TIDMATMA
RNS Number : 0804Q
ATLAS Mara Limited
07 September 2017
7 September 2017
Atlas Mara Limited Interim Results -- Six Months Ended 30 June
2017
Atlas Mara Limited ("Atlas Mara" or the "Company" and, including
its subsidiaries, the "Group"), the sub-Saharan African financial
services group, today releases its reviewed results for the six
months ended 30 June 2017.
Key highlights for the period:
-- Continued earnings progress in Q2 with reported year to date
earnings of $11.5 million as at 30 June 2017 (2016: $1.2
million).
-- Cost efficiencies through restructuring and reducing the
Shared Services & Centers' cost base, on track to deliver $20m
savings target in 2017.
-- Revenue growth from the Markets business and a noticeable
increase in deployment and profitable use of Digital channels, now
extended to all of our presence countries.
-- Since period end, successfully completed a $200m strategic
financing (comprising a Mandatory Convertible Bond and a Firm
Placing and Open Offer) to fund an increased interest in UBN and
further investments in Markets and Treasury and Fintech business
lines.
Financial highlights during the period
-- Reported net profit after tax for the first half of 2017 was
$11.5 million compared to a profit of $1.2 million reported for the
prior year period, reflecting early successes in repositioning of
business lines and cost reduction initiatives, implemented in late
2016 /early 2017. Q2 results of $6.4m is the strongest over the
past four consecutive quarters.
-- Net interest income (NII) increased by 79.0% year on year on
a constant currency (ccy) basis mainly supported by the inclusion
of the FBZ acquisition completed at the end of June 2016. On a pro
forma basis, including FBZ on a like-for-like basis, NII would have
still reflected an increase of 32.2% year on year. Our businesses
benefitted from increased yields and further progress in the
reduction of funding costs, following our continuous focus on
raising less expensive transactional deposits.
-- Non--interest income (NIR) declined by 35.2% on a ccy basis,
largely driven by a one off fair value gain of $15.4 million
reported in H1 2016, which resulted from the depreciation of the
Nigerian Naira in June 2016. This currency deprecation positively
impacted the carrying value of our liabilities measured at fair
value. Although we saw positive growth in the Markets and Treasury
business, the growth for this period was lower than the comparative
period growth as a result of lower trading volumes in Mozambique
and Botswana, due to lower customer activity following the slow
rate of recovery in those markets from macro headwinds experienced
in 2016.
-- Notwithstanding such headwinds, the Markets business reported
a 33% year on year revenue growth, reflecting the accelerated
business focus to increase both volume and value of transaction
flows in this business across all our operating banks.
-- Loan impairment charges of $10.0 million were broadly stable
on the prior year net charge of $9.1 million with the NPL ratio
decreasing year on year from 13.2% to 12.0%. The credit loss ratio
of 1.5% at June 2017 (2016: 1.3%) was supported by improved credit
processes and specific NPL recoveries, notably in Zambia and
Zimbabwe totaling $10.8 million for the first half of 2017, versus
$2.7 million of NPL asset recoveries recorded in the comparative
prior period. This was somewhat offset by additional specific
impairments in Zimbabwe and Rwanda taken on the corporate loan book
of $6.3 million year to date.
-- Cost savings in the Shared Services & Centre, after staff
rationalisation programs and the closure of the Johannesburg office
in March 2017, further contributed to the noteworthy cost reduction
visible in the more than 15% lower cost to income ratio reported
year on year, now at 85.2%. The Centre reported a $8 million lower
cost base recorded for the first half of 2017 compared to the
Centre cost base reported as at June 2016.
-- Union Bank of Nigeria Plc (UBN) continued to demonstrate
ongoing business improvements and contributed $8.7 million of net
income to Atlas Mara's results. While this was 30.4% lower than in
the comparable period, this was largely due to the year on year
decline in the Naira with the contribution increasing by 7.5% in
ccy terms.
-- Loans and advances were $1.33 billion at 30 June 2017. The
loan book declined by 8.0% in ccy terms year on year reflecting a
cautious risk appetite in certain markets coupled with a slower
recovery of economic conditions prevalent in 2016, constraining
demand for credit.
-- Deposits were $1.89 billion at 30 June 2017, this represented
growth of 2.7% on a ccy basis since June 2016.
-- Equity as at June 2017 totals $573.1 million (December 2016:
$ 526.1 million), reflecting the positive net impact of the profit
contribution for the half year, the modest equity placing
undertaken in February 2017 of $13.5 million, and the positive FX
translation impact of $ 17.8 million from converting our African
operations into US dollars as reporting currency over H1 2017, as
some currencies have strengthened against a weaker dollar since
year-end.
-- At the end of June 2017 our book value was $7.18 per share
(December 2016: $ 7.29) and our tangible book value was $ 5.31 per
share (December 2016: $ 5.27).
Key operational highlights during the period
-- The build-out of our onshore Markets and Treasury business
continues to make excellent progress with an uplift in Markets
revenues to $27.4 million from $20.6 million a year ago. This 33.0%
increase year on year was achieved despite lower market volatility
in some Markets especially in Mozambique and Botswana where the
former enjoyed exceptionally strong revenues a year before. This
reflects the improved scale of our markets business, with increased
client numbers and business volumes supporting the diversification
of our revenue streams. Fixed income and FX trading were
particularly strong in Zambia and Zimbabwe. We remain focused on
building out the offshore trading capability in Dubai.
