Absa Group Limited (ABG) Earnings Call Transcript & Summary

Good morning and thank you for joining us for Absa's 2020 Annual Results Presentation. As you are aware, we are presenting these results to you after a difficult week for the Absa Group, during which we lost and laid to rest Peter Matlare, our Deputy Group CEO. Peter was a valuable member of our executive team and played a key role in overseeing our regional operations. He was a seasoned corporate executive, much respected by colleagues, clients and our broader stakeholder community. Many of you sent your condolences and messages of support, and I'd like to thank you for that on behalf of Peter's family and Absa. I will briefly cover the difficult operating environment we encountered in 2020 and then share my thoughts on our performance during the past year. Thereafter, Jason will unpack our numbers, following which I will update you on our refreshed strategy before we respond to any questions you may have. The COVID-19 pandemic upended the global economy in 2020, producing historic declines in economic activity across most countries. The IMF estimates global GDP to have contracted by 3.5% in 2020, with developed economies among the most impacted by the pandemic. While the recovery appears stronger than previously anticipated, the outlook remains uncertain in the wake of new waves of infections, new variants of the virus, the reimposition of lockdowns and logistical challenges with vaccine distribution and administration. Coming into 2020, South Africa's economy was already under pressure and in a mild recession following several years of disappointing growth with very high unemployment, a weak fiscal position and already fragile business and consumer confidence. Real GDP shrank 7% during 2020, well below the 0.9% growth we expected before the pandemic. In order to support the economy and ensure the orderly functioning of markets, the South African Reserve Bank instituted a number of measures, including reducing the policy rate by 300 basis points, purchasing government bonds and providing targeted regulatory relief. Government also provided direct support to a large number of vulnerable households and to many businesses which saw the fiscal deficit increase sharply. Growth in our ARO countries also slowed sharply in 2020, with weighted real GDP declining by 0.4% across the country grouping, significantly below the 5.7% growth we had forecast before the pandemic. And lower commodity prices, interruptions to regional supply chains, social distance and restrictions and sharp declines in tourism all impacted economic growth further. Budget deficits trended higher everywhere on weaker revenues. Policy rates were reduced in all our ARO countries during 2020 as monetary authorities took advantage of generally modest inflation to mitigate some of the impact of COVID-19. Against this backdrop, we demonstrated resilience in many areas last year. Firstly, I am proud of our response to the COVID-19 pandemic and the operational and financial resilience of the business. Our people delivered exceptional support for our customers and clients under very challenging circumstances. Having covered our operational response to COVID-19 in some detail previously, I will highlight only a few noteworthy aspects. At the onset of the crisis, our immediate priority was to keep our colleagues safe and healthy. And therefore, we quickly switched to a predominantly remote working model, which our technology capabilities enabled. About 60% of our staff are still working remotely today. In addition, we ensured customer safety by putting in place various measures to ensure our branches and ATMs were configured appropriately for social distancing. We also gave customers considerable support. For example, during South Africa's hard lockdown, over 40% of our branches stayed open to provide banking services, including distributing social grants. We gave customers significant payment relief on loans of ZAR 219 billion, 22% of our total group loans. Retail and Business Banking in South Africa offered a very comprehensive relief program, covering 613,000 retail and business banking customers. Additionally, we waived various transaction fees and provided insurance premium relief while extending our credit cover to include a wider definition of loss of income events. Absa Regional Operations extended COVID-19 payment relief to over 61,000 customers. In CIB, we extended approximately ZAR 54.4 billion in payment relief to clients across South Africa and ARO markets during the year. This included interest and/or capital moratoriums, covenant concessions and extensions of maturity dates on expiring facilities. We mobilized our citizenship program to support the communities in which we operate. Absa and its employees contributed ZAR 83 million to COVID-19 response initiatives across the continent, including donating over 3 million meals to communities in need. Completing our separation from Barclays PLC was a top priority for us over the last few years, culminating in us completing that successfully on time and over ZAR 1 billion below budget during 2020 despite COVID-19 lockdowns affecting some of our projects. Successfully completing one of the largest bank separations to date was a significant undertaking and milestone, involving almost 1,300 colleagues and consultants working on 273 projects at its peak. It has given us confidence as we embark on the next phase of our journey. Moreover, the separation enhanced many of our systems and fundamentally improved our resilience and capabilities. It