abc holdings limited

ABC HOLDINGS LIMITED

Results Presentation

for the year ended 31 December 2008

2

Economic Environment

Financial Performance

Overview

Income statement review

Balance sheet review

Outlook

Challenges & outlook

Capitalisation

Dividend

AGENDA

3

Country

GDP

(USDm)

2008

GDP Growth

rate

2008

Banking Deposits (USDm)

2008

Banking Credit

(USDm)

2008

Banking Assets

(USDm)

2008

Population

2008 est (m)

No. of

banks

Botswana 11,728 3.3% 4,991 2,251 6,449 1.8 12

Mozambique 10,100 6.5% 2,965 1,631 4,235 21.2 12

Tanzania 21,346 7.5% 4,680 3,201 6,325 40.1 36

Zambia 13,484 5.8% 2,354 1,685 3,363 12.3 14

Zimbabwe* 2,000 -10.5% 377 50 945 12.4 28

ECONOMIC ENVIRONMENT & INDUSTRY ATTRACTIVENESS

Sources: - IMF – World economic outlook database: October 08 -Central Banks statistics

*Estimates

4

Due to the negative impact of the global economy, GDP growth slowed down in all Southern African economies

Zimbabwe registered negative GDP growth for the tenth consecutive year

Commodity prices weakened significantly in sympathy with the global economic downturn

Banking assets however continued to grow, albeit at a slower pace

Botswana boasts the highest GDP per Capita and highest banking assets per Capita but other countries are making strides

ECONOMIC ENVIRONMENT

5

Average inflation was in double digit level ( except in Zimbabwe, where it was well in excess of this)

Generally all currencies weakened particularly in the second half of 2008

Zimbabwe in a hyperinflationary environment; Last official inflation at 231m% in July 2008

ECONOMIC ENVIRONMENT

6

Country

Inflation Rate

Dec-2008

Avg. TB Yield Rate*

Dec-2008

Avg or Prime

Lending Rates 2008

Avg. Prime Lending

Rates 2007

Botswana 12.6% 12.58% 16.6% 16.2%

Mozambique 10.4% 13.72% 20.1% 20.1%

Tanzania 10.3% 8.11% 13.6% 14.4%

Zambia 12.4% 12.20% 25.2% 25.0%

Zimbabwe 231 m%*** 340%** 3,700% 559.0%

* 90 day** 1 year***July 2008

ECONOMIC ENVIRONMENT– Inflation & Interest Rates

7

ZWD Old Mutual implied rateZWD revalued in 2008

To 1 BWP 31 Dec-08 31 Dec-07

United States Dollar 0.13 0.17

Mozambique Metical

3.38 4.30

South African Rand 1.25 1.13

Tanzania Shilling 174 191

Zambian Kwacha 636 640

Zimbabwe Dollar 88 Quad 0.0001 Quad

ECONOMIC ENVIRONMENT– Exchange Rates

8

•ZWD Old Mutual implied rate•ZWD revalued in 2008

To 1 US dollar 31 Dec-08 31 Dec-07

Botswana Pula 7.54 6.02

Mozambique Metical

25.50 25.67

South African Rand

9.40 6.81

Tanzania Shilling 1 315 1 146

Zambian Kwacha 4 795 3 850

Zimbabwe Dollar 665 Quad* 0.001 Quad

ECONOMIC ENVIRONMENT– Exchange Rates

9

International Equity Market Cap, US$ Trillions

2007 Mkt Cap

2008 Mkt CapNYSE

Nasdaq

Tokyo SE

London Shanghai

9.2

15.6

3.1

4.3

2.4

4

1.9

3.9 3.6

1.4

10

International Banks Market cap

Source: Bloomberg, March 9th 2009

255

215

165

120108

9176

49

6

59 60

1025

7

49

18

0

50

100

150

200

250

Citigroup HSBC JP Morgan RBS BNPParibas

Barclays DeutscheBank

MorganStanley

US

$ B

nMkt Cap as of Q2 2007 Mkt Cap as of 9-Mar-09

11

Stock Market Cap in Some African Equities (2007 vs 2008)

-42.1

-35.8

-35

-32.3

-19.3

-14.9

14.7

33.5

36.4

-50 -40 -30 -20 -10 0 10 20 30 40

JSE Ltd.

