TIDMATMA
RNS Number : 4913B
ATLAS Mara Limited
08 October 2020
8 October 2020
Atlas Mara Limited Interim Results -- Six months ended 30 June
2020
Atlas Mara Limited ("Atlas Mara" or the "Company" and, including
its subsidiaries, the "Group"), the sub-Saharan African financial
services group, today releases its reviewed results for the six
months ended 30 June 2020.
Key highlights for the period:
-- Adjusted profit after tax of $4.3 million for the six months
ended 30 June 2020 (30 June 2019: $17.0 million) with adjusted
earnings per share of $0.03 (30 June 2019: $0.10).
-- Local currency depreciation across all markets not only
negatively impacted the Group's profitability, but also resulted in
additional currency translation losses of $150.7 million, reducing
book value to $391.9 million, representing a decline of $0.89 per
share compared to a year earlier. Excluding depreciation, the Group
would have reported an adjusted profit of c. $6.8 million.
-- Union Bank of Nigeria ("UBN") contributed associate income of
$13.8 million for the period ended 30 June 2020 (30 June 2019:
$18.7 million). The decrease is mostly attributable to the Group's
accounting policy change to move from the official exchange rate to
the NAFEX reference rate. Despite the effects of the COVID-19
pandemic, UBN achieved a 3.3% increase in profit before tax from
its continuing operations (excluding UBN UK, which has been
classified as held for sale) in local currency terms in H1 2020
compared to H1 2019.
-- All operating banks maintained capital adequacy ratios above
the regulatory minimum, reflecting stable balance sheets.
Commenting on the results, Michael Wilkerson, Executive
Chairman, said, "We are pleased to report a resilient performance
in the first half of the year. While facing a number of acute
market challenges including COVID-19 related business disruptions,
market liquidity shortages, local currency depreciation, and
interest rate cuts, six of our seven banks showed strong growth in
our digital channels, and our Markets and Treasury business
delivered an excellent contribution across markets on the back of
trading income. In the near-term, we continue to focus on
responding to the global crisis by prioritising safety of our
employees, safely supporting our customers, pursuing innovation,
and protecting our banking franchises through credit management and
cost controls. We also continue to progress in our strategic
review, in order to strengthen the Group to weather the current
environment and position ourselves for profitable growth in the
future recovery."
Highlights during the period:
Botswana:
-- The BancOnline remote corporate banking solution (launched in
late 2019) and the SaruMoney banking app both saw strong growth in
users and volumes; SaruMoney active users were more than double
that of the legacy platform as of period-end.
-- Secured $10 million of Tier II capital from PROPARCO to
support growth, especially in the retail consumer segment. This is
part of the strategic plan to optimise bank capital, which is more
than 80% Tier I.
-- Continue to actively participate in industry-wide measures to
support borrowers during the pandemic. The central bank also
reduced the primary reserves rate by half, and the capital adequacy
requirement from 15.0% to 12.5%, to enable banks to better support
borrowers.
-- Launched a new 84-month tenor personal loan to provide relief
to customers by reducing instalment amounts.
-- Continued focus on deposit capture through innovative
products and digital offerings, including a new high-yield savings
account Maungo Saver, resulted in an increase in retail deposits of
16% year on year.
Mozambique:
-- Reported 20.7% increase in total income and 6.9% reduction in
costs on a constant currency basis, compared to the prior year due
to strong forex trading income and cost reduction initiatives.
-- Successfully piloted a nano loans program with the biggest
mobile operator in the country, with expectation of full commercial
roll out in H2 2020.
-- Launched a variety of technology-based operational
improvements at the point of customer (such as "tablet banking"
where a number of customer activities are paperless and completed
on a tablet) to expand capabilities outside of the traditional
branches and tie into new digital banking offerings, increasing
distribution and reducing cost of delivery.
-- Supported small businesses affected by the pandemic through
moratoriums to help them to survive during this period.
-- Conducted information awareness campaigns both on public
broadcasters and social media to raise awareness about the COVID-19
pandemic and promote health and safety protocols to citizens of the
country.
Nigeria:
-- UBN reported strong year on year growth in transaction
volumes for payments (139%) and collections (536%).
-- Growth of active user sign-ons across channels: 39% on Union
Mobile; 44% on Union Online; 19% on cards; and 27% Union 360 &
Union One.
-- #UnionRiseChallenge launched in June to recognise and reward
customers who are rising to support their communities during the
COVID-19 crisis. The bank awarded NGN15 million to 90 recipients
over a period of four weeks and helped amplify the great work of
over 1,500 community initiatives that were submitted through the
campaign.
-- Gross earnings increased by 7.7% year on year in local currency terms.
-- Operating expenses remained under control during H1 2020,
despite the macroeconomic conditions, reflecting the bank's ongoing
cost reduction and efficiency program.
-- Increased customer count by 24% to 6.1 million from 4.9 million in H1 2019.
-- Gross loans increased by 5.9% in local currency terms,
reflecting the bank's deliberate strategy to grow risk assets,
thereby driving the increase in interest income on loans.
-- Increased demand for UBN's innovative offerings and the
continued benefits of UBN's brand growth resulted in a 12.3% growth
in deposits in local currency terms .
-- NPL ratio increased slightly to 6.3% in H1 2020 from 5.8% in
December 2019, resulting from increased impairments due to the
business disruptions caused by the COVID-19 pandemic. The bank
remains committed to meeting its objectives for the year,
leveraging the solid risk management structure in place.
-- Reported capital adequacy ratio of 19.2% versus the minimum
requirement of 15.0% for banks with an international banking
licence.
