TIDMATMA
RNS Number : 6182M
ATLAS Mara Limited
12 May 2020
12 May 2020
Atlas Mara provides audited results for the year ended 31
December 2019
Atlas Mara Limited ("Atlas Mara" or the "Company" including its
subsidiaries, the "Group"), the sub-Saharan African financial
services group, releases its consolidated audited financial results
for the year ended 31 December 2019. The results represent an
extract from the audited summarised financial statements .
Principal highlights:
-- Adjusted net profit of $5.8 million (2018: $26.4 million),
excluding the impact of the previously reported impairment loss on
IFRS 5 remeasurement of subsidiaries held for sale and other
transaction and restructuring related expenses.
-- In February 2019, the Company announced that the Board was
undertaking a review of strategic options to determine the key
priorities and actions for 2019 and beyond to drive shareholder
value. The Company continued to focus on these strategic priorities
in 2019 and made progress on each.
-- This strategic review led to a decision of the Board to
assess indications of interest with respect to Atlas Mara's
investments in banking interests in four countries: Mozambique,
Rwanda, Tanzania and Zambia. Consistent with this decision, the
Group announced a binding term sheet with Equity Group Holdings
("EGH") on 30 April 2019. As previously announced in January 2020,
while there have been delays in closing a transaction, the Group
continues to actively pursue a strategic transaction for these
subsidiaries.
-- The Group increased its shareholding in UBN to 49.97% in 2019
and UBN declared a dividend to shareholders for the first time in
over a decade. The Company has continued to support UBN management
as they deliver shareholder value, including by facilitating access
to significant long-term funding and assisting in the sale of its
UK subsidiary.
-- The Group has continued to make progress in streamlining the
holding company to remove centralised cost structures and to focus
on avenues for value creation in the operating banks under a more
decentralised structure. The completion of a strategic transaction
is expected to enable an acceleration of these processes.
-- The Group completed the repositioning of the Markets and
Treasury business model to onshore, moving closer to relevant
business opportunities and accelerating revenue growth. Markets and
Treasury continued to contribute to profitability in the core
markets, with a strong year in Zimbabwe, and a positive second half
performance in Botswana after a new team was onboarded during the
year.
-- The Group continues to prioritize investments in high-impact
digital channels and transactional platforms to drive substantially
lower cost of funds, enhancing core banking systems, and developing
technology-enabled products to retain and grow the customer
base.
-- In part due to the above strategic review, the reported net
loss to equity holders was $143.2 million (2018: profit of $39.7
million); this included a loss from discontinued operations of
$134.7 million (2018: loss of $11.0 million), due primarily to the
impairment loss of $105.5 million related to IFRS 5 remeasurement,
and a loss from continuing operations of $8.5 million (2018: profit
of $50.7 million).
-- Dividends declared and/or paid in two countries (Nigeria and
Botswana), for the first time under Atlas Mara's ownership.
-- Union Bank of Nigeria ("UBN") contributed associate income of
$31.2 million for the period (2018: $56.3 million). The associate
income reported in 2018 reflected the Company's share of income on
an equity accounted basis of $27.8 million, as well as the impact
of the gain on the additional shares of UBN acquired during 2018 of
$28.5 million.
-- Results of operating banking components include
outperformance versus 2018 in Nigeria and Zimbabwe
(inflation-adjusted local currency basis), in-line performance in
Botswana and Rwanda, and underperformance in Mozambique, Tanzania,
and Zambia.
-- Loss per share of 84 cents compared to earnings per share of
23 cents in 2018.
-- Both the statements of financial position and of profit or
loss of the Group were adversely impacted by IFRS 5 impairment loss
of $105.5 million recognised in the year, and by the impact of
hyperinflation accounting in Zimbabwe.
-- All operating banks maintained adequate capital adequacy
ratios, reflecting stable balance sheets.
-- Continued focus on deposit growth, loan book quality, and
growth in business lines:
-- Digital channels' volumes and revenues increased month-on
month across all channels, especially in mobile banking (all
countries), transactional banking platforms (Botswana), mobile
push/pull (Zimbabwe) and POS (Mozambique and Zimbabwe).
-- Launched a deposit drive across Retail, Corporate and
Institutional segments through innovative campaigns to lower cost
of funds and generate sustainable funding for balance sheet
growth.
-- Markets and Treasury pivoted to an onshore model more aligned
to client demand, and continued expansion of the product catalogue
and development of new clients.
Commenting on the results, Michael Wilkerson, Executive
Chairman, said, "We are pleased to report a strong performance from
our largest investment, UBN, and a profitable year in each of our
other two core markets, Botswana and Zimbabwe. Financial
performance in our other banks was mixed, due in substantial part
to acute macroeconomic and industry challenges. While we achieved
an improvement in overall operating expenses, there is more to do
in our critical efforts to streamline the platform, and overall our
growth remains below where we aspire to. Notably, the Company's
reported net loss for 2019 was driven largely by a remeasurement of
the assets classified as held for sale as part of a potential
strategic transaction - an initiative that remains important to our
plans in 2020.
With the ongoing COVID-19 pandemic, our priority remains the
health and safety of our employees, customers and communities. It
is too early to know the full impact of the crisis on our business,
but we are already seeing effects on both our customers and the
regulatory environments in which we operate, and we expect
near-term negative impact on our performance. During this time of
crisis, we are focused on liquidity and capital preservation while
continuing to serve our communities. Our banks are following
government guidance and have responded to this crisis with
innovation. On behalf of the Board, I want to thank all of our team
members for their dedication during this unprecedented time."
Events after the reporting date
-- UBN currency devaluation
Following the recent global economic and health crisis, the
Central Bank of Nigeria ("CBN") adjusted the official exchange rate
from NGN306.5/$1 to NGN361/$1 in March 2020. The policy change has
prompted the Group to reassess the use of the official exchange
rate for translating the investment in UBN. Based on this
post-period development, the Board decided to change the Group's
accounting policy for translating its investment in UBN from the
CBN official exchange rate to the Nigerian Autonomous Foreign
Exchange Fixing ("NAFEX") rate, effective1 March 2020, to reflect a
more accurate picture of USD value.
This change is expected to result in a $104 million, or $0.61
per share, reduction in the carrying value of the investment in UBN
as at 31 March 2020, recognised directly in equity as currency
translation losses.
-- COVID-19
In Q1 2020, the COVID-19 pandemic began to directly impact our
markets of operation, alongsidemyriad negative impacts to global
economic activity. The initial impact on African markets has been
worse than elsewhere, with public equities, sovereign debt yields,
and local currencies showing dramatic deteriorations in a short
period of time. Governments in our markets, like those around the
world, have responded in a variety of ways including measures like
direct economic stimulus and loosened regulations - but also with
the impetus for banks to facilitate relief for customers. It is too
soon to gauge the impact on our business, but each of our banks has
activated business continuity plans and conducted stress tests, the
results of which are available in our annual report.
