TIDMATMA
RNS Number : 9622L
ATLAS Mara Limited
24 April 2018
24 April 2018
Reissued Atlas Mara Limited Reviewed Results - Year Ended 31
December 2017
Atlas Mara Limited ("Atlas Mara" or the "Company" including its
subsidiaries, the "Group"), the sub-Saharan African financial
services group, today releases its consolidated reviewed results
for the year ended 31 December 2017. The results represent an
extract from the reviewed summarised financial statements.
Principal highlights:
-- Reported 2017 net income of $45.4 million (2016: $8.4
million), and EPS of 42 cents (2016: 12 cents). This is the third
consecutive year of profitability for the Company
o 2017 reported profit benefitted from the inclusion of a
one-off gain of $20.6 million associated with the acquisition of
the additional shares in UBN. This gain arose as a result of the
fair value of the shares acquired exceeding the purchase
consideration paid
o Adjusted net profit is $37.0 million (2016: $20.8 million) and
excludes the impact of this gain and other transaction and
restructuring related expenses
-- Delivered $27 million in Shared Services and Centre cost
savings, exceeding the stated guidance of $20 million
-- Focused on growth and execution in streamlined business units:
o Retail & Commercial Banking led to an improved portfolio,
improved credit quality trends with lower NPLs at 11.8% (2016:
13.3%), and improved cost of funds at 5.5% (2016: 6.3%), while
achieving higher NII and NIM on a stable loan book. Achieved BVPS
growth from $4.44 in Q3 2017 to $4.77 in Q4 2017
o Developed our Digital offering and executed on strategic
partnerships
o Continued to enhance Markets and Treasury propositions to
customers, which are provided both directly and through our banking
subsidiaries
-- Continued shareholder support with oversubscribed equity
placement and subsequent strategic financing transaction with
existing Atlas Mara shareholders and new investor Fairfax Africa
Holdings ("Fairfax"), enabling an aggregate of $213.7 million
equity raise to accelerate growth plans
-- Executed on Nigeria strategy by increasing stake in Union
Bank of Nigeria ("UBN") from approximately 31% in Q3 2017 to 44.5%
in Q4 2017 and 48% in Q1 2018
-- Closed DFI facilities for asset growth of our operations to
support digital banking and financial inclusion initiatives
Commenting on the results, Bob Diamond, Chairman, said:
"2017 was Atlas Mara's best operating performance to date.
Against a mixed macroeconomic backdrop, we delivered our highest
reported net profit to date, improved credit quality, stabilised
interest margins, established our asset-light business lines, and
positioned the Company to better achieve our strategic growth
objectives.
"One year ago, we promised to meet two clear performance
targets: more than $20 million in cost savings at the centre, and
more than double our net profit from 2016. We delivered on both
through the efforts of our committed management and staff
throughout our businesses. We have a leaner Shared Services Centre
with stronger presence on the ground, and we expanded our product
portfolio and improved the quality of our loans and deposits. We
significantly increased our investment in UBN, and we brought in a
new strategic long-term partner in Fairfax. Despite headwinds, we
saw significant penetration across customer segments.
"We are better positioned to grow within our markets, and to
benefit as they turn the corner economically. I am very pleased to
deliver a strong 2017, and am even more excited for what lies
ahead. We have more work to do, but our company is the strongest it
has ever been, and I am confident we will deliver increased value
for our shareholders in 2018."
Key Events Since Period End
Management and Directorate Changes
-- Atlas Mara today also announces the appointment of John
Staley to the position of Chief Executive Officer, effective 1 May
2018. Shareholder approval will be sought to appoint Mr. Staley to
the Board. Mr Staley was previously Chief Officer - Finance and
Innovation with Equity Group Holdings, the parent company of Equity
Bank until 2017. He joined Equity Group in 2002 and served in a
variety of roles during his tenure. Mr Staley was instrumental in
the growth and market-leading product development at Equity Bank.
He also brings a strong expertise in technology and infrastructure
to his new role.
-- The Company also today announces the appointment of Mr. Simon
Lee to the Board of Directors, to replace Mr. Quinn McLean, who is
stepping down from the Board of Directors of the Company effective
today. This change is in accordance with the terms of the agreement
entered into with Fairfax as part of the Placing and Open Offer
(the "Strategic Financing") under which Fairfax has the right to
appoint four directors to the Board.
-- Mr Lee was previously the CEO of RSA Insurance Group plc
until 2013. Prior to RSA, Mr Lee held a number of senior roles with
NatWest, part of the Royal Bank of Scotland Group.
Commenting on the appointment and changes, Bob Diamond,
Chairman, said:
-- "We are very pleased to appoint John Staley as the Company's
new CEO. His appointment reflects the ambitions of the Company,
including to build out a leading IT infrastructure, and to utilize
digital products and channels to accelerate the pursuit of the
Company's strategy. The Board and I look forward to working with
John. I am also pleased to welcome Simon Lee to the Board and look
forward to working closely with him. He brings a long record of
accomplishments and his skills will complement the Board and add
value.
-- "On behalf of the Board I also want to thank Quinn McLean for
his contributions, particularly in the areas of corporate finance
and innovative structured finance. We are grateful for his service
to the Company and wish him well in the future."