-- Atlas Mara has been implementing a cost reduction program in
its Shared Services & Centre operations with the intention of
delivering net cost savings of $20 million for FY 2017. Progress
towards this goal remains on track with a continued cost conscious
mindset, amidst continued investment in our core businesses for
longer term sustainable asset and income growth.
-- We continue to make good progress in the roll-out of our
Fintech initiatives. Agency Banking services have gone live in
Mozambique and Tanzania with 136 outlets already approved by the
Bank of Tanzania. Rwanda's Agency Banking platform is expected to
be live by the end of Q4. Since the launch of our Merchant
Acquiring initiative in Q4 2016, we have increased the number of
terminals deployed from 700 in the first quarter to 1000 by the end
of Q2 2017. Zimbabwe, Mozambique and Zambia are operational with
over 500 merchants using our service while Tanzania and Botswana
will go live by end of Q4, mobilising over $23million in new low
cost deposits and $0.4 million in transactional revenue during the
period. We also have an agreement with Blue Marble Microinsurance
(a consortium of eight international insurance companies
collaborating as a for-profit social enterprise) to provide
socially impactful, commercially viable insurance protection to the
underserved in Sub Saharan Africa.
-- Collaboration with Fintech partners is a key driver for our
Digital Reinvention Initiatives, and we are pleased to announce new
partnerships that will deepen our activities in this area.
Following approval by Banco de Mozambique, we executed an agreement
with Vodacom Mozambique for the introduction of Mobile Savings and
Micro Loans to over 1 million mPesa Mobile Money customers in
Mozambique. We also executed an agreement with NetOne Zimbabwe for
management of their Mobile Money Settlement Account and Sponsorship
of companion cards for their over 500,000 customers.
Key events since period end
-- We have successfully completed a $200 million strategic
financing that was announced to the market on June 21, 2017. This
will be used to fund an increase in investment in our Nigerian
associate investment, UBN, and subscribe to our share of the rights
issue proposed by UBN which we expect will be completed later this
year. The proceeds will also support further expansion of our
Markets and Treasury and Fintech business lines.
Commenting on these results, Bob Diamond, Atlas Mara's Chairman,
said:
"We are pleased to report our highest half-year net profit since
inception of the company. Despite ongoing economic challenges
across our markets, in the first half of 2017 we have begun to
demonstrate the potential earnings power that Atlas Mara can
deliver. We remain on track with our stated profit and cost savings
goals announced earlier this year. With this performance momentum,
and the support shown by both our existing and new investors, we
can accelerate delivery on our strategy."
H1 Results Review -- Investor Conference Call
Atlas Mara's senior Management will today be holding a
conference call for investors at 10am EST / 3pm BST. There will be
a presentation available in the Investor Relations section of the
Company's website, http://atlasmara.com.
Dial--in details are as follows:
United States: +1 (718) 873 9077
United Kingdom: +44 (0) 203 1394830
Participant PIN Code: 54625275#
Contacts
Investors
Kojo Dufu, +1 212 883 4330
Media
Teneo Blue Rubicon, +44 (0)207 4203142
Anthony Silverman
Atlas Mara Limited
Consolidated Summary Statement of Comprehensive Income
Quarterly USD' million Six Months Ended 30 June
Reviewed Reviewed Reviewed Unreviewed
Q1 2017 Q2 2017 2017 2016 CC Var
%
37.1 41.5 Net interest income 78.6 45.2 79.0%
21.3 22.3 Non-interest income 43.6 68.3 (35.2%)
---------------- --------- ------------- ----------- ---------
58.4 63.8 Total income 122.2 113.5 9.9%
(3.0) (7.0) Credit impairment (10.0) (9.1) (9.9%)
-----------------------
55.4 56.8 Operating income 112.2 104.4 9.9%
(50.0) (54.1) Operating expenses (104.1) (115.5) 6.6%
---------------- --------- ----------------------- ------------- ----------- ---------
5.4 2.7 Net operating income 8.1 (11.1) >(100%)
---------------- --------- ----------------------- ------------- ----------- ---------
3.9 4.8 Income from associates 8.7 12.5 7.5%
---------------- --------- ----------------------- ------------- ----------- ---------
Profit/(loss) before
9.3 7.5 tax 16.8 1.4 >100%
Taxation and minority
(4.3) (1.0) interest (5.3) (0.2) >100%
Profit/(loss) after
5.0 6.5 tax 11.5 1.2 >100%
---------------- --------- ----------------------- ------------- ----------- ---------
Net interest margin
7.1% 7.4% (earning assets) 7.0% 4.1%
Net interest margin
5.4% 5.7% ( total assets) 5.4% 3.1%
0.9% 2.1% Credit loss ratio 1.5% 1.3%
85.6% 84.8% Cost to income ratio 85.2% 101.7%
0.7% 0.9% Return on assets 0.8% 0.1%
3.7% 4.5% Return on equity 4.0% 0.4%
---------------- --------- ----------------------- ------------- ----------- ---------
Atlas Mara Limited
Consolidated Summary Statement of Financial Position
Quarterly Results USD' million Period Ended 30 June
Audited Reviewed Reviewed CC Var
Unreviewed %
Q4 2016 Q1 2017 2017 2016
406.3 422.4 Cash and investments 486.2 448.3 6.4%
115.6 180.6 Financial assets* 91.4 160.4 (47.8%)
Loans & advances to
1,334.8 1,304 customers 1,329.9 1,421.0 (8.0%)
237.2 187.2 Investments 323.5 181.9 78.0%
Investment in
294.0 295.8 associates 302.6 324.3 (7.6%)
168.2 155.3 Intangible asset 175.1 166.8 4.9%
200.9 226.1 Other assets 204.7 244.0 16.3%
-------------- ----------- ---------------------- ------------------ -------------------- ---------------
2757.1 2771.4 Total assets 2913.4 2,946.7 (2.6%)