Additional financial highlights during the period:
-- BancABC Botswana declared and paid its first dividend under
Atlas Mara ownership.
-- Financial highlights from UBN compared to 2018 included:
-- Profit after tax increased by 9.8% from NGN18.1 billion to
NGN19.9 billion;
-- Return on equity increased from 6.2% to 10.2%;
-- NPL ratio declined from 8.7% to 5.8% driven by an aggressive
focus on recoveries;
-- Total expenses decreased by 0.5%, driven by a cost
optimisation program;
-- Gross loans increased by 9.7%, in line with a drive to create
quality risk assets across key economic segments of
opportunity;
-- Deposits increased by 3.3%, reflecting the strength of the
brand in a very competitive environment for deposits; and
-- BVPS increased by 11.5% from NGN7.75 in 2018 to NGN8.64 in
2019, resulting primarily from the strong earnings in the year.
-- Group credit impairments increased from $0.2 million to $11.4
million, driven by a significant increase in credit risk in
Zimbabwe, Tanzania, and Zambia.
-- Total revenue decreased by 18.0%, attributable to a 35.0%
decline in net interest income, as a result of contraction of the
loan book, lower margins, and tight market liquidity, partially
offset by a 4.9% increase in non-interest income.
-- Operating expenses decreased by 4.1%, driven by the effects
of currency devaluation in Zimbabwe, as well as the strategic cost
management initiatives across the Group.
-- Recoveries totalled $4.4 million (2018: $6.0 million),
reflecting continued focus on managing the asset portfolio.
Key operational highlights during the period:
-- The Group has delivered revamped digital platforms, becoming
more competitive within each market. This has enhanced the banks'
value propositions and is contributing positively to customer
acquisition and transaction volumes.
Nigeria:
-- Successfully concluded management's share capital
reconstruction exercise, positioning the bank to declare a
meaningful dividend for the first time in over a decade.
-- Capital adequacy ratio reached 19.7% at year-end versus the
minimum requirement of 15% for banks an international banking
licence.
-- UBN signed a $200 million ten-year senior debt facility from
the US International Development Finance Corporation, the
development finance institution of the US government. This landmark
financing will accelerate growth in a number of UBN's key customer
segments, including SMEs, women's banking, and digital
channels.
-- Increased customer count from 4.5 million to 5.8 million.
-- Continued adoption of alternative service channels, with
mobile banking customers growing to 2.1 million (December 2018: 1.4
million) and online banking customers growing to 1.3 million
(December 2018: 910k), illustrating improved scalability and cost
optimisation potential.
-- Risk management, a key focus among the bank's core
competencies, continues to improve (evidenced by the NPL ratio
decreasing substantially from 8.7% at December 2018 to 5.8% at the
end of the current period, and oil and gas sector loan book
concentration decreasing from 36% in December 2018 to 29% at the
end of the current period).
Botswana:
-- BancABC Botswana declared and paid its first dividend under
Atlas Mara's ownership.
-- Revamped card and ATM infrastructure as part of wholesale
repositioning for digital business.
-- Reduced interest expense in H2 2019 by 9% versus H1 2019.
-- Opened four new Sales and Service Centres to double the
footprint outside of Gaborone, with performance better than
expected.
-- Hired new, experienced leadership in Corporate &
Investment Banking and in Operations, to drive growth in Corporate
& GMT divisions and to support the bank's transformation
agenda.
-- Completed and launched a new credit card product.
-- Signed five new lending schemes as part of the push to
diversify the loan book.
-- Launched a state-of the art corporate banking platform.
-- Challenging conditions in Markets and Treasury affected
results in H1 2019, but a new Markets and Treasury team was put in
place mid-year and oversaw improved financial results in H2
2019.
-- Subsequent to period end, signed a $10 million Tier II
financing facility with PROPARCO, a French development finance
institution, to support growth in targeted areas including lending
to SMEs. This facility was funded in May 2020.
Zimbabwe:
-- BancABC Zimbabwe reclaimed its position as one of the top
financial institutions in the country with the second-best 2019 net
profit in the market, in line with the Group's strategic goal of
achieving top-five market position in every market.
-- Onboarded new CEO, Lance Mambondiani, the former CEO of
Steward Bank, in July following the retirement of his
predecessor.
-- Markets and Treasury team continued to deliver strong
revenues despite unprecedented economic challenges.
-- Implemented an aggressive Digital Transformation Agenda,
launching a number of innovative products, including WhatsApp
banking and enhanced mobile and internet banking platforms for both
Retail and Corporate customers. As a result, the bank saw 87%
growth in total customers and 79% growth in volume on its digital
platforms, making it one of the fastest-growing banks in the
country. Digital efforts also led to winning the "Best Innovation
Award" from the CEOs Roundtable in 2019.
-- Completed core banking system upgrade, supporting system
stability, including for robust new digital channels.
Investor Conference Call
Atlas Mara will hold a conference call for investors at 10am EDT
/ 3pm BST today. There will be a presentation available in the
Investor Relations section of the Company's website,
www.atlasmara.com . The Company will not be disclosing any new
material information.
Dial-in details are as follows:
United States: +1 631 913 1422
United Kingdom: +44 3333000804
Participant PIN Code: 49717501#
Contact Details:
Investors
Kojo Dufu, +1 212 883 4330
Media
Apella Advisors, +44(0) 7818 036 579
Anthony Silverman
About Atlas Mara
Atlas Mara Limited (LON: ATMA) is a financial services
institution founded by Bob Diamond and listed on the London Stock
Exchange. With a presence in seven sub-Saharan countries, Atlas
Mara aims to be a positive disruptive force in the markets in which
we operate by leveraging technology to provide innovative and
differentiated product offerings, deliver excellent customer
service and accelerate financial inclusion. For more information,
visit www.atlasmara.com.