Convertible bonds
-- Atlas Mara today further announces a new issue of secured
convertible bonds maturing in April 2020. Proceeds from the
issuance will be used to support growth in the Markets and Digital
business lines and for general corporate purposes. A portion of the
bonds will be issued to Fairfax, the Company's largest shareholder,
for a total principal value of $16.0 million and is part of a
series of debt fundraising targeting a total of $37.5 million. The
bonds are secured with a portion of the Company's indirect
shareholding in Union Bank of Nigeria and have a coupon of 7.5%
payable semi-annually. Conversion of the bonds is subject to
shareholder and any other requisite approvals and is convertible
into shares of Atlas Mara at a 10% discount to the lower of the
market price at the date of issuance or the volume weighted average
price on the conversion date prior to the maturity date in April
2020. This conversion is at the option of the bondholder(s) in lieu
of repayment in cash. Shareholder approval for the conversion
feature will be requested at the Company's forthcoming Annual
General Meeting. In the event that shareholder approval is not
secured, the coupon on the bonds will increase retroactively from
7.5% to 9.0%.
Key Financial Highlights During the Period:
-- Adjusted net profit after tax increased significantly both on
a USD and constant currency basis to $37.0 million, driven by
higher revenue, cost savings in the Shared Services and Centre, and
the full accounting impact of the additional 13.4% share of UBN
which was completed on 1 October 2017
-- Total revenue increased by 7.8% and was attributable to
continued focus on lower cost of funding, revenue growth, increased
net interest margins, and the full year impact of the Zambia
acquisition
-- Though we successfully executed cost savings of more than $20
million, this figure was to some extent offset by inflation related
cost increases in certain countries and the non-recurring costs of
integration and branding associated with our newly rebranded
operation in Zambia to "Atlas Mara Zambia", the first operating
bank to carry the Atlas Mara brand.
-- We will continue to invest at a quicker pace in our
businesses' infrastructure to enable them to grow safely and
sustainably from robust, efficient, flexible platforms
-- Our emphasis for 2017 continued to be on managing down higher
risk portfolios in certain countries where we had a cautious credit
risk appetite. This has resulted in muted loan book growth for the
Group
-- The Group NPL ratio continued to steadily improve in 2017 to
11.8% (2016: 13.3%). When specific legacy Zimbabwe and Zambia
loans, where recovery efforts are underway, are excluded from this
figure, the Group NPL ratio reduced to 9.3%.
-- Asset recoveries totalled $20.1 million for the year
reflecting continued focus to deliver shareholder value through
managing the asset portfolio end-to-end
-- UBN contributed associate income of an estimated $38.4
million for the period (2016: $18.1 million), which reflects the
share of 9 months' income at a 31.2% shareholding and 3 months'
income at a 44.5% shareholding, on an equity accounted basis, as
well as the impact of the gain on acquisition. The UBN earnings
have been estimated, based on the average earnings reported for the
9 months period ended 30 September 2017, on an annualised
basis.
-- Reported equity at period end was $813.2 million, which
represents a significant increase from $526.1 million at 31
December 2016. This is as a result of the reported profit of $45.4
million, the positive impact of translation gains as most
currencies strengthened against the USD during 2017 and the impact
of the strategic transaction, which saw the group raise additional
equity of $200 million. Atlas Mara grew book value per share
Quarter on Quarter for the first time in the Company's history to
$4.77 in Q4 2017 from $4.44 in Q3 2017. Year on year BVPS was $4.77
at 31 December 2017 compared to $7.29 at 31 December 2016. Tangible
book value per share was $3.87 at 31 December 2017 ($5.27 at 31
December 2016). The year on year declines resulted from the 2017
equity issuances.
Key operational highlights during the period:
-- The Group continues to focus on building the existing retail
and corporate businesses across all countries of operation. In 2017
significant improvements were made in cost efficiencies,
operations, and talent acquisition in the banks. Cost of funds and
liquidity improved in all countries. Both Botswana and Rwanda
finalized significant new debt funding facilities from global
development finance institutions.
-- We increased focus on deployment of our digital initiatives.
During the quarter the Group continued to expand access points and
deposit mobilization efforts across the footprint. We also launched
Agency banking in Tanzania in partnership with Maxcom, and in
Mozambique.
-- Markets and Treasury's continued to diversify its product
offering and broadening the client base, including through build
out of the offshore desk based in Dubai. Despite a challenging
market environment including a slow foreign exchange environment in
several markets, overall foreign exchange and fixed income revenues
were 16% higher than in 2016.
-- In 2017, shareholders reinforced their confidence in the
company when the Company raised a total of $213.7 million in equity
through a combined $13.7 million oversubscribed placement in
February 2017, and a $200 million placement as part of our
strategic financing with existing Atlas Mara investors and new
shareholder Fairfax in August 2017.
-- In 2017, in accordance with the terms of the agreement
entered into with Fairfax as part of the Placing and Open Offer
(the "Strategic Financing"), the Atlas Mara Board approved the
appointments of Michael Wilkerson, Richard Boucher, Quinn McLean
and Hisham Ezz Al-Arab (the "New Directors") to the Board of
Directors. Ashish J. Thakkar, Co-Founder, and Tonye Cole, Chair of
the Nomination Committee, stepped down from their respective roles
on the Board. As previously noted, subsequent to year-end, Mr
McLean stepped down from his position on the Board, and Fairfax has
nominated Simon Lee for appointment to the Board.
-- In each of our operating territories, we have seen
significant new business momentum in 2017:
- In Botswana,
- we established a market leading position with our prepaid card
product, and we were appointed as card issuer for the government.
This product has the potential to be a powerful driver of client
and wallet share acquisition.
- We finalised a $40 million debt financing facility from a
development finance institution, to support digital initiatives and
financial inclusion.
- We appointed Kgotso Bannalotlhe as Managing Director of the
Bank, who brings with him a strong corporate banking background and
a focus on digital banking, reflecting our strategy to diversify
our Botswana business.
