD) 17 Attributable Profit USD 000’s 2010 % Cont 2009 % Cont % change BancABC Botswana 1,613 40% 816 16% 98% BancABC Mozambique 1,932 47% 2,402 48% -20% BancABC Tanzania 853 21% 231 5% 270 BancABC Zambia 1,092 27% (1,742) -35% 163% BancABC Zimbabwe 1,067 26% 293 6% 264% Banking operations 6,556 161% 2,001 40% 228% Head office (2,494) -61% 3,016 60% -183% TOTAL 4,062 100% 5,017 100% -19%

Income Statement – Net Interest Income Positive trend in net interest income driven by increased margins, better liquidity and increased balance sheet size Recovering economic environment and improved credit risk management reduced impairments Zimbabwe contribution to net interest income growing (12% vs 3% in H1:09) 18

Income Statement – Segmental Analysis 19 Net Interest Income 2010 2009 % change BancABC Botswana 23,076 16,871 37% BancABC Mozambique 15,575 21,475 (27%) BancABC Tanzania 22,416 14,189 58% BancABC Zambia 32,512 32,377 0.4% BancABC Zimbabwe 18,015 2,630 585% Banking operations 111,594 87,542 27% Head office 35,221 -8,858 398% TOTAL 146,815 78,684 87%

Income Statement – Impairments & NPLs Trend of impairments and credit loss ratio is declining Net NPLs covered by collateral Overall NPLs have now stabilised20

Income Statement – Non-Interest Income Bulk of equity investments disposed of in 2009, hence no mark-to-market gains Overall quality of non-interest income improving – greater portion of earnings are now recurring Trading, fee and commission income increasing whilst gains on equity investments are declining21

Income Statement – Cost to Income Ratio 22 Cost to income ratio declining with retail costs stabilising and other expenses stabilising in Botswana, Mozambique and Tanzania and declining in ZambiaZimbabwe costs up post dollarisation - now normalising; hyper-inflation in the pastHead office no longer charging management fees from 2009Retail costs were 13% or BWP27 mill of total expenses (09:10% or BWP18 mill)Going forward, Retail Banking to contribute positively, decreasing C:I ratioTarget C:I ratio remains 50%

Income Statement – Staff Costs 23 Total head count in 2010 of 612 vs 561 in 2009Growth in staff numbers in last 12 months mainly attributable to retail expansionBancABC Zambia staff numbers declined from 147 in June 2009 to 125 in June 2010 following Microfin merger

Retail Banking Capex 24 Group has incurred bulk of costs on retail roll-outAll IT systems expected to be in place by year endIncremental capital expenditure to be driven by number of branches opened in subsequent periodsUSD ‘000 BWP ‘000 Branch capital expenditure 5,768 40,780 Systems roll-out 4,449 31,454 Data centre centralisation 3,478 24,589 13,695 96,823

Balance Sheet 25 BWP '000s Jun-2010Jun-2009% change Dec-2009 Cash and short term funds 717,669 615,471 17% 881,884 Financial assets held for trading 1,423,014 748,819 90% 880,740 Financial assets designated at fair value 4,133 72,033 -94% 17,905 Loans and advances 2,341,744 2,163,487 8% 1,995,325 Property and equipment 302,612 185,245 63% 278,975 Other assets 332,351 298,026 12% 362,916 TOTAL ASSETS 5,121,523 4,083,081 25% 4,417,745 Deposits 4,132,382 2,924,733 41% 3,355,118 Borrowed funds 471,634 553,789 -15% 543,822 Other liabilities 81,101 82,457 -2% 103,026 Total liabilities 4,685,117 3,560,979 32% 4,001,966 Equity attributable to ordinary shareholders 420,189 505,281 -17% 399,069 Minority interest 16,217 16,821 -4% 16,710 Total equity 436,406 522,102 -16% 415,779 TOTAL EQUITY AND LIABILITIES 5,121,523 4,083,081 25% 4,417,745