Rwanda
-- Profit for the period increased by 65.3%, supported by a
17.2% increase in non-interest income and a 45.7% decrease in
impairment charges.
-- Substantial improvement in the NPL ratio from 7.8% to 4.7%.
-- The Agency banking platform launched in Q4 2019 continued to
drive growth of the deposit base.
-- 80% of all customer transactions are now being conducted
through digital platforms, compared to only 33% in the prior
year.
-- The bank has played a key role as part of a wider market
effort accommodate debt repayment relief to businesses directly
affected by COVID-19, as well as providing an avenue for the
disbursement of special recovery funds arranged by the Government
to sectors of the economy that have been most vulnerable to the
effects of the pandemic.
Tanzania
-- Reduced net loss by half year on year, due to increased focus
on credit and cost driving lower impairment charges and operating
expenses, which helped to offset lower income due in part to acute
liquidity challenges.
-- Deposits increased year on year, supported by the agency
banking platform launched late in 2019 and by an increased focus on
retail deposits.
-- Tanzania's COVID-19 related restrictions were less stringent
than in other markets, leading to a positive outlook for the
economic environment in H2 2020.
Zambia
-- Despite challenging macroeconomic headwinds, reported a
profit of $0.9 million compared to a loss of $0.7 million in H1
2019, driven by commendable performance by Markets and Treasury,
with trading income increasing by 62.5%.
-- Secured a $29.4 million medium-term facility to support the
financial sector, in particular through on-lending to customers
affected by the pandemic.
-- 58% of transactions are now occurring through digital
channels, compared to 43% in the prior year.
Zimbabwe:
-- Markets and Treasury and Corporate and Investment Banking
continued to scale up trading activities and leverage regional
synergies to generate income, partially offsetting the negative
impacts of the low yield environment.
-- Retail Banking and Business Banking grew the customer base by
84% between the end of FY 2019 and H1 2020.
-- Introduced webinars for SME capacity-building and knowledge
exchange during the lockdown, deepening customer engagement and
value from the bank.
-- The Ally chatbot and the A360 mobile app have onboarded more
than 10,000 customers, and the Branch X virtual branch had 25,000
customer interactions between April launch and the end of H1.
Income from digital channels now contributes 12% of core income.
System stability was also a key focus given the higher usage, and
the bank achieved a 98% system uptime in H1 2020.
-- Despite market conditions, the bank successfully drove the
NPL Ratio down to 2.2%, the lowest ratio in a decade.
-- Achieved 44% growth in the investment property portfolio In
line with the continued emphasis on this sector to support the
objectives of capital preservation and building a mortgages
book.
-- During the ongoing pandemic, committed ZWL $1.5million (c.
$30 000) to COVID-19 relief efforts and assisted a local trust to
mobilise resources for frontline healthcare workers and food
insecure groups.
Events after the reporting period
-- On 30 September 2020, Atlas Mara Limited entered into
definitive agreements with Access Bank Plc ("Access Bank") for the
sale of ABCH's holdings in African Banking Corporation Mozambique
("BancABC Mozambique").
-- The transaction is subject to regulatory approval and other customary conditions precedent.
-- The transaction will include upfront cash consideration
payable at closing equal to approximately 0.8 times book value as
of 30 June 2020, plus additional cash consideration payable 24
months after closing of the transaction, subject to certain
conditions.
Directorate Changes
-- The Company also announces today that Amadou Raimi, Chair of
the Audit Committee, will retire from the Board of Directors of the
Company effective October 7, to focus on his other responsibilities
with other companies, after serving two terms on the Board. As
Chair of the Audit Committee, Mr Raimi oversaw the Audit Committee
through a transformative period at the Company. Having served in
the role for approximately six years, Mr Raimi has opted to not
seek to renew his appointment for another term of three years. Mr.
Raimi said: "It has been a privilege to serve as Chair of the Audit
Committee of the Company and to work with the Atlas Mara Board and
management through a period of transformation for the Company. I
wish the Board and management the best of luck as they continue to
execute the strategic repositioning that the Board approved in
2019."
-- The Board has appointed Jawaid Mirza to assume the role of
Chair of the Audit Committee in place of Mr Raimi. Mr Mirza has
over 30 years of experience in banking with global financial
institutions, including senior executive positions with Citibank
and ABN AMRO Bank. He served as ABN AMRO's CFO European Region,
Managing Director and COO for Global Private Banking, Asset
Management and New Growth Markets, and Managing Director and CFO
for Asia, Middle East and Australia. Mr Mirza also served as Group
COO and later CEO and Managing Director for Consumer &
Commercial at Commercial International Bank of Egypt ("CIB"). Until
recently, Mr. Mirza was on the Board of Commercial International
Bank ("CIB") of Egypt, where he chaired the Audit Committee and was
a member of the Risk and Board Technology & Operations
committees. Mr Mirza is currently an independent non-executive
board member of Eurobank Ergasias (Athens), where he chairs the
Audit Committee and is a member of the Risk Committee, and of
GroBank, where he is a member of the Audit Committee and is a
member of the Risk Committee. He is also a non-executive board
member of AGT Foods & Ingredients Inc.
Mr. Wilkerson said, "Amadou has been a valuable and
well-respected board member and colleague. We greatly appreciate
his professionalism, dedication and leadership of the Audit
Committee over the last several years. We wish him the very best in
his future endeavours. Jawaid, as incoming Chair of the Audit
Committee, brings extensive experience and the right skills to lead
the Audit Committee through the next phase as the Company continues
its strategic repositioning."
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.