- In Mozambique,
- we launched agency banking, brought in more than 10,000 new
accounts, and expanded our point of sale network to more than 300
terminals. We also partnered with Vodacom M-Pesa to provide two
products: nano credit for cash and credit for usage within the
banking wallet.
- In Rwanda,
- we won the award of "Best Bank in Rwanda" at the Banker East Africa awards.
- We raised RWF 4 billion in deposits through a successful rural
deposit mobilization campaign. We also closed on a $30 million debt
financing facility from a group of development finance institutions
to support SMEs, corporates, and digital banking.
- We enhanced our electronic channels, including mobile and
internet banking. Other initiatives in Rwanda included pioneering
financing structures that have made us leaders in banking off-grid
power producers such as solar and launching mobile/online apps to
facilitate electronic payments for utility services.
- We appointed Maurice Toroitich as Managing Director, who
brings with him a longstanding experience in Retail and Corporate
Banking, to support our ambitions for growth and expansion of our
digital offerings.
- In Tanzania,
- we won the award of "Best Emerging Bank" at the Banker East Africa awards.
- We restructured the business to reduce cost, increase focus on
operations, and make us more responsive to the market.
- We also recapitalized the bank.
- In Zambia,
- we improved efficiency by completing the integration of 2
banks including the merger of 28 branches into 14.
- We launched the new Atlas Mara brand, making this the first
country operation to bear our group's brand.
- We appointed James Koni as Managing Director to lead our
growth ambitions in Zambia and steer the bank through the
completion of the integration process and establishing the
foundation for accelerated growth.
- In Zimbabwe,
- we achieved significant NPL recoveries in our legacy NPL
portfolio, driving a substantial improvement in NPL ratio.
- We made upgrades to our digital platforms, including
reintroducing mobile banking and adding instant interbank
transfers. We also rolled out more than 1,000 point of sale
terminals.
Investor Conference Call
Atlas Mara will be holding a market update for investors at 10am
EST / 3pm BST today. There will be a presentation available in the
Investor Relations section of the Company's website,
http://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: 62857582#
Contact Details:
Investors
Kojo Dufu, +1 212 883 4330
Media
Teneo Blue Rubicon, +44 (20) 7260 2700
Anthony Silverman
About Atlas Mara
Atlas Mara Limited (LON: ATMA) is a financial services
institution listed on the London Stock Exchange. Its vision is to
create sub-Saharan Africa's premier financial services institution
through organic and inorganic growth by combining the best of
global institutional knowledge with extensive local insights. 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, excellent customer service and accelerate
financial inclusion in the countries in which the Company operates.
For more information, visit www.atlasmara.com
Summary of Results
Table 1: Adjusted operating profit and reconciliation to IFRS
profit for year ended December 2017
$'m 2017 2016 Total CCY
----------------------------------------- --------- -------- ------- --------
Reviewed Audited Var % Var %
----------------------------------------- --------- -------- ------- --------
Adjusted profit after tax 37.0 20.8 77.7 >100
----------------------------------------- --------- -------- ------- --------
Transaction and M & A related items 20.6 (8.8) >100 20.6
----------------------------------------- --------- -------- ------- --------
Reorganisations and restructuring costs (10.0) (8.9) (12.4) (10.0)
----------------------------------------- --------- -------- ------- --------
Tax and NCI (2.2) 5.3 ->100 ->100
----------------------------------------- --------- -------- ------- --------
Reported net profit 45.4 8.4 >100 >100
----------------------------------------- --------- -------- ------- --------
Reported cost to income ratio 85.8% 97.1%
----------------------------------------- --------- -------- ------- --------
Adjusted cost to income ratio 82.0% 89.9%
----------------------------------------- --------- -------- ------- --------
Reported return on equity 5.6% 1.6%
----------------------------------------- --------- -------- ------- --------
Adjusted return on equity 4.5% 3.9%
----------------------------------------- --------- -------- ------- --------
Reported return on assets 1.4% 0.3%
----------------------------------------- --------- -------- ------- --------
Adjusted return on assets 1.2% 0.8%
----------------------------------------- --------- -------- ------- --------
Reported EPS ($) 0.42 0.12
----------------------------------------- --------- -------- ------- --------
Operational EPS ($) 0.34 0.29
----------------------------------------- --------- -------- ------- --------
Book value per share ($) 4.77 7.29
----------------------------------------- --------- -------- ------- --------
Tangible book value per share ($) 3.87 5.27
----------------------------------------- --------- -------- ------- --------
Total Shares in issue ('000) 172 259 72 759
----------------------------------------- --------- -------- ------- --------
Table 2: Summary of Financial Position as at December 2017
Q1 Q2 Q3 Q4 $' Reviewed Audited Total CCY
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
2017 2017 2017 2017 million 2017 2016 Var % Var %
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
422.4 486.2 497.6 457.0 Cash and short-term funds 457.0 406.3 12.4 10.0
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
Financial assets held for
180.6 91.4 99.2 95.9 trading 95.9 115.6 (17.0) 20.6
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
1,304 1,329.9 1,303.2 1,330.0 Loans & advances 1,330.0 1,334.8 (0.4) (4.0)
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
187.2 323.5 330.9 355.0 Investments 355.0 237.2 49.7 29.2
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
295.8 302.6 306.1 444.6 Investment in associates 444.6 294.0 51.2 51.2
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
155.3 175.0 171.9 174.6 Intangible asset 174.6 168.2 4.0 3.4
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
226.1 204.8 245.5 283.3 Other assets 283.3 200.9 41.0 44.7
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
2771.4 2913.4 2 954.4 3,140.4 Total assets 3,140.4 2,757.1 13.9 9.9
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
1,753.8 1,892.7 1,799.3 1,877.5 Customer deposits 1,877.5 1,799.4 4.1 0.7
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
367.3 364.7 341.1 346.2 Borrowed funds 346.2 322.6 8.5 8.2
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
102.6 82.9 56.5 103.5 Other liabilities 103.5 109.0 (4.3) (30.4)
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
547.7 573.1 757.5 813.2 Capital and reserves 813.2 526.1 54.5 51.0
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
2,771.4 2,913.4 2,954.4 3,140.4 Total equity and liabilities 3,140.4 2,757.1 13.9 9.9
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
74.4% 70.3% 72.4% 70.8% Loan: Deposit ratio 70.8% 74.2%
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
13.1% 12.3% 11.1% 11.8% NPL ratio 11.8% 13.3%
-------- -------- -------- -------- -------------------------------- --------- --------------- ------- -------
Notes: CCY refers to constant currency variance which excludes
the impact of local currencies' changes against the US$.