Nigerian SE

Botswana SE

Zimbabwe SE

Nairobi SE

Lusaka SE

Ghana SE

Malawi SE

Dar-Es Salam SE

%

12

International Commodity Prices

  Gold Platinum Palladium Copper Nickel Oil Aluminum

  US$/oz US$/oz US$/oz US$/t US$/t

US$/barre

l US$/t

Dec-07 805 1,488 351 6,638 26,143 91 2,379

Mar-08 964 2,046 489 8,398 30,997 106 2,988

Jun-08 889 2,038 450 8,260 22,531 134 2,958

Sep-08 833 1,223 248 6,990 17,791 104 2,525

Dec-08 816 835 175 3,066 9,678 43 1,582

Jan-09 859 950 189 3,164 11,142 45 1,420

Feb-09 943 1,036 206 3,314 10,406 39 1,330

13

International Commodity Prices

964

2049

450

147

816

835

175

43

943

1036

206

39

0 500 1000 1500 2000 2500

Gold

Platinum

Palladium

Oil

US$

Peak price in 2008 Dec 08 Price

Feb 09 Price

14

Overview

Income Statement Review

Balance Sheet Review

FINANCIAL PERFORMANCE

15

Attributable profit at BWP86m is down from BWP 124m in prior year

Net asset value up by 39% from BWP 314m to BWP B438m

Net interest income for financial operations up by 40% from BWP 127 m to BWP 178 m

Total income up to BWP 401m from BWP 339 million

Return on equity of 23% compared to 42% in 2007

FINANCIAL PERFORMANCE - Overview

16

Balance sheet growth of 38% to BWP 4 billion

Loans and advances up by 80% to BWP 2.2 billion, reflecting impact of Tier II capital injection

Deposits increased by 40% to BWP 2.8 billion

FINANCIAL PERFORMANCE - Overview

17

BWP Dec 08 % change

Dec 07

Attributable profits (‘000s) 86,029 -30% 123,523

Basic EPS (Thebe) 60.4 -37 % 95.3

Dividend per Share ( Thebe) 8.00 -43 % 14.00

Cost to income ratio 59% 12 % 47%

Net asset value (‘000s) 437,777 40 % 313,813

NAV per share 3.07 30 % 2.37

Total Assets (‘000s) 3,967,909 35 % 2,930,121

FINANCIAL PERFORMANCE – Salient features

18

Attributable Profit (BWPm) and R O E (%)

124

86

51

46

8620%

30%

37%

23%

42%

-

20

40

60

80

100

120

140

2004 2005 2006 2007 2008

0%5%10%

15%20%25%30%

35%40%45%

Attributable profit R O E

FINANCIAL PERFORMANCE – Five year earnings overview

19

Net Asset Value (BWPm) and N A V per share (Pula)

438

184 186

272314

3.07

2.051.401.62

2.37

-

100

200

300

400

500

2004 2005 2006 2007 2008

-

1.00

2.00

3.00

4.00

Net asset value Net asset value per share

FINANCIAL PERFORMANCE – Five year NAV profile

20

BWP’000s Dec 08%

contributionDec 07

% contribution

% change

ABC Botswana 13,193 22% 7,769 14% 70%

ABC Mozambique 16,644 27% 13,301 23% 25%

ABC Tanzania* 13,171 21% 11,804 21% 12%

ABC Zambia (12,168) -20% (3,584) -6% (240%)

ABC Zimbabwe 25,490 42% 27,861 49% (9%)

Microfin Zambia 4,945 8% 210 0% 2257%

Financial institutions 61,275 100% 57,361 100% 7%

Other Operations 24,754 66,162 (63%)

TOTAL 86,029 123,523 (30%)*Adjusted for minority interest & includes TDFL

FINANCIAL PERFORMANCE: Attributable Profit per Subsidiary

21

All Banking operations profitable, except ABC Zambia

ABC Zambia’s poor performance due to a combination of high impairments and exchange losses in fourth quarter

Zimbabwe performance adversely affected by reduced investment income as economy reached meltdown point

Strong growth in total income in Botswana, Mozambique and Tanzania

Massive depreciation of the Zimbabwe dollar continued

Zimbabwe contribution to total income down to 15% from 35%

Quality of the book has marginally improved

INCOME STATEMENT REVIEW

22

NII increased by 72% to BWP 184m

NII contribution to total income increased from 32% to 42%

NII now covers 78% of total costs, up from 67% in 2007

All banking operations, with the exception of Zimbabwe, showed significant growth in NII

INCOME STATEMENT REVIEW

23

Non-interest income declined by 7% to BWP 216m.