Conference Call Details:
United States: +1 (631) 913 1422
United Kingdom: +44 3333000804
Participant PIN Code: 94376106#
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 institution listed
on the London Stock Exchange. 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 results
Table 1: Adjusted operating profit and reconciliation to IFRS
profit for the six months period ended 30 June 2020
$'million H1 2020 H1 2019 Total CCY
Var % Var %
-------
Adjusted profit after tax 4.3 17.0 (74.8%) (19.5%)
---------------------------------- ---------------- --------------- ------- -------
IFRS remeasurement gain/(loss) 0.4 (125.6) >100% >100%
---------------------------------- ---------------- --------------- ------- -------
Transactions costs (0.5) (10.0) 95.0% 95.0%
---------------------------------- ---------------- --------------- ------- -------
Restructuring costs (3.3) (2.6) (26.4%) (26.4%)
---------------------------------- ---------------- --------------- ------- -------
Tax and NCI (8.8) (5.3) (66.5%) (60.1%)
---------------------------------- ---------------- --------------- ------- -------
Reported net profit attributable
to ATMA (7.9) (126.5) 93.8% 94.6%
---------------------------------- ---------------- --------------- ------- -------
Reported cost to income ratio 104.1% 108.0%
---------------------------------- ---------------- --------------- ----------------
Adjusted cost to income ratio 99.9% 94.7%
---------------------------------- ---------------- --------------- ------- -------
Reported return on equity (4.7%) (25.4%)
---------------------------------- ---------------- ---------------
Adjusted return on equity 2. 5% 6.8%
---------------------------------- ---------------- ---------------
Reported return on assets (0.6%) (5.1%)
---------------------------------- ---------------- ---------------
Adjusted return on assets 0.3% 1.4%
---------------------------------- ---------------- ---------------
Reported EPS ($) (0.05) (0.74)
---------------------------------- ---------------- ---------------
Operational EPS ($) 0.03 0. 10
---------------------------------- ---------------- ---------------
Book value per share ($) 2.06 2.95
---------------------------------- ---------------- ---------------
Tangible book value per share ($) 2.05 2.84
---------------------------------- ---------------- ---------------
Total shares in issue ('000) 174,619 174,619
---------------------------------- ---------------- --------------- ------- -------
Table 2: Consolidated financial position summary as at 30 June
2020
Q1 2020 $'million Reviewed Audited Variance (%) Reviewed Total Var.
(%)
--------------
H1 2020 FY 2019 Total CCY H1 2019
-------- -------------- ------- ------- --------------
ASSETS
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
Cash and short-term
154.6 funds 167.9 130.5 28.6% 38.3% 124.6 34.8%
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
Financial assets
24.7 at FVTPL 24.8 25.2 (1.9%) (1.3%) 23.9 3.7%
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
582.7 Loans & advances 554.2 644.1 (14.0%) (5.1%) 604.6 (8.3%)
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
70.5 Investments 62.8 107.8 (41.7%) (38.3%) 120.9 (48.0%)
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
484.3 Investment in associates 489.2 582.1 (16.0%) (16.0%) 559.1 (12.5%)
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
Goodwill and other
59.1 intangible assets 61.6 73.0 (15.6%) (14.5%) 74.3 (17.2%)
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
70.3 Other assets 103.4 85.1 21.7% 25.9% 74.0 39.8%
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
Assets included in
disposal groups held
979.6 for sale 1,026.1 979.6 4.7% 4.7% 915.2 12.1%
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
2,425.8 Total assets 2,490.0 2,627.4 (5.2%) (2.3%) 2,496.6 (0.3%)
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
LIABILITIES AND EQUITY
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
660.6 Deposits 612.8 723.7 (15.3%) (0.3%) 684.0 (10.4%)
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
378.4 Borrowed funds 410.7 366.8 12.0% 15.9% 413.5 (0.7%)
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
118.1 Other liabilities 138.3 115.5 19.7% 51.7% 43.6 >100%
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
Liabilities included
in disposal groups
874.2 held for sale 936.3 874.2 7.1% 7.1% 809.8 15.6%
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
2,031.3 Total liabilities 2,098.0 2,080.2 0.9% 8.5% 1,950.9 7.5%
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
394.5 Capital and reserves 391.9 547.2 (28.4%) (36.1%) 545.8 (28.2%)
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
Total equity and
2,425.8 liabilities 2,490.0 2,627.4 (5.2%) (2.3%) 2,496.6 (0.3%)
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
Loans to deposit
88.2% ratio 90.4% 89.0% 88.4%
------- ------------------------ -------- -------------- ---------------- -------------- ----------
9.9% NPL ratio 12.0% 11.4% 9.6%
------- ------------------------ -------- -------------- ------- ------- -------------- ----------
Notes: CCY refers to constant currency variance which excludes
the impact of local currencies' changes against the USD.
Executive Chairman's statement
Dear Shareholders,
I hope this finds you safe and healthy during this extraordinary
time.
As the COVID-19 pandemic continues to take a toll on both health
and economies across the globe, Atlas Mara's first priority remains
the safety of our employees, customers, and communities. Our banks
remain open in all of our markets of operation, and I want to thank
every member of our team for their resilience and dedication to
serving our customers.
Interim results
Our banks performed admirably in the first half of the year,
delivering improvements in key metrics despite the extraordinary
dual challenges of the pandemic and already difficult macroeconomic
conditions. All of our markets have experienced lockdowns and
disruptions in various forms, which have suppressed business
activity and required innovative approaches and accelerated shifts
into digital channels. I am pleased to report that our banks have
responded to this challenge. All banks saw strong digital growth,
and all remain adequately capitalised.