Chairman's introduction
Dear Shareholder
One year ago, we promised to meet two clear performance targets:
more than $20 million in cost savings at the centre, and more than
double our net profit from 2016. I am pleased to report to you that
we meaningfully exceeded those targets by 35% and more than 100%,
respectively. We also expanded our product offerings across our
business lines, improved the quality of our loans and deposits, and
materially increased our investment in Nigeria, while bringing in a
strong new strategic partner. 2017 was a landmark year for the
Company and has positioned us better than ever for the future.
The year in review
Against a mixed macroeconomic backdrop, we delivered strong
operating performance and an improved franchise. In 2017, we
established a leaner management team and focused on execution and
strengthening the foundations of our Group. Our efforts yielded
results.
Our Retail & Commercial Banking business line delivered
improved credit quality with a stable loan book, as a focus on
legacy NPLs and the credit approval processes moved us closer to
our company-wide short-term target NPL ratio of below 10%. At the
same time, we improved our deposit mix through a targeted effort to
retire expensive deposits; at year-end, transactional deposits were
50% of the total base (from 38% a year earlier). Finally, we
improved capacity through a focus on talent in our operating
countries, and today, we believe our local franchises are stronger
than ever. Notably, we also launched the first bank with our
group's brand, Atlas Mara, in Zambia, as a precursor of the
synergies we expect to create across the footprint in the
long-term.
Our agency banking program continues to be a strong driver of
customer growth and deposit capture, and we expanded it in 2017
including in Tanzania and Mozambique, adding hundreds of new agents
and thousands of new customers. We also achieved more than $50
million in deposit capture in Zimbabwe in the year. We deployed a
new, best-in-class internet banking solution in Rwanda.
Markets and Treasury faced a particularly challenging yield
environment, but offset this with a focus on other income streams
and broader business expansion. Although net interest income was
down from 2016, non-interest revenue increased 16% and has shown a
strong growth trend since 2015. Markets was particularly focused on
expanding the product portfolio and the client base, and in 2017 it
doubled client visits and launched several new products. It built
out the offshore trading desk in Dubai to drive further revenue
diversification, and this segment contributed more than $3.5
million in revenue in a partial year in 2017. In 2018 Markets is
positioned for strong growth as our product offerings mature and we
take share, particularly in FX.
Strategic partnership and Nigeria
In 2017 we materially increased our investment in Nigeria by
increasing our position in UBN, and today we hold 48% total
ownership in the bank. Our increased shareholding came in part
through a rights issue by UBN, which strengthened the bank's
capital position and equipped it to make key strategic investments
for growth. With Nigeria having turned the corner from recession
during the year, growth forecasts are now increasingly positive for
the medium-term. Against that backdrop, we expect UBN to continue
to take market share and improve its positioning in this crucial
market.
Our Nigeria investments were also enabled in part by our $200
million capital raise from our existing investors and Fairfax.
Fairfax was the ideal partner, given their model of permanent
equity and their long-term outlook. The partnership with Fairfax
brought new capital and further strengthened our Board, ensuring
that Atlas Mara is in position to capitalize on the opportunities
for expansion and investment across our footprint. Today we have
also announced the issuance of a new convertible bond to be
anchored by Fairfax, to support growth across our business lines.
This is yet another strong statement of support for our strategy,
and of our alignment with Fairfax.
Business model
We have adopted a "Buy, Protect, and Grow" strategy for how we
expect to build sub-Saharan Africa's premier financial institution.
Additional acquisitions are likely to be an element of achieving
desired scale in the long-term, but our current top priority is on
execution in our existing operations and growing organically.
Our successful focus in 2017 on strengthening our foundations
and improving the quality of our balance sheet are an example of
our ability to execute on the Protect element of our broader
strategy. In 2018, we are focused principally on retaining and
improving quality in our balance sheet while driving core growth
across all three business lines.
Management update
The Board and I are delighted to welcome John Staley to the
Company as our new CEO. John brings an impressive record of
building up and helping to drive the growth of Equity Bank. His
experience and expertise in banking and payments technology and
infrastructure in particular will help to accelerate the build out
of a best in class platform across our footprint, and to support
our growth through technology, including through new digital
products and channels. I have been working with John for the past
few months and am thrilled that we successfully brought him on
board. He will begin his new role May 1, and you will hear from him
in due course regarding his plans for improving operations and
infrastructure, developing new products, and driving growth. We are
fortunate to have John joining us and I look forward to working
with him to achieve our vision.
Outlook
On the back of a strong 2017, we have more work to do. Most of
all, we will continue to focus on sustainable growth throughout our
businesses, making sensible and supportive investments to enable us
to meet the needs of our customers in a manner that will drive
long-term value for our shareholders.