-------------- ----------- ---------------------- ------------------ -------------------- ---------------
1,799.4 1,753.8 Customer deposits 1,892.7 1,814.9 2.7%
322.6 367.3 Borrowed funds 364.7 343.0 5.2%
109.0 102.6 Other liabilities 82.9 211.5 (61.2%)
526.1 547.7 Capital and Reserves 573.1 577.3 (2.2%)
-------------- ----------- ------------------ --------------------
Total equity and
2,757.1 2,771.4 liabilities 2,913.4 2,946.7 (2.6%)
-------------- ----------- ---------------------- ------------------ -------------------- ---------------
74.2% 74.4% Loan : Deposit ratio 70.3% 78.3%
-------------- ----------- ---------------------- ------------------ -------------------- ---------------
*Includes financial assets held for trading and those designated
at fair value
Bob Diamond, Chairman
Overview
I am pleased to report that in H1 Atlas Mara recorded its
highest half-year net profit since inception. We are delivering on
the cost reductions we promised, and we remain focused on improving
credit quality to enable smart, sustainable growth. We also
continued to grow our deposit base, benefiting our cost of funds
and thus our margins.
Our newer business lines, Fintech and Markets & Treasury,
are developing well. Fintech's mobile banking, internet banking,
and point-of-sale segments are reporting increased revenues.
Markets & Treasury's first half profit was a nearly 50%
increase from the comparable period a year ago.
The committed cost reductions have supported earnings for this
strong first half. Headcount has been reduced by 30-35% across the
Shared Service and Centre, and non-staff costs at the Centre have
reduced substantially as well.
The first half of the year was not without its challenges. While
some macroeconomic conditions improved, in some markets core
factors such as growth, currency values, and market liquidity still
constrained our ability to grow loans and revenue. These negatively
affected our half-year results, albeit offset by improvements
driven by cost reductions and growth in other areas.
Our first half net profit of $11.5 million is a significant
improvement over the $1.2 million in the comparable period last
year and builds on the $8.4 million profit reported for the full
2016 year.
Our long-term goal remains to build sub-Saharan Africa's premier
financial institution. In the short-term, we remain on course to
deliver on the commitments we made during the first quarter of
2017, namely: further cost reductions, and a full year net profit
of more than double that of 2016.
Strategic Update
In our 2016 Annual Report, we highlighted the components of our
"Buy, Protect, Grow" business model. We continue to execute using
this framework as we pursue our steady-state performance targets of
20% return on equity and 2% return on assets.
Acquisitions remain a core tenet of the Atlas Mara strategy, in
order to attain optimal scale. As we recently announced, we expect
to complete later this year the acquisition of an additional 13.4%
ownership stake in UBN, which is fundamental to our growth strategy
in Africa's biggest economy.
Since completing bolt-on acquisitions in Rwanda and Zambia last
year - which took us to scale positions in those countries - we
have increasingly focused on organic growth. Most notably, we have
accelerated investments for growth in our Markets & Treasury
and Fintech business lines. Commercial and Retail Banking also saw
progress in the first half, and with our new Group MD for that
business line in place, we expect further improvements.
Some key highlights within our business lines include:
In Commercial Banking, we saw net interest income growth of
10.0% year on year through margin improvement, and strong growth in
non-interest income supported by certain one-off gains, partially
offset by higher impairments from Rwanda and Zambia. Loan book
growth remains a challenge due to liquidity constraints and lower
demand stemming from the challenging macroeconomic conditions in
some countries. Overall profitability was improved year on
year.
Retail Banking has seen significant improvement driven by growth
in total income (+ 29.4% on a ccy basis) with limited growth in
impairments (+2.5% ccy). A reported loss in H1 2016 has been
reduced in 2017 with the business moving in the right
direction.
Our focused efforts around credit quality continue to bear
fruit. Total NPL ratio declined for the third straight quarter, and
credit impairments decreased year on year.
In Markets & Treasury the growth trend has continued, with
Markets revenue up more than 30% year on year. Although costs
increased with our Dubai Offshore business coming onstream in May,
net profit was higher, and we expect the Offshore business to grow
in the future.
Fintech has successfully established multiple partnerships that
will drive digital revenue in our existing footprint and on a
standalone basis. As our newest business line, its income remains
low relative to the overall Group, but growth is accelerating. We
expect Fintech to contribute meaningfully to net profit in
2018.
Strategic Transaction with Fairfax Africa Holdings
We recently completed a $200 million strategic investment
(including a convertible bond and an equity placement) through
which a new investor, Fairfax Africa, and existing shareholders
subscribed for new ordinary shares in the Company. This investment,
underwritten by Fairfax Africa, will enable us to accelerate our
growth plans across the business. In addition to increasing our
stake in UBN, we are deploying capital to expedite the rollout of
some of our Fintech initiatives, and to drive greater Markets &
Treasury revenue.
We are very pleased to have a new partner in Fairfax Africa.