Balance Sheet (USD) 26 USD '000s Jun-2010Jun-2009% change Dec-2009 Cash and short term funds 101,514 91,028 12% 132,194 Financial assets held for trading 201,285 110,750 82% 132,023 Financial assets designated at fair value 585 10,654 -95% 2,684 Loans and advances 331,240 319,980 4% 299,099 Property and equipment 42,805 27,398 56% 41,818 Other assets 47,012 44,079 7% 54,401 TOTAL ASSETS 724,441 603,889 20% 662,219 Deposits 584,525 432,568 35% 502,932 Borrowed funds 66,713 81,905 -19% 81,519 Other liabilities 11,473 12,197 -6% 15,443 Total liabilities 662,711 526,670 26% 599,894 Equity attributable to ordinary shareholders 59,436 74,731 -20% 59,820 Minority interest 2,294 2,488 -8% 2,505 Total equity 61,730 77,219 -20% 62,325 TOTAL EQUITY AND LIABILITIES 724,441 603,889 20% 662,219

Balance Sheet – Overview 27 Deposits up 41% and 23% relative to H109 and H209 respectivelyGrowth across all the marketsBancABC Zimbabwe had highest rate of growth off a low baseLoans and advances up 8% and 17% relative to H109 and H209 respectivelyGrowth significantly from Zimbabwe as economy stabilisedCautious approach to lending was exercised in other marketsLending in Mozambique constrained by interest rate movements during the periodTotal assets of BWP5.1 billion, an increase of 25% and 16% relative to H109 and H209 respectively,

Balance Sheet – Loans and Advances 28 BancABC Botswana continued being largest contributor to Group’s loan book BancABC Zimbabwe’s contribution grew rapidly on back of economic stabilityLoan book is stable

Balance Sheet – Deposits 29 Growth in deposits across footprint Additional funds generated invested mostly in short-term financial instrumentsBancABC Botswana still the largest contributorBancABC Zimbabwe’s contribution to deposits growing

Balance Sheet – Capital Adequacy 30 Total capital (BWP m) Capital Adequacy RatioSubsidiary Jun 10 Jun 09 Min 2010 2009 BancABC Botswana 166 120 15% 22% 17% BancABC Mozambique 135 157 8% 18% 22% BancABC Tanzania 133 130 12% 14% 12% BancABC Zambia 83 59 10% 30% 14% BancABC Zimbabwe 113 98 10% 14% 31% All entities are adequately capitalised Zambia re-capitalised by injection of US $6 mill in tier II capital and conversion of US $5 mill of existing tier II into tier I capital

OPERATIONAL OVERVIEW

Botswana Economy stabilising and is now growing following recovery in diamond prices PAT improved 84% to BWP11 mill Positive performance driven by increased net interest margins, on a larger balance sheet coupled with reduction in impairment chargeNon-interest income declined by 22% to BWP17 mill following reduction in forex trading volumes and marginsOperating expenses were flat on prior year 32

Mozambique Economy experienced high volatility in interest and exchange rates during the period PAT declined by 24% to BWP13 mill on account of increased tax rate from 16% to 32% following expiry of fiscal benefits Interest rate volatility negatively affected interest margins leading to reduction in net interest income by 27% to BWP16 millHowever, forex trading income increased on the back of increased volume of transactionsOperating expenses increased by 7% to BWP29 mill in line with retail expansion33

Tanzania High exchange rate volatility experienced towards period end, but economy is stable BancABC Tanzania’s liquidity position continued to improve leading to higher net interest incomeNon-interest income also increased 59% to BWP19 mill from increased forex transactions and bond tradingImpairment charge increased 77% to BWP10 mill following classification of a few but large accountsExpenses increased 24% to BWP23 mill mostly from retail expansion related costsPAT none-the-less increased 165% to BWP7 mill34

Zambia BancABC Zambia has now stabilised and is profitable Subsidiary was re-capitalised during the period Recorded a PAT of BWP7.5 mill compared to a loss of BWP13 mill in prior yearImpairments declined to BWP3 mill from BWP22 mill in the prior period. Operating expenses declined by BWP4 mill as a result of synergies arising out of the merger of the bank and microfinance unitSubsidiary is now on strong footing to grow business going forward35