gave us the opportunity to refresh our Absa brand that we had not invested in for many years. The process also bolstered our skills in executing large projects, which has begun paying dividends many times over, especially in our COVID-19 pandemic response. We also completed a review of our group strategy last year. 2 years into our growth strategy and with my arrival as a new chief executive, and COVID-19 accelerating many banking trends, it was appropriate to assess our strategy execution, whether our strategy remained relevant given changes in the operating environment and why it is needed for us to thrive post the pandemic. I will update you on our strategy refresh later. Considering the unprecedented COVID-19 pandemic and economic downturn, many aspects of our 2020 performance were resilient despite our earnings halving. First, we focused on protecting our balance sheet during the year, preserving capital and managing credit and liquidity risk. This is evident in our solid core equity Tier 1 ratio of 11.2% which improved in the second half and remains well above regulatory requirements and within our Board target range. To conserve capital, we did not declare any ordinary dividends for the period. Our liquidity is strong in both rand and foreign currency. Our liquidity coverage ratio and net stable funding ratio of 121% and 116%, respectively, remain well above regulatory requirements. Deposits grew 15%, well ahead of 3% loan growth. Moreover, there were several positive underlying trends within our results, which are worth highlighting. For instance, 2% top line growth to ZAR 81 billion was respectable given the substantial pressure on sector revenue during the period as COVID-19 lockdowns and the weak economy reduced our loan production and transaction volumes materially, particularly in the second quarter. Net interest revenue growth of 5% stands out, considering large policy rate cuts that reduced our net interest income by ZAR 3.7 billion in South Africa. However, our structural hedge released ZAR 2.6 billion to our P&L to partly offset this. Our operating expenses remain well managed, declining 2% to ZAR 46 billion. Part of the decrease reflects previous restructuring and lower variable and travel costs and a material decrease in bonuses. However, we also reduced headcount along with marketing costs. Resilient revenue growth, combined with lower costs, produced positive operating jaws of 3%, improving our cost-to-income ratio noticeably to 56%. Moreover, our pre-provision profit grew 7%, a creditable performance. Our earnings and returns improved materially in the second half due to significantly lower credit impairments when compared to the first half. After falling 82% in the first half, our second half earnings were 19% lower year-on-year, and our return on equity improved to 12% in the second half from 3% in the first half of the year. Turning to the salient features. Our diluted normalized headline earnings per share decreased 51% to ZAR 9.46, marginally ahead of consensus of ZAR 9.37. Credit impairments were the culprit, almost trebling to ZAR 21 billion, which equates our credit charge for the past 3 years combined, again, highlighting the extraordinary operating environment. For illustration, our diluted normalized headline earnings per share was slightly higher than what we reported in 2005, although I must emphasize that our 2020 credit impairments were 24x larger than back then. Our return on equity fell noticeably to 7.2%, just over half our cost of equity. Thus, our profit after regulatory capital charge, or PARCC, decreased to negative ZAR 7.6 billion from positive ZAR 2.1 billion in 2019. Positively, as mentioned earlier, our pre-provision profit grew 7% to ZAR 36 billion, our strongest growth since 2016 when we benefited from a material currency tailwind. Moreover, our net asset value grew 4% to ZAR 131 per share. After carefully considering how the pandemic continues to affect global economic developments and results into changes to government policies and actions, we have decided to follow a balanced approach between retaining sufficient capital for growth, resuming dividends and a period of capital accretion to build and then maintain capital reserves. Therefore, we will not be paying a dividend this year. Jason will later share with you our thoughts going forward. Before handing over to Jason, I will comment on the performance of each of our divisions. As demonstrated in the graph, although their earnings fell materially year-on-year due to significantly higher credit charges, all 3 businesses grew pre-provision profits. I'll highlight how we continue to benefit from diversification across both geography and activity. Starting with Retail and Business Banking South Africa, normalized headline earnings fell 55% year-on-year to ZAR 4.3 billion, a 6% pre-provision profit growth largely cushioned far higher credit impairments. RBB exited the fixed phase of its strategic journey with strong momentum, stability and operational resilience as well as market share gains across all of its portfolios. The strength of the customer franchise has been pleasing. It is now pivoting into the smart growth phase of its journey aimed at building confidence and regaining leadership in the market. This entails a strong focus on the customer franchise, bancassurance model and digitization effort. Despite reduced fee income due to COVID-19 and the weak economy, the customer franchises were resilient, particularly Retail Transactional and Deposits, where earnings increased 11% year-on-year. Transactional