Summary of audited results
Table 1: Adjusted operating profit and reconciliation to IFRS
profit for year ended December 2019
$'million 2019 2018 Total CCY
Var % Var %
---------
Adjusted profit after tax 5.8 26.4 (78.0%) (51.1%)
----------------------------------------- -------- -------- --------- ---------
Transaction and M & A related items (109.5) 28.3 > (100%) > (100%)
----------------------------------------- -------- -------- --------- ---------
Reorganisations and restructuring costs (13.1) (10.7) (22.8%) (22.8%)
----------------------------------------- -------- -------- --------- ---------
Impact of hyperinflation accounting (11.1) - 0.0% 0.0%
----------------------------------------- -------- -------- --------- ---------
Tax and NCI (15.3) (4.3) > (100%) > (100%)
----------------------------------------- -------- -------- --------- ---------
Reported net profit (143.2) 39.7 > (100%) > (100%)
----------------------------------------- -------- -------- --------- ---------
Reported cost to income ratio 121.5% 104.0%
----------------------------------------- -------- -------- --------------------
Adjusted cost to income ratio 106.6% 99.3%
----------------------------------------- -------- -------- --------- ---------
Reported return on equity (28.5%) 6.1%
----------------------------------------- -------- --------
Adjusted return on equity 1.2% 3.8%
----------------------------------------- -------- --------
Reported return on assets (5.5%) 1.4%
----------------------------------------- -------- --------
Adjusted return on assets 0.2% 0.9%
----------------------------------------- -------- --------
Reported EPS ($) (0.84) 0.23
----------------------------------------- -------- --------
Operational EPS ($) 0.03 0.15
----------------------------------------- -------- --------
Book value per share ($) 2.97 3.83
----------------------------------------- -------- --------
Tangible book value per share ($) 2.87 3.00
----------------------------------------- -------- --------
Total Shares in issue ('000) 174,619 174,619
----------------------------------------- -------- -------- --------- ---------
Table 2: Summary of financial position as at December 2019
Q1 2019 Q2 2019 Q3 2019 $'million Q4 2019 Q4 2018 Total CCY
Audited Audited Var % Var %
-------
Assets
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
404.3 124.6 135.4 Cash and short-term funds 130.5 382.0 (65.8) (61.7)
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
29.1 23.9 25.1 Financial assets at fair value 25.2 24.9 1.3 11.2
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
1,097.3 604.6 595.3 Loans & advances 644.1 1,154.1 (44.2) (38.0)
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
318.5 120.9 120.7 Investments 107.8 369.8 (70.9) (63.0)
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
546.2 559.1 566.4 Investment in associates 582.1 532.2 9.4 9.4
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
160.2 74.3 67.7 Intangible asset 73.0 159.0 (54.1) 36.7
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
205.2 74.0 61.9 Other assets 85.1 182.7 (52.6) (50.7)
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
2,760.8 1,581.4 1,572.5 Subtotal 1,647.8 2,804.7 (41.3) (34.9)
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
Assets included in disposal groups held for
- 915.2 915.2 sale 979.6 - 0.0 0.0
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
2,760.8 2,496.6 2,487.7 Total assets 2,627.4 2,804.7 (6.3) 3.8
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
Liabilities
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
1,557.5 684.0 684.3 Customer deposits 723.7 1,631.8 (55.7) (49.8)
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
436.4 413.5 439.6 Borrowed funds 366.8 410.2 (10.6) (7.7)
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
71.9 43.5 41.1 Other liabilities 115.5 73.8 56.7 >100
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
2,065.8 1,141.0 1,165.0 Subtotal 1,206.0 2,115.8 (43.0) (36.1)
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
- 809.8 809.8 Liabilities included in disposal groups held 874.2 - 0.0 0.0
for sale
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
2,065.8 1,950.8 1,974.8 Total liabilities 2,080.2 2,115.8 (1.7) 10.2
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
695.0 545.8 512.9 Capital and reserves 547.2 688.9 (20.6) (14.8)
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
2,760.8 2,496.6 2,487.7 Total equity and liabilities 2,627.4 2,804.7 (6.3) 3.8
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
Loan: Deposit ratio 89.0% 70.7%
---------------------------- ------------------------------------------------ --------- --------- ----------------
NPL ratio 11.4% 11.1%
-------- -------- -------- ------------------------------------------------ --------- --------- ------- -------
Notes: CCY refers to constant currency variance which excludes
the impact of local currencies' changes against the USD.
Executive Chairman's statement
Dear Atlas Mara shareholders,
In this extraordinary time, our priority is first and foremost
the health and safety of our employees and customers and their
families. The COVID-19 pandemic is affecting our businesses and the
economies in which we operate in fundamental ways, many of which
are yet unknown. We remain committed to serving our customers and
communities to the best of our ability, and I want to personally
thank our dedicated team members across our markets who are doing
so every day under difficult and trying circumstances. While we did
not achieve t he objectives we set out to accomplish by the end of
2019, we remain on track and committed to the path we embarked on
last year.
Strategic Transaction
I assumed the chairmanship of Atlas Mara in February 2019. The
Board undertook a review of the Company's strategic options to
drive shareholder value, including an in-depth review of each
banking operation and its fit with our long-term strategy. This led
to a decision to reposition our operations as well as assess
indications of interest with respect to Atlas Mara's banking
interests in four countries: Mozambique, Rwanda, Tanzania, and
Zambia. These countries in aggregate represented less than 2% of
total segment profits, before central costs, and the decision to
partner or exit was driven by our belief that the right strategic
operating partner could accelerate these banks' path to target
returns, while enabling Atlas Mara to share in the value creation
over time through potential equity participation, as these banks
realized their potential. We subsequently announced a binding term
sheet with Equity Group Holdings but were unable to complete the
transaction by year-end. These divestitures have been further
delayed in 2020 by COVID-19 related travel bans and lockdowns. The
basis for our decision to exit direct ownership of these banks
remains sound, and we remain committed to completing a strategic
transaction that includes these banks as soon as practicable this
year.
Financial Results
Our 2019 adjusted net profit (which excludes extraordinary and
one-time items) was $5.8 million, which was lower year over year
due primarily to (i) lower revenue, resulting from loan book
contraction, lower margins, and tighter liquidity, (ii) higher
impairments, and (iii) a one-off gain recognised in the comparable
period on the acquisition of additional shares in UBN . Overall, we
reported a net loss of $143 .2 million, due predominantly to
remeasurement of the four banks set to be part of a strategic
transaction, which, in accordance with IFRS 5 accounting
requirements, must be treated as assets held for sale.
Our 2019 financial performance reflects a more difficult year
for our banks, with macroeconomic challenges across our markets of
operation. I am pleased to report that our core markets - Nigeria,
Botswana, and Zimbabwe - remained profitable, with our banks in
Nigeria and Botswana each declaring a dividend for the first time
since we became shareholders of these banks. While our holding
company operating expenses remain above our target, we made
significant progress in 2019 on cost reductions that should begin
to show through in H 2 2020. We also believe the completion of a
strategic transaction will enable further and accelerated
streamlining of holding company structure and costs.
Nigeria
UBN, our largest investment in our largest market, had a strong
year, with net profit of NGN19.9 billion ( $ 64.9 million ) and an
NPL ratio improved by 290 bps. Assets, deposits, net profits, and
return on equity all improved year on year; a ctive mobile banking
users reached about 2.1 million ; and o il & gas sector
concentration reduced by approximately 7% of the total loan book .
The bank also recently received approval to pay dividend s - its
first in more than a decade - of approximately $20 million. In the
past five years, UBN has achieved impressive results across several
metrics, including active customers average annual growth of 26%,
gross loans average annual growth of 12%, and customer deposits
average annual growth of 11%.
In June 2019 , UBN issued a fully subscribed NGN30 billion Tier
II bond, the largest ten-year bond ever issued by a Nigerian
corporate. During the year , UBN also agreed with the U.S.
International Development Finance Corporation ("DFC " , formerly
the Overseas Private Investment Corporation), for a $200 million
ten-year loan to support growth in key segments including SMEs and
women-owned businesses. For Atlas Mara , this new facility
represents another milestone in our partnership with DFC. This
facility will be a pillar of UBN's targeted growth strategy. The
bank remains well-capitali s ed and is positioned for long-term
growth.
