Achievements and Awards… Property development –Commercial projects - 1st runner up - Zimbabwe Project Management 2017 Awards Best bank supporting SME’S development - 1st runner up - ZNCC Awards 2017 Silver medal - Best SMEs Business Advisory Services - SMEs International Expo 2016 Outstanding Financial Institution of the year - 1st runner up - Megafest Business Awards 2016 Most Innovative Agency Banking Service - Agent Banking and Digital Financial Services Conference and Awards 2016 Best Turnaround Strategy in 2015 - Zimbabwe Quoted Companies Survey 2016 Awards FY17 Analysts’ Briefing Outline 1 FY Financial outturn 2 Strategy execution 3 www.zb.co.zw 1 FY Financial outturn 4 www.zb.co.zw Highlights show strong performance and asset growth.... 5 www.zb.co.zw Annual performance exhibits an upward trend over the past 4 years…. • 36% increase in earnings resulted in the EPS increasing by 45% and a 3% increase in ROE. • Competitive returns have also accrued to the life fund. Summarised statement of profit or loss ($m) Profit after tax ($m) FY17 FY16 % Change Total Income 72.69 65.07 12% Total expenses (50.94) (49.46) -3% 15.51 Profit Before Tax 21.75 15.61 39% 11.43 Transfer to Life Fund (3.56) (0.48) -646% 9.36 Share of profit in associate 0.66 (2.30) 129% FY14 FY15 FY16 FY17 Income tax expense (3.34) (1.39) -139% (9.36) Profit for the year 15.51 11.43 36% Earnings per share (EPS) (cents) 9.15 6.32 45% Return on equity (ROE) 16% 13% 3% 6 www.zb.co.zw Interest rates softened as liquidity increased on the market…. • Net interest income (NII), however, increased as the funding book repriced faster than the supported assets. • This was also enhanced by the tactical shift from wholesale to retail funding during the year. • NII contribution to total income remained low at 24%. Net interest income FY 17 FY 16 Change Net interest income trend ($m) Interest income Interest expense Net interest income Gross interest income(GII) 24.82 27.59 -10% 32 28 28 25 Interest expense 7.01 10.85 35% 20 17 17 18 13 11 11 Net interest income(NII) 17.81 16.74 6% 7 FY14 FY15 FY16 FY17 NII to GII ratio 72% 61% 11% 7 www.zb.co.zw Premiums from the life assurance business firmed…. • Gross life premiums increased in response to improved product penetration driven by the recruitment of more agents. • The technical assurance result improved by 11% on the back of 2.2% improvement in the related expenses ratio from 46.3% to 45.2%. • Annual performance for the past 3 years exhibit a steady and sustainable growth pattern. Net Life Assurance Premium Income ($m) Net life assurance premium income ($m) FY 17 FY 16 Change 6.41 Life assurance premium 11.70 10.72 9% 5.09 5.76 4.98 Life assurance expenses (5.29) (4.96) 7% Technical result 6.41 5.76 11% FY14 FY15 FY16 FY17 Technical expenses ratio 45.2% 46.3% 2.2% 8 www.zb.co.zw Reinsurance business remained flat…. • Reduction in local premiums was offset by an increase in premiums from the region whose contribution increased from 21% to 25%. • Technical expenses reduced marginally in tandem with a satisfactory claims outturn. • Technical results, however, exhibit mild volatility over the last 4 years. Net Reinsurance Premium Income ($m) Net reinsurance premium income ($m) FY 17 FY 16 Change 3.49 Reinsurance premium 19.10 19.13 0% 3.51 3.18 Reinsurance expenses (15.92) (16.10) -1% 3.03 Technical result 3.18 3.03 5% FY14 FY15 FY16 FY17 Technical expenses ratio 83.4% 84.1% 0.9% 9 www.zb.co.zw Non-funded income contributed 67% of total income…. • Banking commissions and fees increased by 9% largely driven by increased volumes in electronic banking products. • Investment returns increased significantly as underlying assets in portfolio paid dividends and experienced appreciation in value in line with movements on the ZSE. • Other income includes fees earned on advisory mandates. Non-funded income Non-funded income trend ($m) FY 17 FY 16 Change Mix Commissions and fees Fair Values Dividend received Other income Commissions and fees 37.80 34.63 9% 78% 4 4 3 5 3 5 1 Fair Values 2.73 0.24 1038% 6% 38 32 33 35 Dividend received 3.80 0.68 455% 8% (1) (3) Other income 3.97 3.22 23% 8% FY14 FY15 FY16 FY17 Total 48.30 38.77 25% 100% 10 www.zb.co.zw Cost efficiency has improved over the last 4 years despite pressure for expense build up…. • Operating expenses increased due to higher acquisition costs in banking and insurance operations, advertising and brand promotion expenses. OPEX analysis($m) Cost