They share our vision for building the premier sub-Saharan Africa
financial services group. Like us, they are permanent capital,
enabling a truly long-term view. Fairfax has a track record as a
supportive investor, and we believe this strategic partnership will
enable greater value for all our shareholders.
UBN Investment
In conjunction with the strategic investment, we executed an
agreement to acquire an additional 13.4% stake in UBN. This will
bring our total (direct and indirect) ownership in UBN to 44.5%,
strengthening our position as we continue to work with other UBN
shareholders to drive value creation at UBN.
We have consistently stated our view that UBN is one of the most
promising banks in Nigeria, and we are thrilled to be able to
increase our investment in the bank. With UBN's rights issue
launching imminently, we intend to take up our maximum rights in
that transaction, and believe that UBN's improved capitalization
will put it in a very strong competitive position amongst Nigerian
banks going into 2018.
Outlook
We expect the second half to reflect further improved
operational performance, with continued momentum from the cost
reductions and growth initiatives that we have implemented this
year. Our medium-term financial targets and strategic goals remain
unchanged.
Bob Diamond
Chairman
Arina McDonald, Chief Financial Officer
Overview
As our Chairman, Bob Diamond, has noted, slow recovery from the
2016 challenging macroeconomic headwinds have not all proven
supportive to our objective of growing our balance sheets in line
with our longer-term guidance. However, we were pleased with the
focused Management actions across all our operating banks to
support continued earnings growth during the first half of
2017.
The consolidated profit after tax for the period to June 2017
was $11.5 million which compares to the comparable prior year
profit of $1.2 million, and the full year 2016 profit of $8.4
million. Excluding the impact of exchange rate movements, our first
half net profit would have been $15.4 million. We continue to
report quarterly growth in earnings for the past consecutive 4
quarters, reflecting a positive growth trajectory in line with our
internal forecasts.
The improvement in our performance this year is mainly due to
targeted and specific management actions, focusing on improving the
credit quality of our loan book, visible through reducing the
operational non-performing loan (NPL) ratio from 13.3% from
December 2016 to 12.0% at June 2017 and IFRS ratio from 9.6% to
9.0%, including the recovery of pre-acquisition NPLs in accordance
with IFRS 3 rules. The NPL book reduced by $7.6 million over the
same period. We have also achieved success in NPL recoveries
especially in Zimbabwe and Zambia of around $24 million
pre-taxation during the first six months of 2017, that has
supported earnings growth and offsetting additional impairments in
Zimbabwe and Rwanda taken on the corporate loan book of $6.3
million (pre-tax) in total.
Improvement in margin on earning assets of 2.9% year on year is
more a result of continuous reduction in cost of funding than
volume growth, with the teams focusing on restructuring the balance
sheet and funding it with lower cost deposits. Current accounts, by
way of example, have increased by $156.3 million or 26.9% year on
year. We have also focused on growing the non-balance sheet
intensive transactional products, as well as the digital business
and alternative channels such as mobile and internet banking, point
of sale device usage, and agency banking across most of our
markets. These initiatives have seen increased revenue generation
and double-digit volume growth in transactions year on year, albeit
off a low base. We believe this positive traction will continue to
grow as the teams are focused on further customer acquisition and
increasing the Fintech offering.
The Markets business has continued to perform well, with a year
on year increase of 18.4% in this business, against a backdrop of
lower volume and value activity in Mozambique and Botswana given
the slower economic activity year on year. Our other businesses
have in turn showed good momentum, resulting in the positive year
on year growth for the Markets & Treasury business of 33%.
We have also taken several steps to improve the operational
efficiency in our business, resulting in lower cost growth year on
year with a cost to income ratio of 85.2% - a notable improvement
considering the H1 results for 2017 include the cost base of FBZ
that was not included in the prior period results. We have also
recorded a saving of $8 million in the Shared Services & Centre
year to date cost base compared to actual costs incurred in H1 of
2016.
While we were pleased with the 15% reduction in year on year
cost to income ratio, the ratio remains higher than where we would
like it to be and we are focusing on further reducing this
efficiency ratio closer to peer levels.
The lower Shared Services & Centre cost base, as was
communicated to the market in February this year of around $20
million for 2017 will support this objective in particular, whilst
we are continuing to invest in some Fintech initiatives and new
products to offer to the Corporate and Retail customer, as we are
investing for sustainable future growth.
We remain focused on execution to deliver improved returns to
shareholders for the full year 2017 of more than double the
consolidated reported profit after tax reported for 2016 of $ 8.4
million.
Table 1: Adjusted operating profit and reconciliation to IFRS profit
for six months to end
June 2017 2016 Var CC Var(1)
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Total income $ million 122.2 113.5 7.7% 9.9%
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Impairment $ million (10.0) (9.1) (9.9%) (9.9%)
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Total expenses (excluding one-off) $ million (103.5) (104.1) 0.6% (3.4%)
Share of profit of associate $ million 8.7 12.5 (30.4%) 7.5%
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Adjusted profit/(loss) before tax $ million 17.4 12.8 35.9% 74%
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Adjusted net profit/(loss) $ million 12.2 9.2 32.6% 60.5%
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
M&A transaction expenses $ million (0.4) (7.8) >100 >100
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Reorganising/restructuring costs $ million (0.2) (3.6) 83.3% 83.3%
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Reported profit/(loss) before tax $ million 16.8 1.4 >100 >100
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Reported net profit/(loss) $ million 11.5 1.2 >100 >100
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Reported cost to income ratio % 85.2 101.7
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Adjusted cost to income ratio % 84.7 91.7
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Reported return on equity % 4.0 0.4
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Adjusted return on equity % 4.3 3.2
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Return on assets % 0.8 0.1
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Adjusted return on assets % 1.7 0.6
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Reported EPS $ 0.15 0.02
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Credit loss ratio % 1.5 1.3
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Book value per share $ 7.18 8.07
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Tangible book value per share $ 5.31 6.07
--------------------------------------------------------------------- --------- ------- ------- ------- ---------
Notes: 1. Constant currency variance excludes the impact of
depreciating currencies against the dollar.