and Deposits and Relationship Banking each made ZAR 2.5 billion and generated attractive returns well above our cost of equity. While all of our retail lending businesses were loss-making in the first half due to significant credit impairments or returns to profitability in the second half, home loans and card, in particular, rebounded strongly. Although increased claims and strengthening reserves in light of the COVID-19 impact dampened insurance and cluster earnings in the second half, the benefits of repositioning it within RBB remain evident as integration of customer journeys improved sales volumes. Short-term insurance earnings grew 42% to partly offset lower life insurance earnings. RBB SA's operating expenses fell 8% in part due to reduced variable costs on lower volumes, although it also reflects the continued benefits of restructuring that started in the second half of 2018. This has sustainably taken out ZAR 3 billion in costs. Importantly, RBB continues to invest, particularly in digital, to improve operating inefficiencies and customer experience. This is illustrated by 23% growth in digitally active customers to 1.9 million, which was largely driven by mobile app adoption. Lastly, RBB's credit charge more than doubled year-on-year as we took large provisions against future expected credit impairments. Corporate and Investment Banking's total normalized headline earnings fell 17% or 20% in constant currency to ZAR 4.9 billion. Strong 22% pre-provision profit growth off a relatively low base was the main driver while business also took advantage of a conducive market environment. Investment Banking in ARO was a standout, with earnings growing 11% or 4% in constant currency off a high base. Importantly, CIB completed its separation from Barclays, which involved 44 projects, leaving it with a number of new systems and freeing up significant management time. Positively, CIB's revenue increased 14% to ZAR 21 billion, and the growth was broad-based. Markets revenues in South Africa rebounded off a low base, while ARO maintained its strong growth, up 55% since 2018. Commercial Property Finance continues to grow strongly, with earnings up 37%. Corporate Banking's revenue growth slowed slightly to 9%, reflecting subdued transactions and trade volumes due to the weak economy. CIB's deposit growth was strong, an area where it had disappointed in the past. Its average deposits rose 22%. CIB completed the acquisition of Societe Generale's local custody business in March, which was integrated successfully and will help it to grow deposits. Operating expenses grew 7% or 5% in constant currency, largely due to incremental run costs post the Barclays separation and restructuring costs, particularly in ARO. Finally, CIB's credit impairments was 6x higher over a relatively low base, particularly in ARO. The large increase reflects single name charges and macroeconomic variable charges. Lastly, Absa Regional Operations earnings fell 56% or 65% in constant currency to ZAR 1.6 billion. Completing its separation from Barclays was a significant event for ARO in 2020. It included the largest single data and system migration in Africa as customers in 9 countries were switched to a new enhanced online banking system. It involved a major rebranding of over 340 branches and corporate offices, over 860 ATMs, over 17,000 point-of-sale terminals and over 1.2 million customer cards. ARO continues to benefit from its well-diversified portfolio, both by activity and geography. For instance, although IBB made a small loss, CIB was more resilient, with strong performance from the investment bank. Similarly, Ghana performed extremely well, with earnings growing and strong returns. It remains our largest country outside South Africa by some way in terms of earnings contribution. While ARO's operating expenses grew 12%, this reflected expected higher incremental run costs after separating from Barclays, restructuring costs to rightsize the business, IT investments and the weaker rand. Excluding these underlying cost growth was sub-inflation in constant currency, reflecting various initiatives, including reducing headcount by 600 or 6%. Strong digital adoption also helped costs, with automation and digitization enabling us to optimize ARO's branch network. The number of digitally active customers grew by 34%, resulting in digital transactional volumes rising 51% and transaction values 118%. We launched a mobile app for business customers and novel effects for currency payments across most markets. Mobile lending with partners in Ghana and Zambia has grown strongly, with 1.9 million loans worth ZAR 1.1 billion disbursed. However, as with the other divisions, credit impairments dominated ARO's performance as its charge was 3x higher. I'll now hand over to Jason to take you through our 2020 financial performance in detail.