I want to congratulate Emeka Emuwa and the management team for
deliver ing an excellent year and continu ing to drive forward on
UBN's long-term plans. We look forward to continuing to work
closely with UBN management to capitali s e on the considerable
opportunities in Nigeria.
Subsequent to year-end
UBN announced in January an agreement to sell its UK subsidiary
to MBU Capital following a competitive selection process. This will
enable a substantially improved capital allocation and management
focus on the domestic market, and we believe the transaction is
accretive to shareholder value.
In March 2020, following the CBN 's devaluation of the official
exchange rate from NGN 306 .5/$1 to NGN 361 /$1 (driven primarily
by low oil prices and impact of the COVID-19 pandemic), Atlas Mara
shifted the exchange rate used to account for our investment from
the official rate to the more market-driven NAFEX rate, to reflect
a more accurate picture of USD value. While it may result in
greater quarterly volatility, we view this as positive for the
market, and it will enable us to more transparently present the
financial picture for USD investors such as Atlas Mara. As a
result, we expect to see in Q1 20 20 negative accounting impact of
$104 million, or $0.61 per share, to the carrying value of our
investment in UBN and the Group's equity.
Botswana
BancABC Botswana remained profitable in 2019, showing a positive
second half trajectory with a 35 % increase in net profit over the
first half. Botswana experienced sluggish economic growth in 2019
due to weakness in the diamond market, a severe drought, and slower
growth in neighbouring (trade partner) countries. During the year ,
the bank made valuable progress in bolstering talent ; launching
new digital platforms including its corporate banking platform,
BancOnline ; reengineer ing legacy processes for improved
efficiencies ; strengthening risk functions ; and revamping its
customer value proposition. The bank also signed a new $10 million
Tier II financing facility with PROPARCO to support growth , which
was funded in May 2020 . I am also pleased to report that the bank
declared and paid dividend s to shareholders, including Atlas Mara,
in Q4 20 19, a first under our ownership. We commend management for
their hard work to deliver dividends to shareholders and look
forward to working with the team to execute the bank's long-term
plans and continue to deliver returns to shareholders.
Zimbabwe
BancABC Zimbabwe continued to perform admirably, delivering
strong operating and financial performance in local currency terms,
despite an extremely difficult macro - environment. The economy
contracted by 7.5% as local currency was reintroduced, severe FX
shortages and hyperinflation ensued, and the country experienced an
acute dry season. Nonetheless, the bank delivered a 16 2.2 %
increase in net profit in inflation-adjusted local currency terms,
on the back of strong fees, commissions, and FX income, as the
Markets and Treasury team in particular continues to deliver in a
volatile market. BancABC Zimbabwe is now the number two bank in the
market as measured by profit after tax.
We have moved proactively to position the bank for the near- and
long-term future in Zimbabwe. The bank is appropriately focused on
strong balance sheet management through foreign-denominated
investments and growth in the property portfolio, while increasing
focus on lower-risk borrowers across SME, commercial, and consumer
segments. In the hyperinflationary environment, the team is
reducing long-term lending and focusing on national priority areas
such as infrastructure and renewable energy. Critically, the bank's
aggressive digiti s ation effort is bearing fruit. Investments in
mobile banking and the completion of the core banking system
upgrade look well-timed in hindsight. Our CEO in Zimbabwe, Lance
Mambondiani, who joined us last July, has done a tremendous job and
we look forward to supporting the team as they continue to navigate
a difficult environment.
Other Markets
Performance in our other markets - now accounted for as assets
classified as held for sale - was mixed, and, other than Rwanda,
generally behind what we expected. Rwanda delivered an increase in
profit year on year supported by a macroeconomic environment that
saw real GDP growth of 9.5%, underpinned by a strong performance in
the services and industrial sectors. Mozambique's core underlying
performance improved on the back of its digital strategy, but it
underperformed in profitability as a result of one-off costs.
Tanzania underperformed in the face of a continually challenging
macroeconomic environment, felt disproportionately by subscale
banks, as well as investments made to refocus the business from a
predominately corporate bank to a retail bank. Notwithstanding the
challenges, Tanzania recorded 60% growth in its Retail business. We
faced some very challenging market environments, particularly in
Zambia, which saw a combination of commodity price collapse,
currency weakness, increasing sovereign debt yields, and severe
market liquidity shortages. While we fully intend to consummate a
strategic transaction involving these banks during 2020, we are
working very closely with our management teams to position the
banks for better long-term performance.
COVID-19 Impact and Looking Ahead
While we believe our long-term thesis and strategy remain
intact, in 2020 our focus is on business continuity, contingency
planning, and supporting our customers, employees, and communities
through this crisis. The full impact of the pandemic on our
business is not yet clear, but some of our countries have already
seen broad effects. We expect near-term increases in NPLs, customer
withdrawals, and other effects including yield and fee compression
as central banks intervene and foreign exchange markets display
extreme volatility. Each one of our banks had contingency planning
in place, including for work from home, which are now being
executed. W e are monitoring the situation daily.
Our banks - deemed essential services in all our markets -
remain open and are following government guidance on best
practices. Our banks are proactively taking specific actions
focused on protecting asset quality and managing balance sheet s ,
as well as accelerating some of our digital propositions to ensure
we remain resilient and weather the crisis. We have also responded
to this crisis with innovation where possible. For example, we have
seen a sharp uptick in digital banking utili s ation, after seeing
increased digital volumes and revenues across all countries in
2019. In Zimbabwe, USSD banking capabilities, and a new WhatsApp
chatbot feature providing basic services as well as COVID-19
information, have been important additions. In Botswana, we
launched our SaruMoney Retail Banking App in March 2020 to
accelerate our digital strategy , and saw in one month the sign-up
volume we expected for the first year. We will continue to look for
opportunities to innovate in the near-term to better serve
customers in this extraordinary environment. We are learning a lot
about our ability to work from home and with fewer resources -
learnings that will enable us to operate more efficiently in the
future.
We know this year will be difficult. The global demand shock,
low commodity prices, local currency devaluations, and current and
potential future regulatory actions will likely affect our
businesses. Regulatory and other government actions to date have
varied across our markets, but have included:
-- Liquidity support: lower reserve requirements, cheaper
overnight funding, eased FX restrictions, and direct injections of
liquidity (e.g. a nearly $10 billion injection in Nigeria).
-- Capital support: lower minimum CARs and special provision
exemptions.
-- Lending, cost, and money supply: lower interest rates, credit
facilities for on-lending and refinancing, increased digital
transaction limits, and lower transaction fees.
-- Fiscal stimulus (e.g. a $1.4 billion IMF package announced in
Nigeria).
We hope to see further stimulus, and we will continue to work
closely with our regulators to support our markets. However, many
of these initiatives will be passed on to the customer and may
ultimately result in more challenging financial performance for our
banks.
