Barclays Africa is on track to meet growth commitments - Absa Group

Barclays Africa is on track to meet growth commitments, achieves strong financial momentum.

Barclays Africa Group Limited (Barclays Africa) released its interim results on 30 June. The Group is on track to deliver on the ambitious targets laid out at its annual results in February. Financial results for the six months ended 30 June 2014 reflect a 10% increase in headline earnings to R6,1 billion underpinned by strong financial momentum across the business, despite a contraction in South Africa’s GDP in the first quarter of this year.

Salient features

Diluted headline earnings per share (HEPS) increased 10% to 720,7 cents.
Headline earnings in SA increased 6% to R5,1 billion and by 34% to R1,0 billion outside of South Africa.
Barclays Africa Limited acquisition remained earnings enhancing
Pre-provision profit increased 5% to R13,4 billion.
Return on equity (RoE) improved to 16,1% from 14,3%.
Interim ordinary dividend per share (DPS) increased 14% to 400 cents.
Revenue grew 7% to R30,7 billion as net interest income rose 10% to R17,5 billion.
Net interest margin improved to 4,56% from 4,45%.
Non-interest income increased 5% to R13,5 billion and accounted for 44% of total revenue.
Operating expenses grew 9% to R17,3 billion, increasing the cost-to-income ratio to 56,4% from 55,5%.
Loans and advances to customers grew 5% to R614,6 billion, while deposits due to customers rose 5% to R597,6 billion.
Credit impairments declined 7% to R3,6 billion, resulting in a 1,18% credit loss ratio from 1,35%, while coverage on performing loans increased to 70 basis points from 60.
Non-performing loans (NPLs) improved to 4,6% of gross loans and advances to customers from 5,3%.
Net asset value (NAV) per share declined 2% to 9 261 cents, due to the R6 billion special dividend paid in November 2013.
Barclays Africa Group Limited’s Common Equity Tier 1 (CET1) ratio was 11,8%, well above regulatory requirements and our board range.

Barclays Africa Group Limited (Barclays Africa) is on track to deliver on the ambitious targets laid out at its annual results in February. The Group’s financial results for the six months ended 30 June 2014 reflect a 10% increase in headline earnings to R6,1 billion underpinned by strong financial momentum across the business, despite a contraction in South Africa’s GDP in the first quarter of this year. Growth in Barclays Africa’s markets outside South Africa remained resilient, notwithstanding a slowdown in key economies such as Ghana and Zambia.

Maria Ramos, Chief Executive of Barclays Africa Group Limited says: “We have taken the time to develop the right strategy for Barclays Africa and have been very clear that this would take three years to deliver. Our results for the first six months of the year demonstrate the traction we are gaining in executing on this strategy and how well we are progressing towards realising our ambitions on the continent. We are transforming the business in the right areas by executing on our four strategic priorities and are determined to accelerate our momentum even faster.”

In February, Barclays Africa outlined four clear targets to grow the business. These include:

to be top three by revenue in the Group’s five largest markets by 2016,
to achieve an ROE in the range of 18-20% in 2015,
to achieve a cost-to-income ratio in the low 50s by 2016, and
to achieve a revenue share of 20-25% from outside of South Africa by 2016.

Maria Ramos says: “Six months into our three year strategy, we are exactly where we wanted to be. We have grown our revenues by 7% while our return on equity has improved to 16.1% and we are confident that we can achieve the necessary milestones this year to reach our 18%-20% target.

As expected, our cost-to-income ratio has increased because of the investments we are making to transform the business over the medium term. Growth outside of South Africa has been strong and this portfolio now constitutes 20% of Group revenue which is already within the range we have set as a target for 2016.”

To deliver on our One Africa strategy, Barclays Africa prioritised four strategic areas to execute in 2014 and solid progress has been made on each of these:

The turnaround programme for the Group’s South African Retail and Business Banking (RBB) franchise, based on simplifying processes, reshaping our branch network and investing heavily in our digital products, is taking effect. Customer numbers have stabilised and the Group has reported growth in important segments like the core middle market and commercial segments. RBB’s headline earnings increased 9% to R3,8 billion largely due to a strong performance from Home Loans as credit impairments declined.
Investing in corporate banking across the continent is paying dividends. Corporate and Investment Bank recorded a 24% increase in headline earnings to R1 903 million, driven by solid revenue growth across all core business units (corporate revenues increased by 11% and investment bank revenues by 20%) as well as focused cost management.
Having obtained the license for Barclays Life Assurance Kenya, already early signs of capturing the growth opportunity in our Wealth, Investment Management and Insurance franchise are emerging. While the business reported flat headline earnings of R688m, solid headline earnings growth for Wealth and Investment Management (11%), Short-term Insurance (11%) and Fiduciary Services (24%) were offset by Life insurance earnings and a loss after tax in the Distribution business.
Barclays Africa has further built out the strength of its management team over the past six months and is investing in talent retention.

Maria Ramos concludes: “By the end of the year I expect that we will have made further progress in the turnaround of our Retail and Business Banking business with a particular focus on our business banking franchise. We will also have significantly advanced the roll-out of our corporate business and completed our next phase of expanding our insurance business into East Africa. If we continue to execute well on our stated priorities, I have no doubt that we will become the ‘Go-To’ Bank in Africa – the destination of choice for customers and clients.”