Thanks, Daniel, and good morning, everybody. I'll cover our 2020 performance and provide guidance for the rest of this year. Starting with the income statement, as usual, I'll talk to our normalized results, which better reflect our underlying performance as it adjusts for the consequences of separating from Barclays. We reconcile these with the reported IFRS results in our booklet. Although we completed the separation from Barclays in 2020, there's a tail of amortization that remains with us for a few years. As I look back, there were 3 very distinct periods to our 2020 results. Firstly, although our first quarter was somewhat impacted by COVID-19 in late March, revenue growth was high single-digit with mid-teen growth in customer loans and deposits. Combined with continued cost management, this produced strong pre-provision profit growth. Our ROE was only slightly lower year-on-year given increased credit impairments as we started to see the impact of COVID-19 towards the end of the quarter. However, this changed abruptly in the second quarter. As the pandemic deepened, our presence countries went into lockdown and their economy stalled, loan production and transaction volumes slowed materially. This was particularly evident in April given South Africa's hard lockdown. Large policy rate cuts also reduced our net interest margin despite protection from our structural hedge. In addition to slowing revenue, we increased credit impairments significantly, resulting in record first half credit impairments of 277 basis points, almost treble the top end of our through-the-cycle range and well above global financial crisis levels. Judgmental forward-looking macro overlays were a large part of the charge. And as a result, our first half earnings fell 82% despite fairly strong 9% higher pre-provision profits given lower costs and resilient revenues. In this environment, we prioritize protecting our balance sheet, including preserving capital and keeping a close eye on liquidity. Thirdly, although year-on-year revenue growth slowed slightly in the second half, our costs remained very well managed, and credit impairments improved substantially to only slightly above our through-the-cycle range. This all resulted in our second half earnings decreasing by 19% year-on-year compared to the first half reduction of 82%. Combining these 3 periods produces the graph you see, with more detail on these aspects in the rest of the presentation. Revenue growth of 2% was resilient considering the unprecedented operating environment, with improved 5% to our net interest income despite noticeable margin compression. Lower fee and commission income and large negative private equity valuations reduced noninterest income, while global markets revenue rebounded off a low base. As you would have come to expect of us, operating expenses were again very well controlled and responded to the crisis, declining 2%. Lower costs improved our cost/income ratio and underpinned strong 7% growth in pre-provision profits. The significant increase in credit impairments is very evident, rising 163% to almost ZAR 21 billion, resulting in a credit loss ratio of 192 basis points. Reduced taxation, despite the increase in our effective tax rate to 27.8% from 26.2%, is the largest component of Other, and together with lower minorities, outweighed the drop in earnings from JVs and associates. All told, our normalized headline earnings fell 51% to ZAR 8 billion. Turning to our net interest margin, significant policy rate cuts and the change in balance sheet composition were the main reasons our margin narrowed to 4.17% from 4.5%. However, with average interest-bearing assets up 14% to almost ZAR 1.2 trillion, net interest income still grew 5%. As an indication of our most recent momentum here, our second half net interest income was 5% up year-on-year and 3% above the first half. Our lending margin widened by 11 basis points. Pricing improved further in home loans and investment banking in South Africa. Slower loan growth in home loans in CIB South Africa versus overall group interest-bearing assets had a positive mix effect, which was partly offset by the sale of the high-margin Edcon store card portfolio in the first quarter. Our deposit pricing margin declined by 7 basis points due to competitive pricing in RBB and Corporate in South Africa, where the ability to fully pass on lower rates was constrained. Reduced reliance on wholesale funding was positive for mix, outweighing the negative impact of strong growth in low-margin deposits in Corporate South Africa. Benchmark rates were reduced in all of our presence countries with large cuts in several countries. South Africa's repo rate fell 300 basis points during the period. Lower policy rates decreased the endowment income on lazy deposits and equity in South Africa, together reducing our group margin by 24 basis points. We continue to hedge structural balances of 12% of our South African equity and liabilities. Our structural hedge released almost ZAR 2.6 billion to the income statement, 16 basis points more than the prior year. Our cash flow hedging reserve increased materially to ZAR 4.3 billion after tax at 31st of December 2020, which is indicative of the current extent of protection available in future periods as the hedges amortize, should all other factors remain the same. Endowments on equity and liabilities after hedging had a net negative contribution of 7 basis points as interest-bearing assets grew faster than endowment balances. The negative reset impact following the drop in South Africa's prime rate during the year was an 8 basis points drag. ARO reduced our group margin by 10 basis points, reflecting substantially lower policy rates in these markets and competitive pricing pressures. Within Other, deploying surplus liquidity into relatively lower-margin assets was a 15 basis points drag, partially offset by an increased basis differential between prime and JIBAR and higher yields earned on our liquid asset portfolio. That last point is one of the interesting dynamics that I wanted to highlight within our 9% asset growth. Unusually, customer lending growth was a very limited contributor as loans declined in both the second and fourth quarters. Strong growth in our trading portfolio, mostly