Income statement review
Table 2: Total income
We reported growth in total income of 9.9% on a constant
currency basis, largely attributable to increased margins year on
year particularly in Mozambique (6.4%), Tanzania (2.3%) and Zambia
(2.1%). This was mainly due to increasing yields and customer
acquisition, although partly as a result of reducing the cost of
funding, notable in Tanzania (80bps) and Botswana (20bps).
We continue to build our capability in the Digital offering
through mobile and internet banking, agency banking and focusing on
corporate transactional business growth having improved our
payments offering to clients. Such lower balance sheet intensive
revenues from these products and services will further accelerate
return on capital, as a core objective of delivering on our
strategy to shareholders.
2017 2016 Var CC Var
$m $m % %
-------------------- ------ ------ ------- -------
Net interest income 78.6 m 45.2 m 73.9% 79.0%
-------------------- ------ ------ ------- -------
Non-interest income 43.6 m 68.3 m (36.2%) (35.2%)
-------------------- ------ ------ ------- -------
Net interest income
Reported NII growth of 79.0% on a constant currency basis mainly
due to acquisition of FBZ where the acquisition was completed at
the end of the comparable period on 30 June 2016. On a pro forma
basis, with FBZ included in the comparative numbers, NII grew by
22.3% mainly due to growth in Mozambique, Zambia and Zimbabwe.
Growth in Mozambique was driven largely by higher yields on
interest earning assets due to an increase in interest rates in the
market. In addition to the contribution from FBZ, we saw positive
traction in the underlying growth in Zambia as the contribution in
the prior period was depressed due to higher cost of funds and the
regulatory interest rate caps on the consumer loan book that
reduced the ability on price adjustments.
Zimbabwe reported positive growth in NII amongst others, from
treasury bills received from the Zimbabwe Asset Management Company
(ZAMCO), following prior year NPL asset sales to ZAMCO, together
with a reduction in cost of funds due to the bank's deposit
repricing efforts.
Non-interest income
NIR declined by 35.2% on a constant currency basis mainly due to
the one-off fair value gain resulting from the sharp depreciation
of the Nigerian Naira in June 2016. This contributed around $15.4
million in the consolidation journals and the comparative numbers
also included a bargain purchase gain of $1 million on the
acquisition of FBZ. Notwithstanding the overall growth in the
Markets and Treasury revenue, we saw declines in the volume of
transactions in particularly Botswana and Mozambique as a result of
lower market FX volatility and reduced client activity. As a
result, NIR performance in Botswana and Mozambique was hampered by
a decline in trading revenue (decline by 41.5% and 57.6%
respectively year on year), whilst other of our banking operations
have in turn seen some growth in this business.
Total expenses
Total costs amounted to $104.1 million versus $115.5 million in
the prior period, a decrease of 6.6% in constant currency terms
year on year. This was despite the inclusion of nearly $22 million
of costs in respect of FBZ in Zambia this year, which were not
included in the comparable prior period figures. Including FBZ on a
pro forma basis, total Group costs would have reduced by 23.3% on
constant currency terms year on year. Expenses also decreased in
Rwanda following the staff restructuring programme in the latter
part of the prior year, as part of the integration activities,
together with a reduction in marketing expenses year on year in
Rwanda, post-merger.
Cost savings in the Shared Services & Centre, after staff
rationalisation programs and the closure of the Johannesburg office
in March 2017, have further contributed to the above noteworthy
cost reduction totalling $8 million year to date, compared to prior
period. This includes savings in staff costs following staff
redundancies, other operational expense savings and non-recurring
M&A costs incurred in H1 2016.
We continue to have a Group-wide focus on cost containment to
support positive JAWS. However, we remain focused to invest in some
core new product and system development to ensure the
sustainability of improved quality and more diverse sources of
income in the future.
Loan impairment charges
The loan impairment charge of $10 million (2016: $ 9.1 million)
is broadly constant year on year but with a positive trajectory on
improved NPL ratio, reflecting an improved overall quality of risk
assets. The credit loss ratio, which has been trending downwards
since Q1 2016 driven by improved credit processes and NPL
recoveries in Botswana, Mozambique and Zimbabwe, increased modestly
in Q2 2017 from 1.3% in H1 2016 to 1.5% as at H1 2017. The increase
in credit loss ratio is largely due to some impairments in the
corporate loan book in Zambia and Rwanda of $6.3 million (pre-tax),
offset by recoveries in Zambia and Zimbabwe.
