Zanaco 2016 AGM presentation

Bruce DickChief Executive OfficerZambia National Commercial Bank Plc. March 31st, 2016

2015 Financial Performance (The Transformation Journey)

A Presentation to Shareholders at the

2016 AGM

2

Agenda

Introduction

Outlook

Economic & Market Conditions

Market Performance

Focused & Consistent Strategy in Chosen Segments

Conclusion

Financial Performance

Current Significant Developments

How Is Our Performance?

Fit2Serve

What Drives Us?

Our Board & Executive Team

Our Journey

Our Governance Structure

Note: Office of CEO includes (Transformation & Strategy, Corporate Affairs investor relations, PR, external communications, Corporate Legal Counsel, Bank Secretary)

CCO Chief Commercial Officer

COOChief Operations Officer

CROChief Risk Officer

CFOChief Finance Officer

Business unit

Support function

Key

Compliance

HR & Training Office of CEO

Internal Audit

CEO

Board Of Directors

ChairpersonVice-

Chairman

MD Member MemberMemberMemberMember

4

Our Journey

Source: Zanaco MIS

Mar ‘13-Jan ‘14

• Board approved upgrade to core banking system• Designed and implemented the system

Feb ‘14-Jun ‘15

• Post implementation challenges arose from upgraded core banking system

• Market conditions challenging (cheque truncation, new reserving requirements, liquidity)

• Revised Medium Term Plan (2015-2017) approved by the Board

Jul ‘15 to date

• Revised Medium Term Plan put to context (how we will align organisation with MTP, position for challenging market conditions, etc)

• Planned for operating model review and redesign, the Fit2Serve (F2S) program

• Implementing the F2S

5

Focused & Consistent Strategy

978K customers

197 ATMs2,044 PoS

Clear focus on Food & Agric

67 Branches& Agencies

1.2 million Cards

oIncreasing engagements

with our customers

oIncreasing focus on our

core segments;

Personal

Food & Agriculture

SME

GRZ

Corporate

oDriving operating model re-

alignment to deliver;

Increased productivity

across the organisation

increased efficiency in

the way we conduct the

business

Source: Zanaco MIS

>500 ZanacoXpress Agents

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Deteriorating Macro Backdrop

Source: BoZ, WB country report

Dom

estic

econom

y e

xperie

ncin

g

stro

ng h

eadw

inds

7


Deteriorating Macro Backdrop cont’d

……

..Driv

en b

y a

mong o

ther is

sues, a

declin

e in

copper p

rices, w

hic

h is

als

o

negatin

g th

e p

ositiv

e im

pact o

f low

er

glo

bal o

il pric

es


8



…..T

hus a

chie

vin

g p

rice s

tability

rem

ain

s a

big

challe

nge


9



Tig

hte

r liquid

ity w

ith ris

ing in

terb

ank

fundin

g


Impact of inflation/Fx rate on money mkts

10

How Has The Market Performed?

Growing market, but fx assets and liabilities driving most of the growth, thus disadvantaging banks with predominantly Kwacha balance sheets

Source: BoZ

11

How Has Fx Impacted Market Deposit Growth?

Normalized market deposits growth rate (after stripping-out abnormal fxinfluence on demand deposits) remains in the upper teens

Source: BoZ

Significant Fxrate influence

YoY Growth Dec-15

Total Deposits 33%

Demand Deposits 35%

Savings Deposits 15%

Time Deposits 33%

12

Abnormal growth in Fx deposits arising from translation effects

Source: BoZ

Fx rate influence on growth

How Has Fx Impacted Market Deposit Growth?

13

How Have Core Deposits in the Market Performed?

……Non-traditional fx demand, & volatile term deposits driving funding growth in the market

Source: BoZ

Significant Fxrate influence

14

How Was Our Financial Performance?

Grew but at a much slower rate, however, cost were significantly

higher

* Impact of steep exchange rate depreciation on FX NPLs

** Impact of share consolidation exercise in 2015

• Revenue grew but below the

historically normal growth rate on the

back of;

• High cost of funding

• Slower than normal growth in L & A

• Operating cost significantly up due to;

• Challenges in the current operating

model

• FX impact on US $ denominated service

contracts (IT, & property expenses)

• One-off costs relating to cheque

truncation clean-up (industry wide

challenge), operating model redesign

etc

• Deposits grew but mainly driven by

term deposits which are expensive and

rate driven

Source: Zanaco IFRS Financials

Financial Highlights

(ZMW’ million) 2015 2014 Change

Revenues 1,068 973 10%

Operating expenses 785 606 30%

PBT 283 367 -23%

Exceptional Loss 104

Impairment 98 49 100% *

Tax charge 67 71 -6%

PAT 118 143 -17%

Deposits 6,033 5,054 19%

Assets 7,946 6,664 19%

L & A (net) 3,447 3,139 10%

Equity 1,040 1,001 4%

Operational C/ I 74% 62% 18%

Operational C/ I (less one-off) 65% 62% 5%

Dividend/share in ZMW 0.03 0.005 500% **

EPS in ZMW 0.081 0.016 406% **

ROA 1.5% 2.1% -31%

ROE 11.3% 14.3% -21%

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There is scope for revenue productivity improvement


How Was Our Financial Performance? cont’d

16

Further financial efficiency improvement expected


How Was Our Financial Performance? cont’d

17

Balance Sheet Structure & Efficiency

Strong opportunities still exist to further improve the way we sweat our assets


18

How Do We Fund Growth?