in the first half, was mainly on the back of increased market volatility. Loans to banks also grew substantially all in the first half as these decreased in the second half. Investment securities rose 31% as we deployed significant surplus liquidity into government bonds, again, largely in the first half. Entering 2020, the balance sheet momentum that we delivered over the last few years continued as gross loans were 16% higher year-on-year at the end of the first quarter. National lockdowns reduced our loan production significantly in the second quarter, while runoff slowed due to the substantial payment relief we granted. Loan growth also slowed in the second half, with gross lending ending the year at 3% up or 4% excluding reverse repurchase agreements. Given the shape of our loan growth, average gross customer loans were 8% higher over the year. RBB South Africa, our largest book, grew 4% year-on-year to ZAR 552 billion, with our retail market share increasing slightly to 22%. CIB South Africa's gross loans rose 2% year-on-year or 5% excluding reverse repurchase agreements to ZAR 306 billion. Strong growth in preference shares and targeted Commercial Property Finance growth outweighed lower overdrafts. ARO's gross loans decreased 1%, which was up 2% in constant currency. After strong first half growth, largely due to the weak rand, its book declined in the second half. RBB grew 8% or 13% in constant currency, while CIB decreased 10%, down 7% in constant currency. Looking at RBB's loan growth in South Africa on the right-hand side, home loans rose 5% to ZAR 255 billion driven by strong production in the first quarter and second half, plus slower back book runoff on the sizable payment relief portfolio. Our share of mortgage new business increased to 22% from 21%. Vehicle and Asset Finance grew 9% to ZAR 95 billion, improving our market share to 22% as we gained share both in new and used segments. Personal loans declined 1% to ZAR 24 billion, although it was 8% higher on average during the year only due to strong first quarter production, with risk appetite adjustments impacting the rest of the year. Given our defensive positioning on this asset class, our market share here remains low at just 12%. Credit cards grew 3% to ZAR 46 billion, broadly in line with inflationary-type limit increases, although total card issuing turnover fell 12% during the year due to lockdowns and reduced economic activity. Lastly, Relationship Banking was unchanged at ZAR 128 billion, with lower Commercial Property Finance offsetting strong growth in agri loans. This slide shows the significant impact South Africa's hard COVID-19 lockdown had on our retail loan production. After a solid first quarter growth, our new business dropped sharply in the second quarter. Sector mortgage registrations dropped 39% year-on-year in the first half, exacerbated by closure of the Deeds office, while industry new vehicle sales fell 37%. It was encouraging to see that the mortgage market recovered strongly in the second half, with registrations up 27% year-on-year driven by first-time homebuyers under the age of 35 taking advantage of low interest rates. For the full year, our registrations grew 1%, while the market fell 9%. Our vehicle finance production also improved considerably in the second half with a particularly strong fourth quarter. Second half production increased 14%, resulting in new business staying flat for the full year, well ahead of the industry. Personal loan production dropped by more than 3/4 in the second quarter. Unlike the secured books, production remained well done year-on-year in the second half as we tightened risk appetites with large reductions in approval rates. Our deposit growth trends during the year were quite different to loans. Deposits increased fairly consistently after the second quarter, while gross customer loans reduced in the second quarter and remained at those levels through to year-end. Combining strong deposit growth with subdued loan growth, our loans to deposits and debt securities improved materially to 85% from 93%. Adding ZAR 134 billion in core deposits produced strong positive balance sheet jaws as gross customer loans grew only ZAR 27 billion year-on-year. Managing our liquidity was one of our key priorities in 2020, and our position remained very strong throughout the year. For instance, our group's sources of liquidity grew 11% to ZAR 260 billion, while our liquidity coverage ratio of 121% and net stable funding ratio of 116% are both far above regulatory requirements. Our liquidity coverage ratio is particularly strong in the context of the temporary reduction of the minimum requirement from 100% to 80% by the Prudential Authority during the period. Growing core deposits remains a priority, and it's an indicator of the health of our franchise, particularly in RBB. Total customer deposit growth improved to 15% year-on-year or 17% excluding reverse repos, with average deposits up a similar amount. It was good to see that customer deposits increased to 80% of our total funding mix from 75% given similar reductions in the proportion of deposits from banks and debt securities in issue. South African deposits grew 17% to ZAR 793 billion, accounting for 83% of the total. RBB South Africa grew 12% to ZAR 416 billion or 44% of our total deposits, excluding reverse repos, given strong growth in notice deposits, transactional account deposits and savings and transmissions deposits. It is notable that high-margin deposits grew 13% in both Retail and Relationship Banking. Within RBB South