Table 3: Loan impairment charges
2017 2016 Var CC Var
$m $m % %
------------------------ ---- ---- ------ ------
Loan impairment charges 10.0 9.1 (9.9%) (9.9%)
------------------------ ---- ---- ------ ------
Share of profit of associates
This represents Atlas Mara's share of profit from the 31.15%
stake in Union Bank of Nigeria Plc ('UBN') based on their published
results to 30 June 2017. The impact of intangible amortisation is
also included. Given that, as of the date of release of these
results, UBN had publicly disclosed its first half results to the
market, their results have been included in this set of accounts
without any change.
The challenges seen in the Nigerian macroeconomic environment in
2016 have continued this year. The decline in commodity prices,
especially in oil and gas, has led to a reduction in national
income and slower growth, as well as a reduction in Foreign Direct
Investment. Against this backdrop, UBN performed credibly with
profit after tax up 7.5% on June 2016 in constant currency
terms.
In constant currency terms, net interest income before
impairments improved 2.5% year on year and the credit impairment
charge in the income statement reduced notably following lower
specific impairments compared to the prior period, and somewhat
muted loan book growth, thus not resulting in a much higher
portfolio provision.
Net interest margins however tightened from 9.1% to 7.1%, given
the continued market liquidity tightness. Non-interest revenue was
down 14.6% on a constant currency basis year on year due to lower
trade volumes adversely impacted by scarcity of foreign currency.
However, the sharp increase in portfolio inflows over the past few
months (ca. $1.3 billion in May to roughly $ 1.9 billion in July)
is ascribed to the Nigerian Central Bank's more liberal stance on
the Naira exchange rate. The launch of the Investors' and
Exporters' forex window played a significant role in this regard,
and should support more FDI (US dollar) inflows and thus improved
market liquidity, and also support a downturn in inflation and thus
improve economic growth - an environment that bodes well for the
future growth plans of UBN.
Growth in expenses was due to increased investments in the brand
with the celebration of its 100(th) Year of doing business, the
continued investment in technology and other CAPEX with a higher
inflationary environment and a weaker Naira, noting that most of
this IT and capex spend is USD-linked expenditure.
Table 4: Share of profit of associates
2017 2016 Var CC Var
$m $m % %
------------------- ---- ---- ------- ------
Share of profit of
associates 8.7 12.5 (30.4%) 7.5%
------------------- ---- ---- ------- ------
Statement of financial position review
Customer loans and advances comprise ca. 46% of the Group's
total asset base. Balance sheet growth is relatively stagnant in
most of the countries due to market liquidity constraints and a
lower than anticipated demand for credit due to challenging
economic environment and rising inflation in many markets. On a
constant currency basis, total assets declined by 2.6% compared to
2016.
Credit quality
The operational NPL coverage ratio has remained relatively
stable year on year at 58.1% (2016: 58.7%). Given the nature of the
loan book and relatively diverse sector exposure, Management is of
the view that this represents an adequate provision level for the
Group. Non-performing loans (NPLs) as a percentage of the loan book
declined to 11.7% (June 2016: 13.2%), with the NPL ratio also
decreasing year on year from 13.2% to 12.0%. Including the
accounting treatment of IFRS 3 Business Combinations
at-acquisitions NPL recoveries, this ratio in fact decreased from
9.6% to 9.0% reflecting a more extensive perspective of total NPLs
including those recorded and discounted upon Atlas Mara's
acquisition of its various subsidiaries.
We continue to focus on improving credit processes and embedding
responsible lending practices across the Group to drive
improvements in the quality of the loan portfolio - all being a key
priority for Management. This focus is evidenced by the reduction
in the NPL book from $204 million in June 2016 to $169 million as
at June 2017.
Capital position
As at 30 June 2017, all of Atlas Mara's operating banks complied
with local minimum capital ratios relevant in each of our operating
countries, as summarised in the table below.
Capital ratios June 2017 December 2016 Regulatory minimum
---------------- ---------- -------------- -------------------
Botswana 19.1% 20.2% 15.0%
---------------- ---------- -------------- -------------------
Mozambique 26.1% 24.0% 8.0%
---------------- ---------- -------------- -------------------
Rwanda 23.1% 23.0% 15.0%
---------------- ---------- -------------- -------------------
Tanzania 14.1% 14.2% 12.0%
---------------- ---------- -------------- -------------------
Zambia (ABC) * N/A 30.6% 10.0%
---------------- ---------- -------------- -------------------
Zambia (FBZ)* N/A 31.1% 10.0%
---------------- ---------- -------------- -------------------
Zambia 14.2% N/A 10.0%
---------------- ---------- -------------- -------------------
Zimbabwe 22.5% 20.9% 12.0%
---------------- ---------- -------------- -------------------
(--) Effective 1 April 2017, BancABC Zambia and FBZ merged in to
a single entity. The ratio presented above for June 2017 represents
the merged entity capital adequacy
Table 5: Customer loans and deposits
2017 2016 Var CC Var
$m $m % %
--------------- ------- ------- ------ ------
Total assets 2,913.4 2,946.7 (1.1%) (2.6%)
--------------- ------- ------- ------ ------
Customer loans 1,329.9 1,421.0 (6.4%) (8.0%)
--------------- ------- ------- ------ ------
Total deposits 1,892.7 1,814.9 4.3% 2.7%
--------------- ------- ------- ------ ------
Deposits in Zimbabwe grew by $77.6 million as compared to prior
year reflecting a net cash inflow from selected corporate
accounts.
Across the Group, the contribution of transactional deposits
continued an upward trajectory compared to prior year (increase of
current accounts of $156 million year on year), whilst the Group's
reliance on term and interbank deposits has been gradually
declining (by $67 million year on year) which will support the
Group-wide focus to reduce cost of funding.