With a strong 2017 behind us, I am incredibly excited about what
lies ahead. We are in a better position than ever, and I am
confident we will deliver increased value for our shareholders.
Bob Diamond
Chairman
Kenroy Dowers, Chief Financial Officer
Performance Overview
2017 was a year in which we continued to deliver on our strategy
in line with our business model of Buy, Protect, Grow. In 2017 we
focused on achieving the cost savings communicated to the market
and achieving our strategic objectives to deliver shareholder
value.
We draw attention to our adjusted operating profit, which
excludes certain non-recurring revenues and costs that are not part
of the ongoing earnings base, to make us more comparable to other
'market peers' by separately identifying and excluding one-off
gains and charges, including acquisition costs, integration of
businesses, etc. Our operating profit for 2017 on this basis was
$37.0 million versus the $20.8 million on a similar basis for 2016,
representing an increase of 77% in US$ and an increase of >100%
on a constant currency basis (basing 2016 operating earnings on
2017 FX rates as a more appropriate year-on-year comparative).
Excluding one-off and transaction-related expenses or gains, our
cost to income ratio was 82.0% versus the comparable figure in 2016
of 89.9%. This ratio remains higher than what we would like it to
be, partly due to our continuous investment in our operations to
facilitate future growth. While in the near term we expect to
increase investments in IT and infrastructure, we continue to
strive towards our longer-term goal of reducing the cost to income
ratios to comparable peer levels, which will increase earnings and
thus shareholder returns.
While we not only met but exceeded the targeted profit for 2017,
the returns being generated by the business remain considerably
below the level to which we aspire. We remain committed to
improving the ROE and have already implemented a number of steps to
improve the core performance of the business as we remain wholly
focused on execution to deliver the returns our shareholders
expect. For example:
-- We intensified efforts and initiatives to grow low-cost
retail deposits across the Group, facilitate regional corporate
banking relationships, manage down our NPL ratio, improve credit
processes, and expand our digital products capabilities to further
support growth of our business. We also remain focused on
operational improvements around credit and control environment that
requires some investment to strengthen our platform, which is set
to continue as part of our overall risk management focus into
2018.
-- We have invested in our Markets and Treasury business with
the aim to broaden the spectrum of African currencies that we focus
on, and to offer transaction capability on currency hedging and
trade finance support, to include markets and currencies for
customers outside our current country footprint. Likewise,
following the recent equity raise, we have invested in specific
growth initiatives in our digital finance product offering, as
another source to diversify and improve revenue generation.
At the end of the year our book value was $4.77 per share
(December 2016: $7.29) and our tangible book value was $3.87 per
share (December 2016: $5.27). The main contributor to this
reduction in year-on-year book value is the impact of the
additional shares issued as part of the strategic transaction which
was completed during Q3 2017.
The financial information included within this document
represents an extract from the reviewed IAS 34: Interim Financial
Statements compliant condensed consolidated financial statements.
The review opinion of the auditors on these accounts was
unmodified.
Those accounts do not represent the Group's Annual Report and
Accounts, which is subject to publication of UBN's 2017 results.
The Audited Annual Report and Accounts will be published on the
Group's website by 30 April 2018.
Statement of comprehensive income review
Table 2: Total income for the year ended 31 December 2017
$'m 2017 2016 CC Var %
---------------------------------------------------------------- ------ ------ ---------
Net interest income 145.3 127.2 12.8
---------------------------------------------------------------- ------ ------ ---------
Non-interest income 115.2 114.5 (0.3)
---------------------------------------------------------------- ------ ------ ---------
- Net income from derivative and foreign exchange transactions 47.1 35.9 >100%
---------------------------------------------------------------- ------ ------ ---------
- Fees and commissions 51.8 48.9 (8.0)
---------------------------------------------------------------- ------ ------ ---------
- Other revenue 16.3 29.7 (6.0)
---------------------------------------------------------------- ------ ------ ---------
Total income 260.5 241.7 6.6
---------------------------------------------------------------- ------ ------ ---------
Atlas Mara reported growth in total revenue of 7.8% (6.6% on a
constant currency basis), largely attributable to lower cost of
funding especially in Botswana and additionally in our recently
merged banks in Rwanda and Zambia. We continue to build out our
Digital product offering and further expect the efforts around
growing transactional banking services across the region to improve
revenues.
Net interest income
Net interest income grew by 12.8% on a constant currency basis,
mainly driven by growth factors in three countries: in Mozambique
due to an increase in interest rates, in Zimbabwe due to a
reduction in the cost of funds through the repricing of deposits
and in Zambia, due to the full 12 month impact of the inclusion of
the results of the acquired bank vs. only 6 months impact for the
comparative period in 2016. Net interest income constituted 55.8%
of total income for the Group, an increase from the 52.6% reported
for the comparative period.
The net interest margin on earning assets was approximately 6.8%
(2016: 6.3%). This margin increase occurred in a slower loan book
growth environment during 2017 as we adjusted risk appetite for
credit growth given the more challenging economic conditions across
the SSA region.
Though improved cost of funds continues to be a key focus area
for the Group, in markets where we experienced liquidity pressures
specifically relating to local currency shortages there was
downward pressure on loan growth and upward pressure on the cost of
funding.
We continue to drive liability growth, with a specific focus on
transactional deposits, which will be critical to improve NII in
our banking operations.
With an emphasis on attracting low-cost retail deposits across
the Group, we expect to see our retail business making a greater
contribution to net interest income over time.
Non-interest income
Non-interest income grew modestly to $115.2 million in 2017
(2016: $114.5 million). This lower growth was driven by a decline
in the forex trading volumes in Botswana and Mozambique.