At UBN, our largest investment, despite the challenging
macroeconomic environment, management delivered a strong
performance, with increases in loans, deposits, and total income
(in Naira terms). Loans and deposits grew across all three channels
(corporate, commercial, and retail) thanks to substantially
expanded digital offerings in response to the pandemic. Mobile
users increased by 39%, and 90% of transactions were completed
digitally in the period (compared to 57% a year earlier). Strong
cost controls kept operating expenses in check and, despite the
substantial impact of lockdowns, the NPL ratio increased only 50
bps year on year, which is a testament to the bank's credit risk
management. The bank is also shifting its lending focus toward more
crisis-resilient sectors (such as FMCG, healthcare, and telecom).
For Atlas Mara, our share of income from UBN was negatively
affected by the devaluation of the Nigerian naira; the NAFEX rate
depreciated by 7.3% from 360.6 in H1 2019 to 386.8 at the end of
the current period. I want to commend Emeka Emuwa and the UBN team
for another strong result over the period.
Outside of Nigeria, we faced many similar challenges from
lockdowns, tight liquidity, and interest rate environments.
Nonetheless, our teams responded well to the environment, in
particular by leaning into digital distribution to expand customer
access, cut costs, and grow assets. Digital has quickly become part
of our DNA and was a primary driver of increased loans and
deposits, lower cost of funds, and lower brick and mortar overhead
expenses. The Markets and Treasury business was also a key driver
of improved results, with forex trading income contributing
substantially to the bottom line. In response to the
pandemic-induced slowdown, we continue to reduce overhead and focus
on strong credit risk management, with a proactive restructuring
approach to avoid unnecessary defaults. It is worth noting that
across the Group's countries of operation, excluding Zimbabwe, the
local currencies depreciated by an average of 14% compared to June
2019, negatively impacting the Group's results as reported in
USD.
In Botswana, despite severe liquidity shortages and two interest
rate cuts, net profit increased by 8.6% year on year. Technology -
including the launch of the SaruMoney digital platform - and an
aggressive deposit repricing effort drove interest expense down
15.3% year on year, while impairments remained low. The bank also
secured $10 million in growth capital from PROPARCO, the French
development finance institution, to support its long-term
goals.
Zimbabwe was a severely challenging market environment even
before the pandemic, with hyperinflation, low economic growth,
forex shortages, and a fiscal crisis all impacting business
performance. Nonetheless, our bank delivered another outstanding
period, with profit up by over 100% in local currency terms. The
bank launched multiple innovative digital products, including the
Branch X virtual branch platform and an AI chatbot feature for
customer service. In response to the volatile currency environment,
the bank implemented effective forex hedges, and delivered another
strong period of trading results.
In Mozambique, aggressive cost reductions, a new digital
offering, and increased forex trading income led to a profitable
half year. The bank is now booking "nano loans" through an agency
banking initiative to meet customers where they are (outside the
branch), and we believe this will continue to be a growth area in
Mozambique. Management also shifted the focus of the loan book from
corporate - where spreads are currently too tight - to the more
profitable retail business.
In Rwanda, strong net profit growth was driven by forex income
and substantial improvements in asset quality, with impairment
charges lower and the NPL ratio down to 4.7% from 7.8% in December
2019, despite the pandemic environment. The bank will continue to
aggressively cut distribution costs in favour of digital channels,
with plans to reduce the branch network by more than 20% in the
near-term.
In Tanzania, the bank continued a substantial business refocus
and saw improved performance year on year. The corporate banking
arm has been largely scaled down due to low margins, and the bank
is now focused on retail. Asset quality improved thanks to a
strengthened credit function, which we expect to yield improved
recoveries in the future.
In Zambia, we achieved a turnaround to profitability in the
first half of the year compared to a year earlier. Management
demonstrated very tight liquidity management and grew digital
banking, leading to lower cost of funds, helping to lower overall
expenses year on year. Markets and Treasury achieved strong forex
trading income, with a considerable amount of regional transactions
in the period.
Strategic update
The board of Atlas Mara continues to focus on the strategic
transformation we announced in 2019, albeit with timelines affected
by COVID-19. The ongoing repositioning of the Group as a more
streamlined holding company is evident in our cost reductions to
date, and in moving the Markets and Treasury business onshore,
which yielded good results. The improved performance across our
banks in Southern and East Africa reflects strengthened management
and governance, and we continue to work closely with UBN management
to deliver consistent profits and enable continued returns to
shareholders.
The board also remains committed to pursuing strategic options
that ensure the business can thrive during this crisis and will be
positioned for profitable growth alongside an economic recovery.
The transaction we announced in September with Access Bank Plc for
the sale of our Mozambique subsidiary is firmly in line with this
initiative. We are on the path to a more focused group with a core
footprint, with our capital deployed in and resources concentrated
on areas where we can add real value. The Company continues to
evaluate strategic options, which may include additional
divestiture or partnership transactions, or other alternatives that
benefit Atlas Mara and its shareholders in the long term. We are
also exploring options for refinancing the December 2020
convertible bonds, discussing an extension of the maturity date
with the principal bondholders, and engaging with development
finance institutions ("DFIs") and other counterparties regarding
various COVID-19-related financing options that could be beneficial
to the Group and its shareholders. The Company will update the
market in due course as these engagements develop.
We are concurrently reviewing the areas where we can most
contribute to shareholder value, and increasing our focus on those
core capabilities, including capital mobilisation and portfolio
management. Through initiatives such as the $200 million growth
financing for UBN, as well as various growth financings and the
minority stake IPO for BancABC Botswana, the Company has
demonstrated a distinct ability to add value to operating banks,
and it is an area we continue to prioritise.