Africa, retail deposits rose 12% to ZAR 240 billion, with our market share stable at 22%. Transactional deposits grew 13% and investment deposits 11%. Our retail deposits have grown by 1/3 since 2017, reflecting our investment in technology and strong service from customer-facing staff. Relationship Banking deposits rose 16% to ZAR 167 billion, with strong growth in transactional, plus savings and investments on the back of new products. Growth in both SME and commercial deposits offset reduced local and provincial government deposits. Deposits are also a priority for CIB South Africa and grew 36% to ZAR 283 billion or 45% excluding reverse repos, with strong growth across all classes. Transactional deposits increased 60%, largely due to substantial national government balances, a portion of which is expected to be temporary in nature. Excluding this, transactional deposits were up 12%. ARO's deposits grew 6% or 11% in constant currency to ZAR 159 billion. Within this, RBB's rose 11% to 18% in constant currency, largely driven by transactional deposits. CIB's declined 1% due to call account outflows, although its deposits were 14% higher during the year on average. Better momentum in balance sheet growth coming into the year with a focus on growing our customer base and improving primacy was starting to translate into better noninterest income, with 8% first quarter growth year-on-year. However, noninterest income slowed significantly in the second quarter on the back of COVID-19 lockdowns and the sharp reduction in economic activity. For instance, RBB South Africa's fee and commission income decreased 22% year-on-year in the second quarter and despite improving in the second half, was still 10% lower year-on-year in the fourth quarter. Reduced transactional activity was very evident in 2020, with credit card turnover down 12% and ATM cash withdrawal volumes 13%, while merchant income was more resilient and decreased only 3%. Since RBB South Africa is the largest component by far, our group fee and commission income was 8% down year-on-year in the fourth quarter and still below the first quarter levels. Overall, fee and commission income fell 9% for the year. This decrease was partly offset by very strong growth in global markets revenue, which I'll discuss shortly. The decline in Other in the graph on the left reflects negative fair value adjustments in the noncore private equity business. At a divisional level, RBB South Africa's noninterest income was most impacted, falling 8% year-on-year. Within this, Everyday Banking decreased 7%, with Relationship Banking and the insurance cluster down 12% and 9%, respectively. CIB South Africa's noninterest income increased 13%, a strong performance. Substantial global markets and solid corporate revenue growth outweighed the negative private equity fair value adjustments. ARO grew 4% with 16% growth in CIB, mostly from global markets, while RBB decreased 7%, reflecting lower transaction volumes due to COVID-19 and the reduced economic activity. Global markets revenue increased 33% to ZAR 6.2 billion, our strongest performance in the last 5 years. ARO grew 24% or 18% in constant currency, off a high base due to continued product and geographic diversification. It now accounts for 43% of our total global markets revenue. South African-based global markets revenue rebounded, growing 41% year-on-year off a low base to ZAR 3.6 billion given significant growth in fixed income trading revenue, which benefited from increased volatility. I was pleased to see that South African revenues are back to the levels we saw before Barclays exited, which disrupted our global markets business materially. While South African fixed income trading revenues were outsized, we still see opportunity for growth in global markets and the business has had a very strong start to 2021. The graph on the right shows strong growth in institutional client flows, particularly in fixed income and FX, plus a significant turnaround in client facilitation risk. Corporate flows decreased largely due to COVID-19 as clients put strategic risk management decisions on hold and prioritize their funding needs. Moving to costs. Our operating expenses declined 2% or 3% in constant currency to ZAR 46 billion. This reduction reflects the benefits of our restructuring efforts over the past 2 years, particularly in RBB South Africa, plus management actions in response to COVID-19 and lower variable costs as activity decreased due to national lockdowns. Staff costs decreased 2% year-on-year or 4% in constant currency to ZAR 25 billion and remain the largest component at 55% of the total. Salaries increased by only 1% year-on-year, reflecting structural headcount reductions as well as continued hiring freeze, which together reduced headcount by 1,700 year-on-year. Our headcount is now 4,100 lower than the 2018 position. Bonuses and deferred cash and share-based payments decreased materially with a large reduction in our incentive pool, in line with group earnings. Non-staff costs declined 1% year-on-year or 2% in constant currency. Property-related costs grew 7%, largely due to additional spend on protecting colleagues and customers from COVID-19, with no increase in the underlying cost base, which was in line with previous periods. Technology costs rose 11%, reflecting continued investments and post-separation incremental run costs. Our total IT spend, including staff, amortization and depreciation, grew 9% to ZAR 10 billion or 22% of group expenses. Amortization of intangible assets grew 17% due to a 15% increase