Zimbabwe Economy growing following end of hyper-inflation in Feb 2009 Subsidiary has been able to grow its income by 195% to BWP59 mill Both loans and deposits increased markedlyHowever, expenses increased 138% to BWP49 mill largely due to an increase in staff costsPAT increased 246% to BWP7 mill36

Retail Banking Update Six new branches opened up to half-year One each in Botswana, Mozambique and Tanzania Three in ZimbabweExpecting to open a further 8 branches by year-endAll IT systems to be fully operational by year-endRetail has started contributing to the Group’s income stream37

OUTLOOK

Outlook 39 Economies generally stable in operating countriesBoth Retail and Wholesale units expected to do well in the second halfHead Office costs continue to be a challenge although stabilisingImpairments now under control which bodes well for the Group going forwardWould like to start paying dividends in the near term

APPENDIX

Exchange Rate Developments 41 Movement in Exchange Rates vs. the USD (End Period) Movement in Exchange Rates vs. Botswana Pula (End Period) Bots Moz Tanz Zam RSA BWP/US$ MZN/US$ TZS/US$ ZMK/US$ ZAR/US$ Dec-07 6.01 23.66 1,147 3,845 6.80 Dec-08 7.52 25.09 1,280 4,832 9.36 Dec-09 6.67 27.51 1,326 4,641 7.40 Mar-10 6.79 27.79 1,345 4,704 7.37 Apr-10 6.80 34.16 1,358 4,743 7.34 May-10 7.05 33.73 1,390 5,002 7.61 Jun-10 7.06 34.51 1,394 5,156 7.64 Moz Tanz Zam RSA BWP/MZN BWP/TZS BWP/ZMK ZAR/BWP Dec-07 3.94 190.85 639.77 0.88 Dec-08 3.34 170.21 642.55 0.80 Dec-09 4.12 198.80 695.80 0.90 Mar-10 4.09 198.09 692.78 0.92 Apr-10 5.02 199.71 697.50 0.93 May-10 4.78 197.16 709.50 0.93 Jun-10 4.89 197.45 730.31 0.92 Source: BancABC

Banking Sector Deposits and Loans 42 Banking Sector Total Deposits (US$m) Banking Sector Loans to the Private Sector (US$m) Bots Moz Tanz Zam Zim Dec-07 5,214 2,460 4,211 2,435 580 Dec-08 5,046 2,835 4,702 2,354 313 Mar-09 4,429 2,754 4,739 2,059 400 Jun-09 5,417 2,931 4,902 2,217 710 Sep-09 5,601 3,066 5,300 2,496 970 Dec-09 5,574 3,418 5,476 2,680 1,381 Jan-10 5,462 3,485 5,582 2,663 1,406 Feb-10 5,336 3,455 5,608 2,690 1,546 Mar-10 5,461 3,469 5,608 2,783 1,689 Apr-10 5,678 3,004 5,758 2,873 1,752 May-10 5,464 3,024 5,537 2,745 1,832 Bots Moz Tanz Zam Zim Dec-07 2,236 1,306 2,594 1,351 99 Dec-08 2,281 1,795 3,559 1,635 140 Mar-09 2,283 1,856 3,498 1,535 118 Jun-09 2,636 1,987 3,585 1,544 267 Sep-09 2,861 2,229 3,675 1,668 455 Dec-09 2,963 2,597 3,763 1,586 636 Jan-10 2,937 2,639 3,732 1,555 759 Feb-10 2,947 2,627 3,759 1,533 802 Mar-10 3,076 2,682 3,810 1,541 940 Apr-10 3,115 2,299 3,929 1,534 937 May-10 2,908 2,363 3,832 1,524 1,012 Source: Respective Central Banks

Income Statement – Net Interest Margins 43

Income Statement – Opex by Operation 44