Share Price Performance
We share the frustration of our shareholders with the
performance of the Company's share price. Like many African
corporates, Atlas Mara has seen financial performance substantially
affected by the pandemic, the broader macroeconomic slowdown in
much of sub-Saharan Africa, and the effects of currency
depreciation - but the Company's share price has suffered
considerably more. Our tangible book value per share (at 30 June
2020) was several times the current share price. We believe the
market is considerably undervaluing our franchise.
Conclusion
For 2020, we remain focused on serving our customers safely,
protecting our franchises during the crisis, pursuing
transformational strategic options, and looking for efficient
avenues for future growth. With our improved governance and credit
functions, strong digital offerings, and continued cost reductions
across the footprint, our banks' resilience continues to improve,
and we are increasingly positioned to capitalise on a post-pandemic
recovery period.
Thank you for your continued support.
Michael Wilkerson
Executive Chairman
Omar Khan, Chief Financial Officer performance overview
The impact of the COVID-19 pandemic on the global economy has
been felt across all of the Company's countries of operation. While
the mortality rates across the African continent have been lower
than initially feared, the economic impact has been
unprecedented.
Many of the countries across sub-Saharan Africa ("SSA") continue
to have border and travel restrictions, as well as work-from home
restrictions, and despite government and central bank interventions
to stimulate economies, as of the date of this statement, the SSA
region is now projected to contract by 3.2%, with most African
economies revising their growth outlook downwards.
The Group's results have been impacted by this, with the
adjusted profit declining from $17 million for the six months ended
30 June 2019 to $4.3 million for the six months ended 30 June 2020.
While the cost to income ratio has improved to 104.1% (H1 2019:
108.0%), the Group has seen nearly all key financial indicators
negatively impacted with the adjusted ROE reducing to 2.5% from
6.8% for the comparative period. The NPL ratio has increased to
12.0% from 11.4% reported as at 31 December 2019.
The Group has been stress testing its portfolios in the current
environment. As at 30 June 2020, there was a marginal increase in
our ECL estimate and NPL ratio in line with the composition of our
portfolios. We continue to monitor the portfolios and will continue
to act as the situation unfolds.
Country performance summary
Nigeria
UBN has weathered the COVID-19 storm fairly well and has
reported a 3.3% increase in profit before tax from continuing
operations (which excludes the performance of its UK subsidiary
which is currently classified as asset held for sale). Including
the results of the discontinued operations, profit before tax
declined by 7.0% in local currency terms in the six months ended 30
June 2020 in comparison to the corresponding period in 2019. The
devaluation of the Naira and the Group's decision to move away from
the official exchange rate which was at NGN306.4/$1 as of 30 June
2019 to the NAFEX reference rate which stood at NGN386.8/$1 at the
end of the current period, has resulted in the income from
associate further reducing profit before tax in USD terms from
$18.7million in H1 2019 to $13.8 million in H1 2020.
Overall, UBN lowered its cost to income ratio to 75.5% from
76.1% reported in H1 2019 but has seen contraction in the net
interest margin to 5.3% (H1 2019: 5.8%) and return on equity to
8.5% from 10.8% for the comparative period.
While the NPL ratio has increased to 6.3% from 5.8% at year-end,
the NPL coverage ratio remained strong at 127.5% (31 December 2019:
138.1%).
Despite the impact of the contraction in earnings, UBN remains
well capitalised with its CAR at 19.2%, well above the regulatory
minimum of 15%.
Zimbabwe
Zimbabwe has continued to grapple with serious economic
challenges created due to long standing structural weaknesses and
inflation which is expected to reach 1,000% in the second half of
2020.
Following numerous changes to the currency regime on 23 June
2020, the Reserve Bank of Zimbabwe ("RBZ") announced the
replacement of the interbank market rate with weekly foreign
exchange auctions to determine the Zimbabwe dollar exchange rate.
This change is expected to build market confidence, improve access
to foreign currency and help stabilise the exchange rate.
Our Zimbabwe business has shown resilience despite the
challenging situation and delivered an impressive performance in
the current period. In local currency terms, the bank recorded
>100% increases in both operating income and profit before and
after tax for the six month period ended June 2020 compared to the
corresponding period last year.
Sound credit risk management practices have also resulted in the
decline in the NPL ratio to 2.2% and the liquidity and capital
adequacy ratios at 137% and 43.6% respectively are above the
regulatory minimum.
Botswana
The first half of the year was impacted by the ongoing subdued
macroeconomic environment further compounded by the impact of
COVID-19, however, building blocks have been put in place since the
listing on the Botswana Stock Exchange. Strong momentum established
in H2 2019 carried into Q1 2020 which helped mitigate the COVID-19
downside pressures. Despite the challenges in the macroeconomic
environment and COVID-19 related impacts, the bank reported an
increase in profit after tax of 8.6% on a constant currency basis
for the six months period ended 30 June 2020 compared to the
corresponding period last year.
Total income increased by 3.0% (11.1% on a constant currency
basis) in the six month period ended 30 June 2020 driven by a
strong performance on net interest income (NII) despite two rate
cuts of 50bps in August 2019 and April 2020 impacting the review
period. This growth in NII was supported by both the growth of the
loan book by 4%, largely in the first quarter, and the successful
reduction in interest expense by 15% year on year. The reduction in
interest expense has been achieved through the more efficient use
of technology such as the platform rolled out for corporate clients
BancOnline and the downward re-pricing of term deposits.
Discontinued operations
On a consolidated basis, the subsidiaries classified as
discontinued operations contributed $4.2 million to the Group loss
before tax reported for the period. This was mostly driven by
macroeconomic headwinds and weakened currencies. The subsidiaries
have shown resilience in their performance despite the impacts of
the COVID-19 pandemic on business activities.