in capitalized software assets to ZAR 6.2 billion. Depreciation rose 7%, largely related to technology. Professional fees grew 21% given higher spend on change in technology services as our book of work moves more towards a digital agenda, with separation activities now completed. The 9% decline in cash transportation costs is a good example of lower variable costs due to COVID-19 lockdowns and reduced economic activity, which will revert to higher levels as the economy recovers, but so will the revenue. Management actions include reducing marketing spend and communication costs, plus a substantial decline in travel and entertainment spend in Other. Other also includes significantly lower fraud losses and 12% lower administration fees after disposing of the Edcon store card portfolio. In this tough operating environment, you would expect us to continue to manage costs very carefully. We see further structural cost-saving opportunities in operations and technology and through digitalization while continuing to reduce discretionary costs, and thus, we expect low cost growth this year. Despite the constrained revenue growth, lower costs produced positive draws resulting in a 56% cost-to-income ratio, our lowest in many years. Since there were several moving parts in our operating expenses, we've added a new slide so that you can understand some of the drivers better. Bonus accruals through the cost line dropped 36% to ZAR 1.2 billion; on the face of it, less than the fall in normalized headline earnings, which was reflected in the bonus pool value toward decrease of 51%. This difference was mostly caused by a material reduction in short-term incentive deferrals as well as an impact from prior year accrual adjustments. The corollary of all of this is that all else being equal, the step-up in the bonus charge going forward will be similarly lower than the recovery in earnings. Three base effects reduced our 2020 cost growth, including selling the Edcon store card portfolio with costs of over ZAR 500 million in the base and elevated 2019 fraud costs mostly in RBB South Africa. We also had around ZAR 700 million of restructuring costs in 2019, although ARO incurred almost ZAR 500 million in restructuring costs to rightsize that business towards the end of 2020. At the same time as all of this, we've absorbed substantial incremental run costs in the past 3 years due to separating from Barclays. These were ZAR 1.8 billion last year, predominantly in CIB, ARO and central functions. These are now in the base, and thus, I won't call them out again in the future. Lastly, COVID-19-related costs totaled almost ZAR 300 million, largely for personal protective equipment to keep customers and colleagues safe as well as increased communication costs as we engaged extensively with customers and colleagues working from home. After considering the above items, our underlying cost growth was very low. Given the significant build in our credit impairments and balance sheet coverage, I'll spend a lot of time on credit risk today. Credit impairments of almost ZAR 21 billion were more than 2.5x higher year-on-year, reflecting the significant strain in our customers and the impact of IFRS 9 accounting. While most of the increase came from RBB South Africa, it grew far less year-on-year than CIB South Africa or ARO. Our credit loss ratio rose from 80 basis points, at the bottom of our expected through-the-cycle range of 75 to 100, to 192 basis points, above global financial crisis levels of 175 basis points. Our credit impairments included ZAR 5.4 billion of management judgmental provisions based on the unprecedented deterioration in macroeconomic variables. We provide details of the macro scenarios we used as well as a detailed sensitivity analysis in our booklet. Given the material uncertainty about the economic outlook, we have retained our significant first half macro provisions. We also raised ZAR 2.7 billion for single name exposures. There wasn't one particularly large exposure that stands out, and the industries these companies operate in vary. RBB South Africa's credit loss ratio rose to 264 basis points, well above the top end of its through-the-cycle range of 155 basis points. Home loans credit charge was 12x higher off a very low base. Vehicle and Asset Finance's charge almost trebled, reflecting deteriorating delinquency and higher inflows into legal. Within Everyday Banking's ZAR 7.3 billion credit impairment, card and personal loans credit loss ratios increased to 8.5% and almost 12%, respectively. Relationship Banking's charge also increased materially, again, off a low base. It's pleasing to see that our new business vintages are performing in line with expectations across the board, in line with our approach to very targeted growth. CIB South Africa's credit loss ratio rose from a low 11 basis points to 54 due to increased single name charges and macroeconomic variable adjustments. ARO's credit loss ratio increased materially off a low base, particularly in CIB, due to single names and a tail risk provision raised for the hospitality and leisure industry in certain countries. As Daniel mentioned, from March, we granted significant payment relief to customers in good standing who required short-term financial relief due to the COVID-19 pandemic. RBB South Africa's relief covered ZAR 152 billion of loans or 27% of its overall book last year and over 2/3 of the total relief we granted. At ZAR 84 billion, home loans was the largest portfolio by value, although cards was the largest by number of customers. CIB South