Sta

ble

and s

ticky fu

ndin

g p

ara

mount to

our g

row

th s

trate

gy

19

Balance Sheet Utilization


…….But current monetary policy measures hurting asset efficiency development.

High liquidity level arising from unwinding the bond portfolio in 2014 key for

relatively strong liquidity position

20

How Are We Adding Value?

Increasing our share in the key

sectors of the economy driving our

focus


21

How Are We Adding Value? cont’d

……While we also maintain a robust risk management framework, that support

our strategy of taking a long term view on our customers. The Food and

Agric segment which is core to the Bank demonstrate our ethos


22

How Do We Turn Around Performance?

Source: Zanaco MIS

oWe recognise that since privatisation, Zanaco; Has changed its outlook, business

model, key performance metrics, and it has significantly grown but has never reviewed its operating model

Has updated its core banking system without fully reviewing the supporting processes

oThe need to review the current operating model is apparent and thus, Zanacoembarking on the transformation journey, which involves re-organising the way we currently operate.

oThe aim of the transformation is to re-align the way Zanaco is organised with a view to; Increase productivity across the

organisation increase efficiency in the way we

conduct the business Increase financial sustainability &

growth

The re-organization of Zanaco is a Board approved

program led by a core group of executive

management with assistance from consultants

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What Have We Done So Far?

oWe have reviewed how the Bank is performing (diagnostics)

oWe have used the outcomes of the diagnostics to design what Zanaco

should look like in order to deliver on its Medium Term Plan

aspirations, as well as build a sustainable bank

oWe are now in the implementation phase of the re-organisation.

oImplementation is a collective team effort driven by executive and

senior management together with their respective teams, and

supported by consultants

oThe implementation of program initiatives is driven from a central

point, the Results Delivery Office, that manages, monitors, and

provide feedback to the executive team and the Board on progress,

challenges, and required mitigating solutions to encountered

challenges

What will it take? The journey will be tough but will create a winning culture based on strategic goals and investing in Zambia

WE MUST CREATE A CONSISTENT WINNING CULTURE…

…BASED ON LONG TERM STRATEGIC GOALS

Be #1 in Zambia’s most critical sectors

(e.g. Agric, SME)

Increase sales coverage to serve target

sectors and reach the underbanked

Reward top performers with above market

compensation

25

What Is Our Dividend Proposal?


Dividend Amount (K '000) 42,013 43,313 43,313 43,313

Main

tain

div

idend d

ecla

red &

paid

in 2

014

2012 2013 2014 2015

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Conclusion

Challenges in the macro and market conditions will continue, but focus on delivering performance is key

oEconomic outlook, and market conditions will remain fragile due to;

Elections pressure

Continued inflationary pressure

Continued power challenges

Tight liquidity

Further decline in industrial productivity due to increasing cost of borrowing as a

direct result of MPR upwards adjustment and removal of lending cap

Potential rise in default rate as borrowers are likely to struggle with payment

obligations

oOur focus will be on;

Continue building on the current improvements (deposits, customer engagement,

service delivery etc.)

Effective implementation of initiatives under F2S (Branch productivity

improvements, new organization structure, cost improvements etc)

Closely managing different stakeholders expectations during this massive

change program

Increasing risk management for both F2S and BAU activities

Turning around the financial performance of the Bank

Thank You for Time, Any Questions?

Disclaimer

Zambia National Commercial Bank PLC, (hereafter “Zanaco”) has taken all reasonable care to ensure that to the best of its knowledge this presentation is true and correct in

all material respects, does not contain any untrue statement of a material fact, is not misleading and does not omit to state any material fact, the result of which would make

the statements, opinions and intentions herein, in the context in which they are made, misleading in any material respect. This presentation and any other information

supplied is not intended to provide the basis of any evaluation, and should not be considered as a recommendation by Zanaco. Any recipient of this presentation, or of any

other information supplied in connection with this presentation should make its own independent investigation of the financial condition and affairs, and its own appraisal, of

Zanaco, including the merits and risks involved. This presentation does not constitute an offer to sell or the solicitation of an offer to buy any Zambia National Commercial

Bank PLC, ordinary shares in any jurisdiction to any person. Zanaco does not represent that this presentation may lawfully be distributed, or that any Zambia National

Commercial Bank PLC, ordinary shares may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an

exemption available there under, or assumes any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by Zanaco that would

permit a public offering of any Zambia National Commercial Bank PLC ordinary shares or distribution of this document in any jurisdiction where action for that purpose is

required. Accordingly, this presentation may not be re-distributed or re-published in any jurisdiction, except with the express approval of Zanaco.

Forward-looking statements

This presentation may include “forward-looking statements” which include all statements other than statements of historical facts, including, without limitation, those

regarding Zambia National Commercial Bank PLC’s financial position, profit and revenue forecasts, business strategy, plans and objectives of management for future

operations (including development plans and objectives relating to Zambia National Commercial Bank PLC’s products and services) and any statement preceded by, followed

by or that includes the word “projects”, “estimates”, “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “could” or “seeks” or any similar

expression or the negative thereof. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other

important factors beyond Zambia National Commercial Bank PLC’s control that could cause the actual results, performance and/or achievements of Zambia National

Commercial Bank PLC, to be materially different from future results, performance and/or achievements expressed or implied by such forward-looking statements. Forecasts or

projections made in this presentation are based on assumptions that may or may not materialize. While such forecasts or projections have been prepared with due care and

objectivity, no representation, warranty or undertaking, express or implied is made and no responsibility is accepted for the reasonableness of any forecast or projection.

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Zanaco 2016 AGM presentation

Investor Relations

Transcript of Zanaco 2016 AGM presentation