Share Price Performance
As Chairman and as a fellow shareholder , I share your
frustration with our company's share price performance. While our
financial results have been below our expectations, we firmly
believe the current market price is disconnected from the
fundamental value in the company. O ur stock price underperformed
throughout 2019, and unfortunately the impact of the current
pandemic has exacerbated this trajectory in 2020. Atlas Mara is not
alone among African corporates in this regard. Stock markets in
Africa have performed especially poorly in the current crisis, with
the impact of the pandemic already worse for Africa than the rest
of the world, and indeed worse than in the depths of the 2008
global financial crisis.
Stock / Index Global Financial COVID-19 Pandemic
Crisis (Q4 (Q1 2020)
2008)
Atlas Mara n/a (46.6%)
Africa (1) (20.8%) (39.2%)
Emerging Markets
(2) (27.9%) (23.9%)
S&P 500 (22.6%) (20.0%)
NASDAQ (24.6%) (14.2%)
(1) MSCI Emerging Markets
Frontier Africa Index
(2) MSCI Emerging Markets
Index
At FYE 2019, Atlas Mara's tangible book value per share was
$2.87. Taking into account the subsequent impact of the Nigerian
Naira devaluation and accounting change, the pro forma tangible
book value per share of $2. 26 remains more than four times the
current market price. We believe our stock - like major African
markets - has been oversold.
At the same time, there are reasons for optimism. While Africa
will be challenged by the pandemic, there are reasons to believe
that the direct impact could be relatively less than in other parts
of the world, and the region could be poised to show strong
economic and social resilience in the recovery. The difference
between Africa and developed markets in underlying fundamental
demographic trends will be starker now, and Africa's opportunity to
accelerate directly into a digital future is unparalleled globally.
From 2001 - or from 2008, the last global economic crisis - through
the latest projections for 2020-2021, economic growth in
sub-Saharan Africa has been fairly uncorrelated with that of the G7
economies.
The combination of our markets' attractive underlying
demographic trends, the long-term focus in Africa on increasing
trade (in contrast to much of the West today), the importance of
the banking sector in facilitating economic recovery efforts, and
the apparent undervaluation of both African equities generally and
Atlas Mara specifically make us optimistic that our strategy can
bear fruit in the long-term, in conjunction with a broader African
recovery and growth story.
Like most businesses globally, our banks will be tested this
year, and management teams will likely need to defer some 2020
goals and priorities in favour of more urgently pressing concerns
to weather the crisis. Our focus is on keeping customers and
employees safe, prioriti s ing liquidity and capital, delivering
for our stakeholders, and supporting the recovery effort. We will
be there for our communities today, and we will pursue the
opportunit ies we see in tomorrow.
Thank you for your continued support, understanding and patience
in this challenging environment.
Michael Wilkerson
Executive Chairman
Omar Khan, Chief Financial Officer performance overview
These results reflect the continued execution of the strategic
review that commenced in February 2019, combined with macroeconomic
headwinds faced in some of our countries in both our continuing and
discontinued operations.
Continuing operations
Nigeria
Union Bank of Nigeria ("UBN") reported robust results for the
year, with profit before tax increasing by 33% on a constant
currency basis and double digit return on equity of 10.2% compared
to 6.2% in 2018. The NPL ratio improved from 8.7% to 5.8% in 2019,
and cost to income ratio decreased to 74.1% from 79.8%.
While the Nigerian economy saw positive GDP momentum during
2019, with growth of 2.3% compared to 1.9% reported in 2018, this
has been negated in Q1 2020 by the impact of the global crash in
oil prices as well as the federal government's decision to impose
strict lockdowns in the states of Abuja, Lagos, and Ogun, and
introduce restrictions on movement elsewhere, in response to the
global pandemic. Revised forecasts now predict that Nigeria will
likely experience a contraction of GDP of between 2% - 3% in
2020.
In response to the oil price crisis and tight liquidity, the
Central Bank of Nigeria ("CBN") adjusted the official exchange rate
from NGN306/$1 to NGN361/$1.
Botswana
Botswana's economy continued to expand, as indicated by real
(full year) GDP growth forecast for 2019 of 3.0%; however, this was
lower than the 4.5% recorded in 2018, mainly as a result of
sluggish output growth in the mining sector, which grew by only
1.6% compared with 4.1% in 2018.
BancABC Botswana's full year results showed a profit before tax
of $14.2 million, a decrease of 7.9% on a constant currency basis
from $16.2 million reported in 2018. After tax and non-controlling
interest, Botswana reported $8.9 million, compared to $12.6 million
in 2018. This decrease reflects the impact of Atlas Mara's sale of
20.47% out of its stake in BancABC Botswana in a successful IPO in
December 2018 and an additional sale of 1.38% stake in 2019,
bringing Atlas Mara's shareholding to 78.15% at the end of 2019.
The bank achieved a modest performance in 2019, which was slightly
lower than that of the previous financial year, albeit with a
significant improvement in performance in the second half of the
year. The project rollout for key transactional technology
platforms will be a key driver in transforming the bank's balance
sheet and future growth capacity. The bank will focus on
accelerating momentum in order to continue to deliver returns to
its investors.
Zimbabwe
Zimbabwe's economic landscape went through significant
transformation in 2019 following the change from a multicurrency
regime and the adoption of a local currency for the first time in a
decade. The Zimbabwean Dollar ("ZWL") became the country's sole
legal tender in June 2019, and has since been under severe
devaluation pressure, reflecting supply and demand mismatch
conditions. Monthly inflation accelerated from 42.1% year-on-year
in December 2018 to 521% year-on-year in December 2019, resulting
in significant erosion of consumer demand based on the
hyperinflation status of the economy.
BancABC Zimbabwe exceeded expectations with a growth rate of
162.2% in net profit in 2019 on an inflation-adjusted local
currency basis. Balance sheet management with hard assets,
including a focus on foreign currency bonds and properties, helped
to enhance profitability at a time when the country is in
hyperinflation. The Markets and Treasury team reaffirmed their
position as a market leader in foreign exchange trading and bonds.
Trading and dealing income was strong despite extreme movements in
the market.
The bank is continuing its transformation of digital platforms
and launching a number of innovative products to provide broader
and better service to customers. Amidst economic contraction and
hyperinflation, BancABC Zimbabwe has developed a reputation for
product innovation, tapping into growth opportunities while
preserving shareholder value.
Discontinued operations
With the announcement on 30 April 2019 of the proposed strategic
transaction involving the Group's subsidiaries in Mozambique,
Rwanda, Tanzania, and Zambia, the operations of the four
subsidiaries have been re-classified as disposal groups held for
sale. The remeasurement of these disposal groups at lower of: (i)
the carrying amount and (ii) fair value less costs to sell,
resulted in an impairment loss of $105.5 million, which
predominantly impacted the intangible portion of Atlas Mara's book
value. In addition, the recycling of the foreign currency
translation losses and NCI (totalling $31.8 million as at 31
December 2019, or (0.19) per share) through the statement of profit
or loss upon disposal, is expected to result in a further decrease
in book value.