Non-interest income includes the impact of a fair value gain of
$26.8 million associated with the acquisition of the additional
13.4% share of UBN completed in 2017.
Total expenses
Underlying total costs of $213.7 million, excluding one-offs,
represented a decrease of 1.7% (37.9% decrease in ccy terms) year
on year.
Shared Services and Centre costs were reduced by $27 million.
This cost saving was achieved as a result of lower staff and other
operating costs following the restructuring of the Shared Services
and Centre and the closure of the office in Johannesburg, and other
cost-savings initiatives implemented across the Group.
Staff costs amounted to $98.8 million (2016: $106.6 million) for
the year and represented 44.2% of total expenditure for the Group
(2016: 48.0%). On an adjusted operating profit basis, Atlas Mara
reported a cost to income ratio of 82.0% (2016: 89.9%), compared to
85.8% (2016: 97.1%) on an IFRS GAAP basis.
Loan impairment charges
The 2017 loan impairment charge of $22.3 million represents a
44.8% (63.7% ccy) increase on the prior year charge of $15.4
million. This is largely due to additional impairments in
Mozambique, Rwanda, Tanzania and Zimbabwe and the impact of lower
IFRS 3 adjustments than historically taken into account. We
reported gross recoveries of $20.1 million in 2017 (2016: $4.3
million). The impact of economic conditions contributed to the
additional charges. In Zimbabwe, despite an increase in recoveries,
we also experienced an increase in portfolio impairments resulting
in an overall increase in the impairment charge for the year. We
continue to focus on restructuring and recovering further from the
legacy NPL book, and have made good progress on a couple of large
single name exposures in Zambia and Zimbabwe, both to increase
profitability and to reduce our overall NPL ratios to closer to
comparable peer levels.
Statement of financial position review
Customer loans and advances comprise c.42.5% of the Group's
total asset base. Cash, short-term funds and marketable securities
represent c.28.1%, other assets represents 11.4%, the investment in
associate UBN accounts for 12.5% of the asset base, with goodwill
and intangible assets making up the remainder at c.5.6% of total
assets. Total asset growth was 13.6% (9.9% ccy) compared to 2016,
with the acquisitions of the additional shares in UBN, the
principal driver of this growth, being part of our strategic focus
to materially increase our shareholding in UBN.
Customer loan composition - 2017
Table 3: Customer loan composition - By Product ($ millions)
Mortgage Instalment Corporate Commercial and Consumer lending Total
lending finance lending property finance
--------- ----------- ---------- ------------------ ----------------- ------
161.3 7.2 440.8 138.4 582.3 1 330
--------- ----------- ---------- ------------------ ----------------- ------
Table 4: Customer loan composition - By Country ($ millions)
Botswana Mozambique Rwanda Tanzania Zambia Zimbabwe Other Total
--------- ----------- ------- --------- ------- --------- ------ ------
588.4 75.2 206.1 75.3 186.1 186.9 12.0 1 330
--------- ----------- ------- --------- ------- --------- ------ ------
Credit quality
The credit information presented below is based on the IFRS
results reported by operating countries, excluding the impact of
IFRS 3 Business Combinations and fair value adjustments made on
acquisition in respect of gross loans and advances and impairment
allowances.
We have broadly maintained our provision coverage ratio, which
at 2017 year-end was 46.5% (including both acquisitions completed
during 2016) vs. December 2016: 47.2%. In addition to statement of
financial position provisions, there is specific security held
against the NPL portfolio at a 73.6% coverage level over and above
the impairments taken.
Non-performing loans (NPLs) as a percentage of the loan book
declined to 11.8% (December 2016: 13.3%), reflecting evidence of
our improved resourcing behind our credit monitoring and collection
processes. The year-on-year improvement was specifically supported
by asset recoveries secured in Mozambique, Zambia and Zimbabwe.
In both Zambia and Zimbabwe, there are a handful of single name
exposures that significantly skew the overall group NPL ratio.
Excluding certain accounts in Zambia and Zimbabwe, which are
already in the legal process for recovering the collateral, the
Group's NPL ratio reduces to 9.3% from the reported 11.8%.
Capital position
As at 31 December 2017, all of Atlas Mara's operating banks
complied with local minimum capital requirements relevant in that
country, as summarised below.
Table 5: Capital Adequacy ratios
Capital Ratios 2017 2016 Regulatory Minimum
---------------- ------ ------- -------------------
Botswana 19.7% 20.2% 15.0%
---------------- ------ ------- -------------------
Mozambique 24.4% 24.0% 9.0%
---------------- ------ ------- -------------------
Rwanda 22.6% 23.0% 15.0%
---------------- ------ ------- -------------------
Tanzania 17.7% 14.2% 14.5%
---------------- ------ ------- -------------------
Zambia 13.8% N/A(1) 10.0%
---------------- ------ ------- -------------------
Zimbabwe 37.6% 20.9% 12.0%
---------------- ------ ------- -------------------
(1) The capital adequacy ratio was not reported on a combined
basis in 2016.
In Zambia, while the bank is compliant with the minimum capital
adequacy requirement, the bank is deficient in the absolute capital
requirement of ZMW520 million set by the Central Bank for
foreign-owned banks, but an ongoing remediation plan to address the
gap approved by the Central Bank of Zambia is at an advanced stage
of implementation.
Risk - weighted asset growth, excluding acquisitions, was
limited reflecting both the subdued demand for credit across our
markets but also our selective approach to credit risk from
refining our overall risk appetite.