to income ratio % FY 17 FY 16 Change Mix Administration 14.21 13.21 -8% 28% Staff 23.49 21.73 -8% 46% Occupation 4.23 4.94 14% 8% 99% Computer and IT 2.20 2.30 4% 4% Communication 0.88 0.61 -44% 2% 80% 70% Transport 1.00 1.11 10% 2% 76% Cash based OPEX 46.01 43.91 5% 90% Depreciation 2.47 2.61 5% 5% Amortisation 2.45 2.95 17% 5% Non-cash OPEX 4.93 5.56 -11% 10% FY14 FY15 FY16 FY17 Total Expenditure 50.94 49.46 -3% 100% 11 www.zb.co.zw % change in income grew faster than the % change in expenses…. • Rate of income growth has been higher than the OPEX growth rate, creating a base for performance sustainability. % change in expenses % change in income -4% 1% 12% 12% 7% 3% -1% -19% FY14 FY15 FY16 FY17 12 www.zb.co.zw Total income contribution mainly driven by non-funded income…. Total income contribution FY 17 FY 16 Net earnings from lending activities 20% 27% Net reinsurance income 4% 5% Net life assurance income 9% 9% Non-funded income 67% 59% Total income 100% 100% 13 www.zb.co.zw All business units posted positive results…. SBU PAT contribution- FY 17($m) SBU PAT contribution- FY 16($m) 12.70 9.76 1.28 1.02 0.95 0.68 0.51 0.40 Banking Banking Reinsurance Life Assurance Life Reinsurance Other segments Other Life Assurance Life Other segments Other 14 www.zb.co.zw Underlying assets increased by 20%.... • Earning Assets contributed 70% of total assets. • Investment securities increased by 80% as the Group optimised on short-term opportunities. Composition of Total Assets ($m) Total assets growth ($m) FY17 FY16 Change Chart Title Earning assets Treasury Bills 155.95 118.63 31% Earning assets Total assets Money market investments 3.54 5.52 -36% Loans and other advances 104.97 99.19 6% Investment properties 31.11 27.87 12% 527 Investment securities 36.71 20.40 80% Investment in associates 35.49 35.23 1% 439 418 Total earning assets 367.77 306.84 20% 416 368 Non-earning assets 307 287 Cash and short term funds 106.82 82.19 30% Other assets 12.97 9.80 33% 230 Property and equipment 39.45 40.45 -2% Total non-earning assets 159.32 132.45 20% Grand total 527.09 439.29 20% FY14 FY15 FY16 FY17 Earning assets contribution 70% 70% 0% 15 www.zb.co.zw Treasury Bills (TBs) investments have remained a major source of income and capital stability…. • TBs purchased from primary market are earning coupon interest rates between 9-10% whilst secondary market trades have earned discount rates above 10% per annum. Treasury bills by category ($m) Treasury bills growth ($m) FY 17 FY 16 change TBs from primary market 11.43 - 100% 156 TBs from secondary market 105.69 83.49 27% 119 Capitalisation treasury bills 15.34 14.89 3% 101 ZAMCO TBs 23.49 20.26 16% 8 Total 155.95 118.64 31% FY14 FY15 FY16 FY17 16 www.zb.co.zw The Group has maintained a cautious approach to private sector credit expansion.… • General facility utilization has been low averaging below 60%. • Mortgage expansion was affected by pricing dynamics on the market which rendered mortgage finance unattractive to most sellers. • The Group has increased focus on guarantee programmes for loan growth. Gross Loans by product ($m) Gross loans growth trend ($m) FY17 FY16 Change Mortgage advances 16.90 17.73 -5% Short term loans 91.85 84.59 9% 173 128 Bankers acceptances 1.40 3.43 -59% 119 115 Insurance debtors 4.62 3.83 21% Guarantees 13.57 5.51 146% Total 128.34 115.09 12% FY14 FY15 FY16 FY17 17 www.zb.co.zw Lending improved by 12%, underpinned by Agric and Services…. GROSS LOANS SECTORAL ANALYSIS FY 17 FY 16 FY 17 FY 16 ($m) ($m) Change Contribution Contribution Private 29.05 29.86 3% 23% 26% Mortgage loans 16.9 17.73 5% 13% 15% Agriculture 12.75 11.41 12% 10% 10% Mining 0.67 6.79 90% 1% 6% Manufacturing 20.24 13.53 50% 16% 12% Distribution 7.29 7.57 4% 6% 7% Contruction 1.90 0.97 95% 1% 1% Transport 3.47 1.3 166% 3% 1% Services 25.39 18.41 38% 20% 16% Financial 10.03 6.96 44% 8% 6% Communication 0.64 0.65 1% 1% 1% Total 128.34 115.09 12% 100% 100% 18 www.zb.co.zw ….and aggressive collections reduced NPLS over time…. • The Group continues to focus on creating quality assets. • The NPL ratio improved from 23% in FY 16 to 11% in FY17. Gross loans impairment analysis ($m) Non-performing loans ratio (%) Non-performing loans Provisions 35% 60 30% 50 29% 49 25% 40 20% 23% 20% 30 18% 30 15% 26 20 24 10% 11% 10 12 13 14 5% 10 10 5 - 0% FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 19 www.zb.co.zw Reduction in NPLs is across all sectors except for construction….