Excluding one-off and transaction-related expenses or gains, our
cost to income ratio was 106.6% (December 2018: 99.3%). Substantial
cost reduction will be a key focus for management as we transition
the Group to a more simplified structure following the completion
of the strategic transaction.
COVID-19 impact
The COVID-19 pandemic has already had significant negative
impact on the global economy, including the geographies in which we
operate.
We believe the pandemic's full impact on our markets is yet to
be seen. While there can be no certainty at this stage, we expect
2020 operating and financial performance to be negatively impacted
in each of our markets. Each bank has been closely monitoring and
prepared stress test models of the potential impact of COVID-19.
Details are included in our annual financial statements available
on the Atlas Mara website.
Nigeria
UBN is relatively well-positioned to weather the impact with a
capital adequacy ratio ("CAR") of 19.7%, which is significantly
above the regulatory minimum of 15.0% for banks with international
operations. This position will be further strengthened once the
sale of UBN's UK subsidiary is completed, reducing the bank's
regulatory minimum CAR to 10%, as required for domestic banks with
a national/regional banking licence.
Atlas Mara accounts for UBN based on the equity accounting
method and has historically applied the CBN official foreign
exchange rate. The CBN's decision to adjust the official rate from
NGN306/$1 to NGN361/$1 and move it closer to the NAFEX rate,
combined with the uncertainties in the wake of the global crisis,
triggered a reassessment of this policy. Effective 1 March 2020, we
have moved away from the official rate to use the NAFEX rate.
As UBN is the Group's largest asset, we incorporated the impact
of this exchange rate change as part of our sensitivity analysis.
The change would result in a decrease of $104 million in net asset
value as further foreign currency translation losses are
recognised, moving book value per share from $2.97 to $2.36 and
tangible book value per share from $2.87 to $2.26.
Botswana
Botswana is expected to see significant economic impact due to
weaker global demand affecting its two primary revenue sources:
diamond exports and tourism. The Central Bank has committed to
exercising regulatory forbearance in relation to the assessment of
non-performing loans and determination of expected credit losses,
for regulatory compliance purposes. The Central Bank will continue
to assess the measures and announce additional actions as the need
arises.
Our business in Botswana has taken the necessary steps to ensure
that operations continue seamlessly during disruptions and that
essential services are provided. We also continue to test our
disaster recovery and business continuity plans. The bank also
launched its SaruMoney retail banking app in March 2020 and in one
month saw the signup volume exceeded the amount expectedfor a full
year.
Zimbabwe
The Zimbabwean economy was expected to contract by 4% this year
due to a depressed agricultural season. The lockdown announced on
19 April 2020 is expected to exacerbate this. Although the country
failed to meet the conditions set out by the World Health
Organization to lift the restrictions, mines have been allowed to
resume operations at full capacity, while manufacturers are
permitted to operate at limited capacity. The government has taken
steps to manage the negative impact on the economy, including
allowing the use of the US Dollar and fixing the exchange rate at
25:1 for the duration of the pandemic.
While critical businesses, including banking services, have been
allowed to continue during the ongoing lockdown, branches are
closed to the public and where possible staff are working from
home. The bank continues to work with customers to support them and
the economy through this period. In response to the crisis, the
bank launched a virtual branch to service customers, as well as a
new WhatsApp chatbot feature to provide basic banking services as
well as COVID-19 information.
Performance summary
The group recorded an adjusted net profit of $5.8 million for
the year ended 31 December 2019 versus $26.4 million for the year
ended 31 December 2018.
Statement of comprehensive income review
Total income
Atlas Mara reported a decrease in total income of 18.0% (18.3%
on a constant currency basis) as a result of decline in net
interest income.
Table 3: Total income for the year ended 31 December 2019
$'million 31 December 2019 31 December 2018 Var % CC Var %
---------
Continuing Discontinued Total Continuing Discontinued Total
----------- ------------- ------ ----------- ------------- ------ ---------
Net interest income 11.4 74.8 86.2 51.4 81.2 132.6 (35.0) (6.5)
--------------------- ----------- ------------- ------ ----------- ------------- ------ ------- ---------
Non-interest income 53.7 49.9 103.6 54.1 44.7 98.8 4.9 51.7
--------------------- ----------- ------------- ------ ----------- ------------- ------ ---------
Total income 65.1 124.7 189.8 105.5 125.9 231.4 (18.0) 18.3
--------------------- ----------- ------------- ------ ----------- ------------- ------ ---------
Net interest income
Net interest income declined by 35.0% (6.5% on a constant
currency basis), mainly driven by the decline in interest income on
loans, as a result of contraction of the loan book, lower margins
and higher cost of funds experienced in some of the banking
subsidiaries.
Interest expense increased by 8.3% (25.6% on a constant currency
basis) compared to the prior period mainly as a result of an
increase in borrowed funds. This was also reflected in the increase
in cost of funds to 5.9% for the year ended 31 December 2019 from
5.6% as reported in the comparable period. The subsidiaries are
focused on reducing cost of funds through attrition of expensive
deposits and replacement with sticky deposits.
Non-interest income
Non-interest income increased during the period by 4.9% (51.7%
on a constant currency basis) mainly as a result of higher trading
income in Zimbabwe, Mozambique and Zambia. Fee income declined by
8.3% in the current year compared to the prior period as a result
of pressure on loan growth.
Total expenses
Total expenses of $230.6 million ($202.3 million excluding
one-offs) represented a decrease of 4.1% (increase of 24.4% on a
constant currency basis). The decrease was largely due to the
effects of currency translation in Zimbabwe as well as the
strategic cost management initiatives across the Group. Excluding
one-off transaction and restructuring costs, total costs declined
by 12.0%.
Costs at the Centre were reduced from $37.4 million in 2018 to
$31.7 million in 2019 on a normalised basis. This reduction is
based on the continuing focus by the Group to reduce costs as it
transforms into a more focused and efficient platform.
Staff costs decreased by 3.9% from $96.8 million in 2018 to
$93.0 million in the current year, but the contribution to total
expenditure has increased to 42.4% from 40.2%.
On an adjusted operating profit basis, Atlas Mara reported a
cost to income ratio of 106.6% (2018: 99.3%), compared to 121.5%
(2018: 104.0%) on an IFRS basis.
Loan impairment charges
Credit impairment charges increased over 100% from $0.2 million
in 2018 to $11.4 million in 2019, as a result of a significant
increase in credit risk on certain loan exposures, reflected by the
movements from stage 1 and 2 to stage 3, combined with the impact
of recalibration of the model as the IFRS 9 process evolves and
factors in the impact of macroeconomic changes.
The Group continues to enhance its risk management framework
including credit monitoring and recovery processes.
Share of profit of associates
This represents Atlas Mara's share of profit from its 49.97%
stake in UBN, based on UBN's published audited results for the year
ended 31 December 2019. The impact of acquisition-related
intangible asset amortisation is also included.