Investment in associate: UBN
Our investment in Union Bank of Nigeria of 44.55% is
equity-accounted for in the statement of financial position as an
investment in associate, with a closing balance of $442.7 million
(2016: $291.4 million). The value of the asset has increased due to
the completion of the additional 13.4% acquisition effective 1
October 2017, the impact of the Group's share of the profit from
UBN (based on an estimated full year profit) million and the gain
on the acquisition of the 13.4% share.
We have reviewed the carrying value of the investment held in
UBN from a valuation perspective as part of the year-end audit
review and valuation work. We have stress-tested future expected
earnings and 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 UBN carrying value for this
investment at December 2017.
The value of equity accounted earnings in the statement of
comprehensive income for Atlas Mara represents the estimated
year-end profit and other comprehensive income for UBN, based the
average results reported for the 9 months period ended 30 September
2017 on an annualised basis. The UBN results are expected to be
published by 30 April 2018. We have done a comprehensive review of
the factors that would impact on our results and conclude that the
Atlas Mara year-end results will not be impacted in a material
manner by the publication of these UBN results.
Goodwill and intangibles
Due to the acquisitions made during 2017 and in compliance with
IFRS 3: Business Combinations, the statement of financial position
incorporates goodwill and intangible assets of $174.6 million at
December 2017 (December 2016: $168.2 million). These assets
represent 5.6% of the Group's asset base, resulting in a tangible
book value of $3.87 per share (December 2016: $5.27 per share)
versus a book value per share of $4.77 (December 2016: $7.29).
Liabilities
Table 6: Customer deposits ($ millions)
Retail Corporate Treasury Total
--------- ------- ---------- --------- --------
FY 2017 489.5 1 115.3 272.7 1 877.5
--------- ------- ---------- --------- --------
FY 2016 551.0 924.8 323.6 1799.4
--------- ------- ---------- --------- --------
Overall, deposits were broadly flat on a constant currency
basis, with a $94.3 million increase driven by Corporate Banking
clients in Zimbabwe being offset by lower deposits in Botswana,
Mozambique, Tanzania, and Zambia.
The key focus for the group remains targeting cheaper
transactional deposits to decrease cost of funding as evidenced by
the upward shift of transactional deposits in the deposit mix. The
result of this focus can be seen by the decrease in the
contribution of interbank deposits from 7.6% at end of 2016 to 5.0%
at end of 2017
Customer deposits comprise 80.7% of the liability base and
represent 59.8% of the aggregate of liabilities and equity. The
loan to deposit ratio for 2017 is 70.8% (December 2016: 74.2%).
Segment information
The segmental results and statement of financial position
information represents management's view of its underlying
operations on a geographic distributed basis, with the business
focus aligned to promote inter-Africa trade within the trade blocs
on the continent. The seven countries of operation and investment
are grouped as follows:
Southern Africa (SADC)
Our Business
Botswana remains our largest profit contributor by country. The
business continued to perform well during 2017, although the impact
of liquidity constraints and a significant decline in the forex
trading volumes affected income. We continued to improve the
business by rolling out a mobile banking solution and improving our
customer cards offering and introducing new bancassurance
products.
Despite broader economic challenges in Mozambique in 2017, the
business reported a profit for 2017, underscoring the benefit of
the focus during 2016 to improve the capability of the workforce.
The high volume trading revenue was negatively impacted by lower
demand in 2017. We have also continued to focus on reducing our US$
denominated expenses given the scale of currency depreciation, roll
out of agency banking and new investments in new products and
channels.
Zambia rebounded from the negative contribution reported in 2016
as remediation processes and stabilisation of the integrated entity
started to bear fruit. During the year the rebranding of the
combined African Banking Corporation Zambia Limited ("BancABC
Zambia") and Finance Bank Zambia Limited ("FBZ") to Atlas Mara
Zambia made this the first operational banking entity carrying the
Atlas Mara brand.
Our business in Zimbabwe reported strong operating profits
boosted by NPL recoveries, continued focus on cost reduction and
fair value gains booked on some core banking and other assets.
East Africa (EAC)
Our Business
In Rwanda our business has shown significant improvement in
performance due to the strong focus on cost efficiency initiatives.
The positive impact of this was somewhat absorbed by an increase in
the credit impairment charges related to specific provisions. Asset
growth was lower than expected due to the slowdown in the economy,
which is expected to rebound during 2018.
Tanzania saw an improvement in performance from the negative
contribution in 2016. This was mostly driven by fair value gains on
equity investments and some NPL recoveries. Focus continues to be
on further recoveries of legacy NPL loans and growth of the loan
book as the region as a whole looks to rebound from slower growth
reported in 2016 and 2017.
West Africa (ECOWAS)
Through our 48% stake in UBN (as of Q1 2018) and Board
representation, Atlas Mara has a footprint in Africa's largest
economy, Nigeria, and the broader ECOWAS region. 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 ECOWAS region.
Atlas Mara, through its three board seats on the UBN board, 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 Business
Our share of profit from the 44.5% stake in Union Bank of
Nigeria Plc ('UBN') is based on estimated UBN year-end performance.
Estimated earnings are used, due to the UBN results not yet being
publicly disclosed to the market as of the date of release of these
results. The result presented also include the gain on the
acquisition of the 13.4% share in UBN.
As noted above, the Nigerian macroeconomic environment has shown
improvement during 2017. Improved service offerings continue to
generate customer growth.
Other
Included in this segment are Atlas Mara Limited, the BVI
incorporated holding company and Atlas Mara's Dubai subsidiary and
all other intermediate Group holding entities acquired through the
acquisitions of ABCH and ADC in August 2014, also referred to as
the Shared Services and Centre. This segment of Atlas Mara reported
a net loss of $2.9 million for 2017 compared to a net loss of $8.1
million for 2016 due to the commitment to reduce costs in this
segment.