Goodwill and intangibles
As a result of the acquisitions made during 2016 and in
compliance with IFRS 3: Business Combinations, the statement of
financial position incorporates a goodwill asset of $88.8 million
(December 2016: $83.8 million) and intangible assets of $86.3
million (December 2016: $84.4 million). Intangible assets are
amortised over an average seven-year useful life period and include
investment in new product development, specifically focused on the
Group's Fintech strategy and product development to support the
Corporate customer book's further sector diversification
objective.
This asset class represents a combined 6% of the Group's total
assets, resulting in a tangible book value of $5.31 per share
(December 2016: $5.27 per share) versus a book value per share of
$7.18 (December 2016: $7.29).
Investment in associate: UBN
Our investment in UBN is equity-accounted for in the statement
of financial position as an investment in an associate, with a
closing balance of $300.6 million (June 2016: $321.4 million). The
value of the equity-accounted earnings is as reported in UBN's 30
June 2017 unaudited financials.
We have reviewed the carrying value of the investment held in
UBN from a valuation perspective. Stress-testing of future expected
earnings has been considered, taking into account the impact of the
depreciation of the Naira (through the FX window rate versus
official rate), as well as potential credit shocks in the Nigerian
market from lower oil prices and market-wide shortages of US dollar
liquidity. The carrying value was substantiated notwithstanding
such potential stress scenarios. Following on from the recently
closed $200 million strategic investment, post period end, where
the investment in UBN is expected to increase to at least 44.5%
given the purchase of additional 13.35% shares and Atlas Mara
following its rights in UBN's rights offer, this investment
valuation is set to further increase towards December year-end.
Equity and Liabilities
Equity was broadly stable over the period at $573.1 million
(December 2016: $526.1 million) reflecting the positive net impact
of the profit contribution for the half year, the modest capital
raising undertaken in February 2017 of $13.5 million, and the
positive FX translation impact of $17.8 million from converting our
African operations into US dollars as reporting currency over H1
2017. Customer deposits comprise 81% of the liability base and
represent 65% of the aggregate of liabilities and equity. The loan
to deposit ratio for June 2017 is 70.3% (June 2016: 78.3%).
Table 6: Composition of liabilities
2017 2016 Var CC Var
$m $m % %
-------------------------- ------- ------- ---- ------
Deposits due to customers 1,892.7 1,814.9 4.3% 2.7%
-------------------------- ------- ------- ---- ------
Borrowed funds 364.7 342.9 6.4% 5.2%
-------------------------- ------- ------- ---- ------
Segment information
The segmental results and statement of financial position
information represent Management's view of its underlying
operations. The business is managed on a geographic basis
consistent with the Group's emphasis on sub-Saharan Africa's key
trading blocs with a specific focus on underlying business line and
to actively support intra-Africa trade opportunities.
The seven countries of operation and investment are grouped as
follows:
Southern Africa
Our Southern Africa segment includes the operations of the
BancABC Group excluding Tanzania, i.e. Botswana, Mozambique, Zambia
and Zimbabwe, as well as its holding company, ABCH, incorporated in
Botswana. The scale of our operations in Zambia was increased with
a net asset value of $64.6 million following the acquisition of
Finance Bank Zambia at 30 June 2016. The integration process has
largely been completed and we remain positive on the medium- to
long-term growth opportunities for this market, post reaching scale
in that market as a credible competitor bank.
East Africa
Our East Africa segment consists of BancABC Tanzania and Banque
Populaire du Rwanda.
In January 2016 Atlas Mara acquired a 45.03% stake in BPR. BPR
was merged with Atlas Mara's wholly-owned bank, BRD-Commercial Bank
at the beginning of January 2016 with BPR as the surviving entity,
and Atlas Mara owning 62.06% of the merged entity, which is now the
second largest bank in this key East African growth market. The
integration process saw savings materialise following a restructure
process during Q3 and Q4 2016, reducing its year on year cost to
income ratio from 86.3% to 72.6% and reported a total asset base of
$337 million (BPR stand-alone December 2015 was at $250 million) -
and a total customer deposit base of $260 million as at June 2017
(December 2015: $188 million).
West Africa
The contribution to earnings from West Africa comprises our
associate investment in UBN, based on our 31.15% share of UBN's
earnings attributable to equity holders as disclosed in its
published results. Our investment in UBN resulted in associate
income of $8.7 million in 2017 compared to $12.5 million for 2016,
representing a 7.5% increase in constant currency.
Atlas Mara, through its three Board seats on the UBN Board, is
working closely with UBN Management to navigate investment and
banking opportunities in that market as UBN focuses on diversifying
away from a mostly oil-based economy. The total assets growth for
UBN year on year of 15.2% on a constant currency basis reflect
early successes of such a strategy to grow, with a positive 24.1%
growth in customer deposits which has been a key focus over the
past year.
Other
Included in this segment are Atlas Mara Limited, the BVI
incorporated holding company, Atlas Mara's Dubai subsidiary and all
other intermediate Group holding entities acquired in connection
with acquisitions of ABCH and ADC in August 2014.
The Shared Services and Centre of Atlas Mara have shown improved
results for H1 2017 compared H1 2016, representing the positive
result for shareholders following the restructuring in Q1 2017 that
focused on taking costs out of the Centre and better aligning the
Group's head office structure and cost base to its revenue
generating subsidiaries.