Atlas Mara Zambia delivered a profit for the six months period
ended 30 June 2020 with profit after tax increasing to $0.9 million
compared to a loss of $0.7 million for the same period last year,
primarily attributed to the strong forex trading income and the
successful implementation of cost reduction initiatives. The cost
to income ratio decreased by c6% year on year.
Despite the suspension of lending activities due to liquidity
constraints in the market, the loan book grew by 31% on a ccy
basis, following increased draw down by certain large corporate
clients.
Rwanda reported a 65.3% increase in profitability compared to
the corresponding period last year on a constant currency basis.
The growth was driven by an increase in non-interest income
especially commissions from new loans disbursed and transactional
fees as a result of increase in transaction volumes. The quality of
the loan book improved resulting in a reduction in loan impairment
charges. Deposits grew by 10.6% (11.9% on a constant currency
basis), achieved through various deposit initiatives including
account opening through a mobile channel and agency banking which
was launched in Q4 2019.
Mozambique's profit decreased by 87.8% due to an increase
(>100%) in the impairment charge for the period and a reduction
in recoveries, compared to H1 2019. Despite this, total income
increased by 20.7% on a constant currency basis following strong
forex trading revenue due to trading opportunities on the volatile
currency.
In Tanzania, performance was adversely affected by the reduction
in transactional activity caused by the COVID-19 pandemic. This
resulted in a decrease in forex trading revenue, credit related
fees and digital transactions.
Performance summary
The Group recorded an adjusted net profit of $4.3 million for
the period ended 30 June 2020 (30 June 2019: $17.0 million).
Income statement review
Total income
The Group reported a decrease in total income of 5.1% (increase
of 67.5% on a constant currency basis) as a result of decline in
net interest income.
Table 3: Total income for the period ended 30 June 2020
$'million 30 June 2020 30 June 2019 Var % CC Var
%
------
Continuing Discontinued Total Continuing Discontinued Total
---------- ------------ ----- ---------- ------------ ----- ------
Net interest
income 4.3 32.8 37.1 8.8 35.7 44.5 (16.6%) 13.5%
------------- ---------- ------------ ----- ---------- ------------ ----- ------- ------
Non-interest
income 30.6 22.9 53.5 29.7 21.3 51.0 4.9% >100%
------------- ---------- ------------ ----- ---------- ------------ ----- ------
Total income 34.9 55.7 90.6 38.5 57.0 95.5 (5.1%) 67 .5%
------------- ---------- ------------ ----- ---------- ------------ ----- ------
Net interest income
Net interest income declined by 16.6% (increase of 13.5% on a
constant currency basis) to $37.1 million in the current period,
due to the decline in interest income and increased interest
expense.
Interest income decreased during the period by 2.5% (increase of
19.5% on a constant currency basis) to $97.9 million from $100.4
million reported in H1 2019, attributable to rate cuts imposed by
central banks in response to the pandemic; liquidity shortages in
key markets; low lending volumes and COVID-19 related measures put
in place by banking subsidiaries to support customers such as loan
restructures and extended moratorium on loans.
Interest expense increased by 8.7% (21.6% on a constant currency
basis) compared to the prior period mainly as a result of an
increase in borrowed funds and the impact of liquidity pressures
experienced in some of our markets, resulting in more expensive
deposits. This is reflected in the increase in the cost of funds
from 5.5% in H1 2019 to 6.2% in the current period.
Non-interest income
The consolidated total, non-interest income increased during the
period by 4.9% (>100% on a constant currency basis) due a
decrease in FV losses recognised on financial instruments (measured
at FVTPL) in the current period compared to the prior period. The
impressive performance of Markets and Treasury in Zimbabwe
contributed significantly to the Group's non-interest income.
Excluding the impact of the fair value changes on financial
instruments, non-interest income declined by 9.4%, resulting from
lower loan-related and digital channel fees in the period. Lower
loan growth and decline in business activities resulting from the
lockdowns imposed by national governments are some of the factors
that contributed to the decline in non-interest income.
Total expenses
Total expenses of $94.3 million ($90.5 million excluding
one-offs) decreased by 8.5% (increase of 11.2% on a constant
currency basis), largely due to the effects of currency translation
in Zimbabwe and the strategic cost management initiatives across
the Group. Excluding Zimbabwe where expenses increased on a
constant currency basis due to hyperinflation, the rest of the
Group's expenses declined by 12.1% for the six months ended 30 June
2020 in comparison to the corresponding period last year. Cost
management and productivity enhancement efforts are underway in the
subsidiaries to improve our cost to income ratios.
Staff costs decreased by 6.3% from $47.3 million in H1 2019 to
$44.4 million in the current period, but the contribution to total
expenditure increased to 47.0% from 45.9%.
On an adjusted operating profit basis, Atlas Mara reported a
cost to income ratio of 99.9% (H1 2019: 94.7%), compared to 104.1%
(H1 2019: 108.0%) on an IFRS basis.
Atlas Mara continues to focus on the holding companies' expenses
and for the six months ended 30 June 2020, normalised expenses (net
of restructuring costs) showed a decline of 8.5% compared to the
corresponding period last year.
Loan impairment charges
Credit impairment charges increased by 46.1% (>100% on a
constant currency basis) from $2.7 million in H1 2019 to $3.9
million in the current period. This increase primarily reflects the
impact of the recalibration of the IFRS 9 impairment model for the
Group to incorporate forward looking information (mostly related to
COVID-19) and the impact of other macroeconomic changes. There was
also a decline in recoveries in the current period to $1.1 million)
compared to the prior period ($2.6 million).