UBN's financial performance improved across a number of key
metrics in 2019 as compared to 2018. Return on average equity
improved to 10.2% from 6.2%, supported by profit before tax growth
of 10.3% over the same period last year. During the year, UBN also
focused on expanding its loan book, recording loan growth of 9.7%
from the level at 31 December 2018, while driving recoveries of
loans previously written off. Customer deposits also improved by
3.3%, demonstrating the success of on-going acquisition of low-cost
deposits driven by strengthened brand affinity. UBN's aggressive
focus on recoveries and improving asset quality resulted in the
continued decline in the NPL ratio, from 8.7% at 31 December 2018
to 5.8% at 31 December 2019.
The cost optimisation programme initiated by the bank also
started to yield positive results as total expenses declined by
0.5%, also resulting in a decline in cost to income ratio from
79.8% at 31 December 2018 to 74.1% at 31 December 2019. UBN remains
well-capitalised, with its capital adequacy ratio sitting at 19.7%
at 31 December 2019, substantially higher than the regulatory
minimum of 15.0%.
Statement of financial position review
Customer loans and advances comprise 39.1% of the Group's total
assets (excluding assets included in disposal groups classified as
held for sale). Cash, short-term funds and marketable securities
represent 16.0%; investment in associate (UBN) balance accounts for
35.2%; goodwill and intangible assets make up 4.4% with other
assets (made up of derivatives, property and equipment, investment
property, prepayment and other receivables etc.) making up the
remainder at 5.3% of total assets (excluding assets included in
disposal groups classified as held for sale).
Including assets classified as held for sale, total assets
contracted by 6.3% (3.8% increase on a constant currency basis)
reflecting the impact of the currency devaluation in Zimbabwe and
IFRS 5 impairment loss recognised on the remeasurement of the
assets and associated liabilities of the disposal groups classified
as held for sale.
Loans and deposits
Table 4: Customer loans and deposits composition by country at
31 December 2019
$'million 31 December 2019 31 December 2018 Var CC Var Var CC Var
(%) (%) (%) (%)
Loans Deposits Loans Deposits Loans Deposits
Continuing operations
Botswana 606.3 662.5 541.4 671.8 12.0 10.9 (1.4) (2.3)
Zimbabwe 22.7 61.2 86.6 152.4 (73.7) 76.2 (59.8) >100
Other 15.1 - 16.9 0.1 (10.8) (10.8) (>100) (>100)
Total 644.1 723.7 644.9 824.3 (0.1) 11.7 (12.2) 3.2
Discontinued operations
Mozambique 89.9 179.3 65.9 147.3 36.4 36.6 21.7 21.8
-------------------------------------- -------- -------- -------- -------- ------ ------ ------ ------
Tanzania 51.2 65.3 57.2 65.9 (10.5) (10.5) (1.0) (1.0)
Zambia 188.8 380.1 193.0 348.2 (2.2) 15.0 9.2 28.4
Rwanda 172.5 284.1 193.1 246.1 (10.6) (4.6) 15.5 23.3
Total 502.4 908.8 509.2 807.5 27.0 (20.6) (13.7) (5.7)
Reclassified as part of held for sale (502.4) (908.8) - - - - - -
Reported Group balance 644.1 723.7 1,154.1 1,631.8 (12.0) (2.8) (12.9) (1.4)
-------------------------------------- -------- ------
Loans
As presented in Table 4 above, total loans decreased to $644.1
million at 31 December 2019 from $1,154.1 million at 31 December
2018. The decline is mainly due to the balances related to the
disposal groups held for sale, reclassified in line with IFRS 5.
Other factors impacting the contraction of the loan book include
market liquidity constraints and a lower than anticipated demand
for credit due to the challenging economic environment in our
countries of operations.
Loans in continuing operations increased by 11.7% in constant
currency terms at 31 December 2019 due to growth in Botswana and
Zimbabwe.
Deposits
Total deposits declined to $723.7 million (December 2018:
$1,631.8 million) mainly as a result of the reclassified balances
included in the disposal groups classified as held for sale. Loss
of deposits in Tanzania and Botswana, and the continued devaluation
of the currency in Zimbabwe, also contributed to the decline in
total deposits.
Term deposits remained the highest percentage of deposits while
the decline in transactional deposits and overnight deposits
reflect the tight liquidity situation experienced in most of our
countries of operation especially Zimbabwe.
Customer deposits comprise 60% of the liability base (excluding
liabilities included in disposal groups held for sale) and
represent 27.5% of the aggregate of liabilities and equity. The
loan to deposit ratio for at 31 December 2019 was 89.0% (December
2018: 70.7%).
For continuing operations, deposits increased by 3.2% on a
constant currency basis despite a reduction in expensive deposits
in Botswana.
Credit quality
NPLs as a percentage of the loan book increased to 11.4%
(December 2018: 11.1%), as a result of the 13.7% overall reduction
in the loan book. The non-performing loan book showed positive
movement by a 22.9% reduction in value.
The stage 3 impairment coverage ratio of 50.4% (December 2018:
44.8%) is considered appropriate given the credit quality at
year-end and is in line with coverage ratios reported by other
African banking groups.
Capital position
As at 31 December 2019, all of Atlas Mara's operating banks and
affiliates complied with local minimum capital requirements
relevant in respective countries, as summarised below.
Table 5: Capital adequacy ratios
December December Regulatory
2019 2018 Minimum
------------------------- -------- -------- ----------
Continuing operations:
------------------------- -------- -------- ----------
Nigeria 19.7% 16.4% 15.0%
------------------------- -------- -------- ----------
Botswana 18.6% 17.6% 15.0%
------------------------- -------- -------- ----------
Zimbabwe 58.7% 39.0% 12.0%
Discontinued operations:
------------------------- -------- -------- ----------
Mozambique 19.6% 23.8% 11.0%
Rwanda 23.5% 23.7% 15.0%
------------------------- -------- -------- ----------
Tanzania 16.6% 14.8% 12.0%
------------------------- -------- -------- ----------
Zambia 14.3% 15.9% 10.0%
------------------------- -------- -------- ----------
Investment in associate: UBN
Our total shareholding in Union Bank of Nigeria increased to
49.97% as at 31 December 2019 from 49.0% at 31 December 2018. The
investment is equity-accounted for in the statement of financial
position as an investment in associate, with a closing balance of
$580.6 million (December 2018: $530.6 million). The carrying value
of the asset increased due to the additional shareholding acquired
during the period and the increased profits reported by UBN during
the period.
We performed an impairment assessment on the carrying value of
the investment held in UBN as part of the year-end financial
reporting process, and also performed stress-tests on UBN's future
expected earnings. Having considered the impact of the devaluation
of the Naira, coupled with potential credit shocks in the Nigerian
market from lower oil prices and market-wide shortages of US Dollar
liquidity, the carrying value was nonetheless substantiated, with
no impairment required to the carrying value for this investment at
December 2019.