Table 7: Segmental results
2017 Banking Other
Ops
-------------------- -------- --------- ------- ------ ---------- ---------
US$m Group Southern East West Shared M&A,
Services ADC and
& Centre Consol
-------------------- -------- --------- ------- ------ ---------- ---------
Total income 122.2 95.1 24.7 - 2.1 0.3
-------------------- -------- --------- ------- ------ ---------- ---------
Loan impairment
charge (10.0) (6.9) (5.6) - - 2.5
-------------------- -------- --------- ------- ------ ---------- ---------
Operating expenses (104.1) (79.6) (21.5) - (3.7) 0.7
-------------------- -------- --------- ------- ------ ---------- ---------
Share of profits
of associate 8.7 - - 8.7 - -
-------------------- -------- --------- ------- ------ ---------- ---------
Profit / (loss)
before tax 16.8 8.6 (2.4) 8.7 (1.6) 3.5
-------------------- -------- --------- ------- ------ ---------- ---------
Profit / (loss)
after tax and
NCI 11.5 4.5 (1.6) 8.7 (1.6) 1.5
-------------------- -------- --------- ------- ------ ---------- ---------
Loans and advances 1 329.9 1 047.2 276.0 - - 6.7
-------------------- -------- --------- ------- ------ ---------- ---------
Total assets 2 913.4 2 006.3 480.6 300.6 692.7 (566.8)
-------------------- -------- --------- ------- ------ ---------- ---------
Total liabilities 2 340.3 1 891.1 412.1 - - 37.1
-------------------- -------- --------- ------- ------ ---------- ---------
Deposits 1 892.7 1 518.5 376.0 - (1.8)
-------------------- -------- --------- ------- ------ ---------- ---------
Net interest
margin - total
assets 5.4% 5.7% 8.0%
-------------------- -------- --------- ------- ------ ---------- ---------
Net interest
margin - earning
assets 7.1% 6.4% 8.8%
-------------------- -------- --------- ------- ------ ---------- ---------
Cost to income
ratio 85.2% 83.7% 87.1%
-------------------- -------- --------- ------- ------ ---------- ---------
Statutory credit
loss ratio 1.5% 1.3% 4.1%
-------------------- -------- --------- ------- ------ ---------- ---------
Return on equity 4.0% 7.7% (4.8%)
-------------------- -------- --------- ------- ------ ---------- ---------
Return on assets 0.8% 0.4% (0.7%)
-------------------- -------- --------- ------- ------ ---------- ---------
Loan to deposit
ratio 70.3% 69.0% 73.4%
-------------------- -------- --------- ------- ------ ---------- ---------
2016 Banking Ops Other
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
US$m Group Southern East West Shared Services & M&A, ADCand Consol
Centre
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Total income 113.5 71.2 27.1 - 6.6 8.6
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Loan
impairment
charge (9.1) (8.1) (1.5) - - 0.5
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Operating
expenses (115.5) (61.0) (24.6) - (18.4) (11.5)
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Share of
profits of
associate 12.5 - - 12.5 - -
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Profit /
(loss)
before tax 1.4 2.1 1.0 12.5 (11.8) (2.4)
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Profit /
(loss)
after tax
and NCI 1.2 2.1 1.1 12.5 (11.8) (2.7)
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Loans and
advances 1 421.0 1 125.3 297.0 - - (1.3)
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Total assets 2 946.7 1 979.3 504.2 321.4 722.4 (580.6)
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Total
liabilities 2 369.4 1 873.8 434.1 - 76.3 (14.8)
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Deposits 1 814.9 1 423.7 391.5 - - (.0.3)
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Net interest
margin -
total
assets 3.1% 3.4% 7.9%
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Net interest
margin -
earning
assets 4.1% 4.3% 9.3%
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Cost to
income
ratio 101.7% 85.7% 90.9%
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Statutory
credit loss
ratio 1.3% 1.4% 1.0%
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Return on
equity 0.4% 3.9% 3.1%
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Return on
assets 0.1% 0.2% 0.4%
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Loan to
deposit
ratio 78.3% 79.0% 75.9%
------------- ---------------------------------------------------------------------------------- ----------------------- -------------------- -------------------- ---------------------- ----------------------
Arina McDonald
Chief Financial Officer
Principal Risks
The principal risks as listed and described on pages 38 -- 40 of
the 2016 Annual Report have been evaluated and individually
considered by Management. The Prospectus dated 10 August 2017
published in connection with the Placing and Open Offer also sets
out certain risk factors on pages 38 -- 40.
These risks are deemed to be still applicable and no material
additional risks have been identified as at the period ended 30
June 2017.
Directors' Responsibilities Statement in Respect of the Interim
Results
We confirm that to the best of our knowledge:
The condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
The interim management report includes a fair review of the
information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
By order of the Board
Bob Diamond
Chairman
7 September 2017
Forward Looking Statement and Disclaimers
This announcement does not constitute or form part of any offer
or invitation to purchase, otherwise acquire, issue, subscribe for,
sell or otherwise dispose of any securities, nor any solicitation
of any offer to purchase, otherwise acquire, issue, subscribe for,
sell, or otherwise dispose of any securities.
The release, publication or distribution of this announcement in
certain jurisdictions may be restricted by law and therefore
persons in such jurisdictions into which this announcement is
released, published or distributed should inform themselves about
and observe such restrictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FMGGLVNGGNZG
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