Investment income in Zimbabwe declined 78% from BWP 116m to BWP 26m

Impairment charge of BWP 44m up 35% compared to 2007. Botswana and Zambia most affected.

Operating expenditure increased by 48% to BWP 237m

Increased costs are largely due to additional staff for the new retail business and strengthening of credit department.

INCOME STATEMENT REVIEW

24

BWP’000sDec 08

%

contribution Dec 07

%

contribution

%

change

ABC Botswana 82,934 21% 50,67615% 64%

ABC Mozambique 62,151 16% 41,87512% 48%

ABC Tanzania** 57,928 14% 36,43011% 59%

ABC Zambia 36,612 9% 30,2759% 21%

Microfin Zambia 49,027 12% 28,6478% 71%

ABC Zimbabwe 35,858 9% 39,402 12% (9%)

Total Fin OPS 324,510 81% 227,30567% 43%

Other Operations 76,137 19% 111,72433% (32%)

TOTAL GROUP 400,647 100% 339,029 100% 18%

*Before impairments**Including TDFL

INCOME STATEMENT REVIEW – Total income*

25

BWP’000s Dec 08%

contributionDec 07

% contribution

%

change

ABC Botswana 41,389 22% 29,48327% 40%

ABC Mozambique 34,295 19% 23,26922% 47%

ABC Tanzania 29,09016% 13,69913% 112%

ABC Zambia 22,782 12% 16,11615% 41%

Microfin Zambia 50,778 28% 28,86827% 76%

ABC Zimbabwe 67 0% 15,429 14% (100%)

Total Fin OPS 178,40197% 126,864118% 41%

Other Operations 6,0113% (19,576)(18%) 131%

TOTAL GROUP 184,412 100% 107,288 100% 72%

*Including TDFL

INCOME STATEMENT REVIEW – Net interest income

26

Ave. Yield on IEA

Ave. CostSpread

2008

Spread

2007

ABC Botswana 13.0% (10.0)% 3.0% 1.3%

ABC Mozambique 12.3% (5.8)% 6.5% 5.4%

ABC Tanzania 10.4% (6.2)% 4.2% 3.7%

ABC Zambia 15.8% (8.9)% 6.9% 4.9%

ABC Zimbabwe 1.0% 0% 1.0% 20.5%

Microfin Zambia 66.7% (22.1)% 44.6% 43.9%

INCOME STATEMENT REVIEW – Net interest income

Spread has increased across the board

27

BWP’000s Dec 08%

contributionDec 07

% contribution

%

change

ABC Botswana 41,545 19% 21,1939% 96%

ABC Mozambique 27,856 13% 18,6068% 50%

ABC Tanzania* 28,838 13% 23,62510% 22%

ABC Zambia 13,830 6% 14,1606% -2%

Microfin Zambia (1,752) 1% (222)-% -689%

ABC Zimbabwe 35,791 17% 23,97310% 49%

Total Fin OPS 146,108 68% 101,33544% 44%

ABCH and other 70,127 32% 130,40656% -46%

TOTAL GROUP 216,235 100% 231,741 100% -7%

*Including TDFL

INCOME STATEMENT REVIEW – Other income

28

BWP’000s Dec 08 Dec 07%

change

Gains investment securities 25,931 101,438 (74%)

Dividends received 3,342 3,113 7%

Fee & commission income 69,827 65,322 7%

Fx trading income & currency revaluation 29,448 9,658 205%

Fair value gains on investment properties

45,872 26,408 74%

Fair value adjustment: derivative instruments

38,585 (10,073) 483%

Rental and other income 3,230 35,875 91%

Total 216,235 231,741 (7%)

INCOME STATEMENT REVIEW – Other income

29

Excluding impairmentsIncrease in NII contribution due to increase in lending bookNII income covers 78% of costs, up from 67% in 2007

43%

47%

42%

32%

46%

57%

53%

58%

68%

54%

2004

2005

2006

2007

2008

NII

Other income

INCOME STATEMENT REVIEW – Total income composition

30

Cost to income ratio

75%

66%

49% 47%

59%

2004 2005 2006 2007 2008

Due to retail banking roll outCost containment strategy

• Imperative to strengthen cost containment measures

INCOME STATEMENT REVIEW – Operating expenditure

31

Cost to income ratio up from 47% to 59%

Head count increased from 395 to 484 due to new retail banking and credit department staff