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 unaudited results for the
six month period ended 30 June 2020. The impact of the amortisation
of acquisition-related intangible assets is also included.
UBN's financial performance for the period was impacted by the
challenging economic environment and the lockdown measures taken by
the government to limit the spread of the COVID-19 pandemic.
Profit before tax declined marginally by 7% in the six months
ended 30 June 2020 compared to the corresponding period last year.
This decline is attributable to the increase in credit impairment
charges in the current period, resulting from the impact of the
COVID-19 pandemic.
UBN remains well-capitalised, with its capital adequacy ratio
sitting at 19.2% at 30 June 2010, higher than the regulatory
minimum of 15.0%.
Statement of financial position review
The Group's balances are split between continuing and
discontinued operations, with the balances relating to discontinued
operations disclosed as a single line item in the consolidated
statement of financial position.
Analysis of balances related to continuing operations as
presented on the statement of financial position is as follows:
Loans and advances comprise 37.9% of total assets; Cash, short-term
funds and marketable securities represent 17.5%; investment in
associate (UBN) balance accounts for 33.3%; goodwill and other
intangible assets make up 4.2%; while other assets (made up of
derivatives, property and equipment, investment property,
prepayment and other receivables etc.) make up the remainder at
7.2% of total assets relating to continuing operations.
Total assets relating to continuing operations contracted by
11.2% (6.7% on a constant currency basis) reflecting the impact of
currency movements in the Group's core markets (Botswana, Zimbabwe
and Nigeria) and the slow-down in business operations resulting
from the disruptions caused by COVID-19.
Deposits comprise 52.7% of the liability base for continuing
operations and represent 24.6% of the aggregate of liabilities and
equity. The loan to deposit ratio for the period was 90.4%
(December 2019: 89.0%).
Loans and deposits
Table 4: Customer loans and deposits composition by country at
30 June 2020
$'million 30 June 2020 31 December Var CC Var Var CC Var
2019 (%) (%) (%) (%)
Loans Deposits Loans Deposits Loans Deposits
Continuing operations
Botswana 522.5 550.9 606.3 662.5 (13.8%) (4.3%) (16.8%) (7.7%)
Zimbabwe 16.7 61.9 22.7 61.2 (26.6%) >100% 1.1% >100%
Other 15.0 - 15.1 - (0.3%) 0.0% - -
Total 554.2 612.8 644.1 723.7 (14.0%) (2.4%) (15.3%) (0.3%)
----------- -------- ------
Discontinued operations
Mozambique 77.2 170.0 89.9 179.3 (14.1%) (2.0%) (5.2%) 8.2%
Tanzania 50.8 65.6 51.2 65.3 (0.7%) 0.1% 0.4% 1.3%
Zambia 191.7 286.7 188.8 380.1 1.5% 31.0% (24.6%) (2.7%)
Rwanda 180.6 314.3 172.5 284.1 4.7% 5.9% 10.6% 11.9%
----------- -------- ------
Loans and deposits
As presented in Table 4 above, total loans decreased by 14.0%
(2.4% on a constant currency basis) to $554.2 million at the end of
the current period from $644.1 million at 31 December 2019. Total
deposits also declined in the current period by 15.3% (0.3% on a
constant currency basis) to $612.8 million from $723.7 million at
31 December 2019.
Decline in loans and deposits is attributable to the impact of
currency devaluation in Botswana and Zimbabwe and the slowdown in
business activities due to the COVID-19 pandemic. The economic
environment was challenging in the period as a result of the
business disruptions caused by the pandemic and the market
liquidity constraints in our countries of operations significantly
impacted the writing of new loans (as there was a market-wide
decline in the demand for credit) and also resulted in the loss of
some significant deposits.
Term deposits remained the highest contributor to deposits,
making up 58.2% of total deposits in the current period, compared
to 72.0% in December 2019. There was an increase in overnight
deposits/interbank borrowings reflecting the tight liquidity
situation experienced in Botswana and Zimbabwe.
Credit quality
NPLs as a percentage of the loan book increased from 11.4% in
December 2019 to 12% at the end of the current period. This is due
to the impact of the COVID-19 pandemic on business activities which
in turn increased the credit risk on the Group's loan
portfolio.
Capital position
As at 30 June 2020, 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
June December Regulatory
2020 2019 Minimum
---------------------- ----- -------- ----------
Continuing operations
---------------------- ----- -------- ----------
Botswana 21.0% 18.6% 12.5%
---------------------- ----- -------- ----------
Zimbabwe 43.6% 58.7% 12.0%
---------------------- ----- -------- ----------
Discontinued
operations
---------------------- ----- -------- ----------
Mozambique 19.1% 19.6% 11.0%
Rwanda 21.7% 23.5% 15.0%
---------------------- ----- -------- ----------
Tanzania 15.1% 16.6% 12.0%
---------------------- ----- -------- ----------
Zambia 11.9% 14.3% 10.0%
---------------------- ----- -------- ----------
Investment in associate: UBN
Our total shareholding in Union Bank of Nigeria remained at
49.97% as reported in FY 2019. The investment is equity-accounted
for in the statement of financial position as an investment in
associate, with a closing balance of $487.7 million (December 2019:
$580.6 million). Reduction in carrying value is mainly attributable
to the dividend income earned from UBN during the period and the
impact of currency translation losses, following the devaluation of
the naira during the period.