Table 7: Segment report for the year-ended 31 December 2017
Banking Other
Ops
-------------------- -------- --------- ------- ------ ----------
US$m Group Southern East West Corporate
-------------------- -------- --------- ------- ------ ----------
Total Income 260.5 181.7 54.1 - 24.7
-------------------- -------- --------- ------- ------ ----------
Loan impairment
charge (22.3) (12.7) (9.6) - -
-------------------- -------- --------- ------- ------ ----------
Operating expenses (223.5) (156.8) (41.3) - (25.4)
-------------------- -------- --------- ------- ------ ----------
Share of profits
of associate 38.4 - - 38.4 -
-------------------- -------- --------- ------- ------ ----------
Profit / (loss)
before tax 53.1 12.2 3.2 38.4 (0.7)
-------------------- -------- --------- ------- ------ ----------
Profit / (loss)
after tax and
NCI 45.4 8.5 1.4 38.4 (2.9)
-------------------- -------- --------- ------- ------ ----------
Loans and advances 1,330.0 1,037.6 286.7 - 5.7
-------------------- -------- --------- ------- ------ ----------
Total assets 3,140.4 2,000.1 503.0 442.7 194.6
-------------------- -------- --------- ------- ------ ----------
Total liabilities 2,327.2 1,875.2 422.3 - 29.7
-------------------- -------- --------- ------- ------ ----------
Deposits 1,877.5 1,505.1 372.4 - -
-------------------- -------- --------- ------- ------ ----------
Net interest
margin - total
assets 4.6% 5.6% 7.6%
-------------------- -------- --------- ------- ------ ----------
Net interest
margin - earning
assets 6.8% 6.7% 9.0%
-------------------- -------- --------- ------- ------ ----------
Cost to income
ratio 85.8% 86.3% 76.5%
-------------------- -------- --------- ------- ------ ----------
Statutory Credit
loss ratio 1.7% 1.2% 3.3%
-------------------- -------- --------- ------- ------ ----------
Return on equity 5.6% 6.8% 1.8%
-------------------- -------- --------- ------- ------ ----------
Return on assets 1.4% 0.4% 0.3%
-------------------- -------- --------- ------- ------ ----------
Loan to deposit
ratio 70.8% 68.9% 77.0%
-------------------- -------- --------- ------- ------ ----------
Table 8: Segment report for the year-ended 31 December 2016
2016 Banking Other
Ops
-------------------- -------- --------- ------- ------ ----------
US$m Group Southern East West Corporate
-------------------- -------- --------- ------- ------ ----------
Total Income 241.7 165.3 57.3 - 19.1
-------------------- -------- --------- ------- ------ ----------
Loan impairment
charge (15.4) (11.5) (3.9) - -
-------------------- -------- --------- ------- ------ ----------
Operating expenses (234.8) (156.5) (50.4) - (27.9)
-------------------- -------- --------- ------- ------ ----------
Share of profits
of associate 17.9 (0.2) 0.1 18.1 (0.1)
-------------------- -------- --------- ------- ------ ----------
Profit / (loss)
before tax 9.4 (2.9) 3.1 18.1 (8.9)
-------------------- -------- --------- ------- ------ ----------
Profit / (loss)
after tax and
NCI 8.4 (4.9) 3.3 18.1 (8.1)
-------------------- -------- --------- ------- ------ ----------
Loans and advances 1,334.8 1,046.0 287.1
-------------------- -------- --------- ------- ------ ----------
Total assets 2,757.1 1,895.5 475.9 291.4 94.3
-------------------- -------- --------- ------- ------ ----------
Total liabilities 2,231.0 1,799.5 404.9 26.6
-------------------- -------- --------- ------- ------ ----------
Deposits 1,799.4 1,431.6 367.9 (0.1)
-------------------- -------- --------- ------- ------ ----------
Net interest
margin - total
assets 4.7% 5.0% 8.3%
-------------------- -------- --------- ------- ------ ----------
Net interest
margin - earning
assets 6.3% 5.4% 9.1%
-------------------- -------- --------- ------- ------ ----------
Cost to income
ratio 97.1% 94.7% 87.9%
-------------------- -------- --------- ------- ------ ----------
Statutory Credit
loss ratio 1.2% 1.1% 1.4%
-------------------- -------- --------- ------- ------ ----------
Return on equity 1.6% (5.1%) 4.6%
-------------------- -------- --------- ------- ------ ----------
Return on assets 0.3% (0.3%) 0.7%
-------------------- -------- --------- ------- ------ ----------
Loan to deposit
ratio 74.2% 73.1% 78.0%
-------------------- -------- --------- ------- ------ ----------
This statement contains certain non-GAAP financial information.
The primary non-GAAP financial measures used are 'adjusted
operating profit' which is computed by adjusting reported results
for the impact of one-off and transaction related items and
"constant currency balances/variances, which adjusts for the
period-on-period effects of foreign currency translation
differences. One-off items are considered, but not limited to be
those related to matters such as separation packages paid to staff
and executives, integration cots when acquiring new business and
costs associated with corporate restructures and reorganisations
which management and investors would identify and evaluate
separately when assessing performance and performance trends of the
business. Reconciliations between non-GAAP financial measurements
and the most directly comparable IFRS measures are provided in the
2017 Annual Report and Accounts - Annexure B and the
Reconciliations of Non-GAAP Financial Measures document, which will
be available on the Atlas Mara website.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR ZMGZDZDRGRZM
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