Employee costs accounted for 50% of total costs

Operating expenditure up 48% to BWP 237m

Marketing costs set to increase in support of growth targets and retail roll out

INCOME STATEMENT REVIEW – Operating expenditure

32

Total employee costs up 31% from BWP91m to BWP119 mEmployee costs 50% of total costsStaff compliment of 484 (2007: 395)Staff compliment up by 89 people mainly due to retail & credit

43

67

4154

38

50

109

130

153

161

1122

Botsw ana Mozambique Tanzania Zambia Zimbabw e ABCH

2007 2008

Head count per Operation

33

Balance sheet growth of 38% to BWP 4 billion

Loans and advances up by 80% to BWP 2.2 billion, reflecting impact of Tier II capital injection

Deposits increased by 40% to BWP 2.8 billion

Net asset value up by 39% from BWP 314m to BWP B438m

Zimbabwe FCTR up BWP 95m in 2008

BALANCE SHEET REVIEW

34

Total Assets (BWPm)

1,759,327 1,903,284

2,447,135

2,930,121

3,967,909

2004 2005 2006 2007 2008

38% balance sheet growth compared to December 07 sustained balance sheet growth since 2004Compound annual growth rate of 23%

BALANCE SHEET REVIEW - Total Assets

35

40% growth in Deposits Botswana continues to lead with deposits of BWP 1.3 billion Growth of 118% & 63% in Mozambique & Tanzania respectively; albeit from a low

base

Botswana51%

Mozambique21%

Tanzania18%

Zambia7%

Microfin3%

Zimbabwe1%

BALANCE SHEET REVIEW - Geographic split of deposits

36

80% growth in Loans. Growth in excess of 48% in all countries except Zimbabwe Growth shows impact of capital injection in late 2007

Botswana33%

Mozambique17%

Tanzania28%

Zambia17%

Microfin4%

Zimbabwe1%

BALANCE SHEET REVIEW - Geographical Split of Loans

37

BWP’000Capital*

Dec-08

FCTR

Dec-08

Capital*

Dec-07

FCTR

Dec-07

ABC Botswana 114,012 - 99,856 -

ABC Mozambique 157,774 13,951 104,712 (7,789)

ABC Tanzania** 143,015 117 96,601 7,231

ABC Zambia 81,952 5,021 83,725 3,316

Microfin Zambia 20,868 2,110 15,275 2,686

ABC Zimbabwe 143,484 (500,857) 110,035 (405,766)

*Including Tier II**Including TDFL

Zimbabwe FCTR up BWP 95m since Dec 07

BALANCE SHEET REVIEW - Capital

38

Dec 08 Dec 07

Botswana 16% 18%

Mozambique 28% 44%

Tanzania 15% 28%

Zambia 24% 29%

ABC Zimbabwe 31% 26%

Healthy capital adequacy ratios

BALANCE SHEET REVIEW - Capital Adequacy

39

Rights issue postponed as a result of the turmoil in the global financial markets

IFC subscription of 13.9 million shares, bringing shareholding to 10.7% in January 2008

IFC convertible loan still to be drawn down as Group is in the process of clearing outstanding conditions precedent. Draw down imminent.

All conditions precedent on the CVCI convertible loan fulfilled. Drawdown in the coming weeks

CAPITALISATION

40

Retail Banking head office now appropriately staffed

First few branches to be opened in July 2009

Funds raised from IFC and CVCI to be used for capitalisation of this business

Largely driven by state of the art technology

RETAIL BANKING

41

Need to strengthen operations in the face of the uncertainty in global markets

Directors propose that a final divided be passed

DIVIDEND

42

Environment expected to be challenging during most of 2009 and 2010 due to a deterioration in the global markets

Major thrust will be consolidation and ensuring modest growth notwithstanding high costs as a result of retail banking

Proactive management of the loan book

Support clients in the face of adversity

Introducing fresh thinking and smart banking

OUTLOOK & CHALLENGES

43

Changing the business model –People, processes, systems and culture

Branch profitability still estimated to be between 12 to 24 months

Deposit mobilization remains a key focus area for the group, particularly in Zambia

OUTLOOK & CHALLENGES

THANK YOU