Goodwill and intangibles
The statement of financial position incorporates goodwill and
intangible assets of $61.6 million at 30 June 2020 (31 December
2019: $73.0 million). The decline in this balance is attributable
to amortisation for the period and currency translation losses on
local currency balances reported by the Group's foreign
subsidiaries (Botswana and Zimbabwe). These assets represent 4.2%
of the Group's asset base (excluding assets held for sale),
resulting in a tangible book value of $2.05 per share (December
2019: $2.87 per share) and book value per share of $2.06 (December
2019: $2.97).
The impact of the macroeconomic challenges in Nigeria triggered
the requirement for an assessment of the goodwill allocated to the
Nigeria segment. While no impairment is required as at 30 June
2020, the headroom previously reported has been completely eroded,
resulting in the goodwill balance of $13.9 million being at risk in
2020.
Segment information
The segmental results and statement of financial position
information represents management's view of its underlying
operations.
Nigeria
Through our 49.97% stake in UBN and Board representation, Atlas
Mara has a footprint in Nigeria, Africa's largest economy.
Our share of profit from the 49.97% stake in UBN is based on
UBN's published unaudited financial statement for the six months
period ended 30 June 2020.
Botswana
Represents the Group's 78.15% investment in BancABC Botswana and
its subsidiaries. BancABC Botswana has been listed on the Botswana
Stock Exchange since 2018.
Zimbabwe
Represents the 100% owned investment in BancABC Zimbabwe and its
subsidiaries.
Discontinued operations
Our operations in Mozambique, Tanzania, Zambia and Rwanda still
remain classified as discontinued operations as the Group is still
committed to implementing the strategic decision to dispose of
these subsidiaries and continues to actively evaluate several
options with the objective of completing a strategic transaction in
2020.
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 period ended 30 June 2020
$'million Group Continuing operations Discontinued
operations
--------------------------------------
Botswana Zimbabwe Nigeria Corporate
-------- -------- ------- ---------
Total Income 90.6 23.6 28.2 - (16.9) 55.7
Impairment charge on
financial assets (3.9) (0.2) (0.6) - - (3.1)
----------------------------- ------- -------- -------- ------- --------- ------------
Operating expenses (94.3) (17.1) (11.9) - (8.5) (56.8)
----------------------------- ------- -------- -------- ------- --------- ------------
Net loss on monetary
position (4.7) - (4.7) - - -
----------------------------- ------- -------- -------- ------- --------- ------------
Share of profits of
associate 13.8 - - 13.8 - -
Profit / (loss) before
tax 1.5 6.3 11.0 13.8 (25.4) (4.2)
Gain on IFRS 5 remeasurement 0.4 - - - - 0.4
Profit / (loss) after
tax and NCI (7.9) 3.8 7.4 13.8 (26.8) (6.1)
Loans and advances 554.2 522.5 16.7 - 15.0 -
Total assets 2,490.0 740.5 165.6 487.7 70.1 1,026.1
----------------------------- ------- -------- -------- ------- --------- ------------
Total liabilities 2,098.0 617.1 111.6 - 433.0 936.3
----------------------------- ------- -------- -------- ------- --------- ------------
Deposits 612.8 550.9 61.9 - - -
Net interest margin
- total assets 3.0% 5.4% 3.7%
Net interest margin
- earning assets 4.7% 6.1% 12.8%
----------------------------- ------- -------- --------
Cost to income ratio 104.1% 72.4% 42.1%
Statutory credit loss
ratio 0.7% 0.1% 7.5%
----------------------------- ------- -------- --------
Return on equity (4.7%) 7.4% 27.4%
Return on assets (0.6%) 1.0% 8.9%
----------------------------- ------- -------- --------
Loan to deposit ratio 90.4% 94.8% 27.0%
----------------------------- ------- -------- --------
Segment report for the period ended 30 June 2019
$'million Group Continuing operations Discontinued
operations
--------------------------------------
Botswana Zimbabwe Nigeria Corporate
-------- -------- ------- ---------
Total Income 95.5 22.9 33.0 - (17.4) 57.0
Loan impairment charge (2.7) 0.5 (0.3) - (0.9) (2.0)
----------------------------- ------- -------- -------- ------- --------- ------------
Operating expenses (103.1) (17.1) (9.3) - (13.1) (63.6)
----------------------------- ------- -------- -------- ------- --------- ------------
Share of profits of
associate 18.7 - - 18.7 - -
Profit / (loss) before
tax 8.4 6.2 23.5 18.7 (31.5) (8.5)
Loss on IFRS 5 remeasurement (125.6) - - - - (125.6)
Profit / (loss) after
tax and NCI (126.4) 3.8 18.8 18.7 (32.4) (135.3)
Loans and advances 604.6 558.6 31.6 - 14.4 -
Total assets 2,496.6 800.1 165.4 557.5 58.4 915.2
----------------------------- ------- -------- -------- ------- --------- ------------
Total liabilities 1,950.8 684.5 121.0 - 335.5 809.8
----------------------------- ------- -------- -------- ------- --------- ------------
Deposits 684.0 603.7 80.3 - - -
Net interest margin
- total assets 3.6% 4.5% 7.2%
Net interest margin
- earning assets 10.5% 5.1% 10.3%
----------------------------- ------- -------- --------
Cost to income ratio 108.0% 74.8% 28.1%
Statutory credit loss
ratio 0.5% (0.2%) 1.7%
----------------------------- ------- -------- --------
Return on equity (25.4%) 10.6% 84.5%
Return on assets (5.1%) 0.9% 22.7%
----------------------------- ------- -------- --------
Loan to deposit ratio 88.4% 92.5% 39.3%
----------------------------- ------- -------- --------
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END
IR FIFVRIALTIII
(END) Dow Jones Newswires
October 08, 2020 02:45 ET (06:45 GMT)
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