Goodwill and intangibles
The statement of financial position incorporates goodwill and
intangible assets of $73.0 million at 31 December 2019 (December
2018: $159.0 million). The decline in this balance is attributable
to the reclassification of balances relating to the four
subsidiaries classified as held for sale. These assets represent
4.4% of the Group's asset base (excluding assets held for sale),
resulting in a tangible book value of $2.87 per share (December
2018: $3.00 per share) and book value per share of $2.97 (December
2018: $3.83).
Segment information
The segmental results and statement of financial position
information represents management's view of its underlying
operations. In previous periods, management's view of the Group's
operations was presented on a geographically grouped basis.
However, following the announcement of the potential strategic
transaction resulting in an accounting reclassification, the
Group's activities were re-segmented based on countries of domicile
of our operating banks. The countries of operation are as listed
below:
Nigeria
Through our 49.97% stake in UBN and Board representation, Atlas
Mara has a footprint in Nigeria, Africa's largest economy. Nigeria
continues to represent a long-term destination for investment,
particularly in financial services, and our stake in UBN is a key
facet of our strategy for the region.
Atlas Mara, through its board seats, is working closely with UBN
management to monitor the impact of oil price and currency changes
on the credit and capital positions. We see positive medium-term
growth potential for UBN irrespective of the near-term challenges
from the macroeconomic environment.
Our share of profit from the 49.97% stake in UBN is based on
UBN's published audited financial statement for the year ended 31
December 2019.
Botswana
BancABC Botswana remains on track to execute its transformation
for growth strategy. While the performance for 2019 was softer,
there are several initiatives underway that should drive better
momentum, including building on the launch of the new Corporate
online banking platform and the onboarding of several new lending
scheme clients. We expect BancABC Botswana to continue to pay
dividends in 2020 and beyond.
Zimbabwe
In 2019, Zimbabwe managed to increase its profitability, on an
inflation-adjusted basis in local currency terms, by 162.2%. The
bank focused on customer experience and superior service with an
emphasis on technology-driven solutions. With this purpose in 2019,
the bank achieved significant milestones including a core banking
system upgrade, enhanced basic platforms such as mobile banking and
internet banking, and improved internal capabilities including core
risk functions and cyber resilience.
Discontinued operations
As a result of the strategic decision to exit Atlas Mara's
direct investment in four subsidiaries, and the related transaction
announced on 30 April 2019, our operations in the following
countries were reclassified as discontinued operations: Mozambique,
Tanzania, Zambia and Rwanda.
Corporate
Included in this segment are Atlas Mara Limited, the BVI
incorporated holding company, Atlas Mara Management Services, the
Dubai subsidiary, and all other intermediate Group holding
entities, also referred to as the Shared Services and Centre.
Table 7: Segment report
Segment report for the year ended 31 December 2019
$'million Group Continuing operations Discontinued
operations
----------------------------------------------
Botswana Zimbabwe Nigeria Corporate
Total Income 189.8 50.1 38.3 - (23.2) 124.6
Loan impairment charge (11.4) 1.5 (0.2) - (0.3) (12.4)
Operating expenses (230.6) (37.4) (21.6) - (33.6) (138.0)
----------------------------- ------- ---------------- -------- ------- --------- ------------
Share of profits of
associate 31.1 - - 31.2 (0.1) -
----------------------------- ------- ---------------- -------- ------- --------- ------------
Profit / (loss) before
tax (21.1) 14.2 16.5 31.2 (57.2) (25.8)
----------------------------- ------- ---------------- -------- ------- --------- ------------
Loss on IFRS 5 remeasurement (105.5) - - - - (105.5)
Profit / (loss) after
tax and NCI (143.2) 8.9 7.8 31.2 (56.4) (134.7)
Loans and advances 644.1 606.3 22.7 - 15.1 -
Total assets 2,627.4 856.7 161.3 580.6 49.2 979.6
Total liabilities 2,080.2 736.1 107.9 - 362.0 874.2
----------------------------- ------- ---------------- -------- ------- --------- ------------
Deposits 723.7 662.5 61.2 - - -
----------------------------- ------- ---------------- -------- ------- --------- ------------
Net interest margin
- total assets 3.3% 4.5% 6.1%
Net interest margin
- earning assets 4.7% 5.0% 14.4%
----------------------------- ------- ---------------- -------- ------- --------- ------------
Cost to income ratio 121.5% 74.6% 56.4%
----------------------------- ------- ---------------- -------- ------- --------- ------------
Statutory credit loss
ratio 1.0% (0.2%) 0.8%
----------------------------- ------- ---------------- -------- ------- --------- ------------
Return on equity (28.5%) 11.2% 14.7%
----------------------------- ------- ---------------- -------- ------- --------- ------------
Return on assets (5.5%) 1.3% 4.8%
----------------------------- ------- ---------------- -------- ------- --------- ------------
Loan to deposit ratio 89.0% 91.5% 37.1%
----------------------------- ------- ---------------- -------- ------- --------- ------------
Segment report for the year ended 31 December 2018
$'million Group Continuing operations Discontinued
operations
----------------------- ------- -------------------------------------- ------------
Botswana Zimbabwe Nigeria Corporate
----------------------- ------- -------- -------- ------- --------- ------------
Total Income 231.4 54.0 57.1 - (5.6) 125.9
Loan impairment charge (0.2) 1.9 0.1 - (0.5) (1.7)
----------------------- ------- -------- -------- ------- --------- ------------
Operating expenses (240.5) (39.6) (41.6) - (29.1) (130.2)
----------------------- ------- -------- -------- ------- --------- ------------
Share of profits of
associate 56.3 - - 27.8 28.5 -
Profit / (loss) before
tax 47.0 16.3 15.6 27.8 (6.7) (6.0)
Profit / (loss) after
tax and NCI 39.7 12.6 13.1 27.8 (2.8) (11.0)
Loans and advances 1,154.1 541.4 86.6 - 210.0 316.1
Total assets 2,804.7 851.0 220.6 530.6 240.2 962.3
----------------------- ------- -------- -------- ------- --------- ------------
Total liabilities 2,115.8 741.2 181.3 - 222.2 971.2
----------------------- ------- -------- -------- ------- --------- ------------
Deposits 1,631.8 671.9 152.4 - - 807.5
Net interest margin
- total assets 4.7% 4.8% 19.0%
Net interest margin
- earning assets 7.3% 5.4% 16.5%
----------------------- ------- -------- -------- ------- --------- ------------
Cost to income ratio 104.0% 73.4% 72.8%
Statutory credit loss
ratio 0.0% (0.3%) (0.1%)
----------------------- ------- -------- -------- ------- --------- ------------
Return on equity 6.1% 13.9% 33.2%
Return on assets 1.4% 1.5% 5.9%
----------------------- ------- -------- -------- ------- --------- ------------
Loan to deposit ratio 70.7% 80.6% 56.8%
----------------------- ------- -------- -------- ------- --------- ------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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