Africa granted payment relief on ZAR 40 billion of loans or 13% of its book. This ranged from providing bridging finance to deferring capital or interests or relaxing covenants on a temporary basis. ARO granted payment relief of ZAR 27 billion of loans or 24% of its book mostly in the second and third quarters. Within CIB ARO, hotels and tourism were the largest sectors under relief by value. The relief portfolios were ring-fenced to ensure heightened monitoring when the relief expired. By year-end, the vast majority had expired, with RBB South Africa still providing payment relief on total exposures of just ZAR 1.6 billion. The payment relief portfolio has performed in line with expectation, with 92% of the portfolio up-to-date. Performance is best in CIB South Africa, while Everyday Banking's unsecured lending has the lowest proportion that is up-to-date at 79%. In classifying the book, we considered whether a significant increase in credit risk event had occurred, resulting in a migration from stage 1 using 12-month expected losses to stage 2 with lifetime expected losses. Our stage allocation for the payment relief portfolio was more conservative than our actual experience to date. Our direct exposure to industries that have been significantly impacted by COVID-19 is relatively low. However, some are large in absolute terms, and clearly, the specific names within each is crucial. The graph shows our aggregate exposure to each sector impacted as a proportion of total group loans. CIB South Africa constitutes the bulk, although RBB South Africa has quite large exposures to commercial property finance, manufacturing and construction, while ARO has more lending to nonfood retail, manufacturing and hospitality in particular. Commercial property, predominantly in South Africa, is the biggest exposure, although it is still relatively modest in the context of our overall lending book. While parts of the property sector are under pressure, our CPF portfolio is well diversified, and we've improved its risk profile in recent years with its LTV low at around 50%. The book has proven very resilient with no specific credit impairments made during the year. Manufacturing and nonfood retailers are the next largest, and these books are well diversified. Our loans to the construction sector and hospitality industry are comparatively small. While South Africa's construction sector has been distressed for some time pre-COVID-19, hospitality and hotels were in reasonable shape before the pandemic. Lastly, our exposures to oil and gas, automotive dealers, health care and aviation are all small in a group context and have demonstrated improving attributes. Despite substantial payment relief measures, our delinquency profile and nonperforming loans deteriorated. Starting in the first half, our level of stage 2 and 3 loans increased materially after improving consistently for the past 2 years. It's important to highlight that the second half uptick was less pronounced than we expected. Stage 2 increased as a result of higher early-stage delinquencies and SICR adjustments. Stage 3 growth included specific names in the wholesale portfolios that were impaired. Delays in asset realizations, plus extending personal loans write-off period to 12 months from 6 to align with the industry practice, also increased stage 3 loans. Our stage 3 loans are higher than peers due largely to our more conservative U.K. PRA-based definitions on forbearance, which we'll update as these models are redeveloped over the medium term. Total loan coverage increased from 3.3% to 4.5%, which we believe is appropriate for the operating environment based on our current expectations. Given the forward-looking components of the macroeconomic variable reserves that we raised, these reserves will be consumed or utilized going forward if and when the delinquency is crystallized. Stage 1 coverage rose to 92 basis points from 55, largely due to our macroeconomic variable adjustments. Stage 2 cover increased to 7.1% from 6.4%, also reflecting macroeconomic variable adjustments in RBB South Africa and book construct deterioration in South African personal loans. CIB ARO's coverage also rose given provisions raised against the hospitality and leisure sectors. While stage 3 coverage decreased slightly, it reflects lower coverage in CIB South Africa due to inflows that require less coverage because of the high level of collateral held against them. RBB South Africa's coverage rose given the macroeconomic variable adjustments and growth in the vehicle finance legal book. Moving to our divisional performance. Normalized headline earnings declined across the board due to the substantial credit impairments we just covered. However, it was encouraging that all the divisions grew pre-provision profits last year and that their second half earnings were far stronger. RBB South Africa, which usually accounts for almost 60% of group earnings, fell 55% to ZAR 4.3 billion as its credit charge outweighed solid 6% pre-provision profit growth. Its earnings decreased 17% year-on-year in the second half as credit impairments were less of a headwind. CIB South Africa dropped 6% year-on-year to ZAR 3 billion despite strong 33% pre-provision profit growth. It was good to see that its second half earnings grew 32% year-on-year on even higher pre-provision profit growth. ARO's earnings decreased 56% to ZAR 1.6 billion given significantly higher credit impairments off a low base. All the divisional returns were below cost of equity for the year with substantial reductions in RBB South Africa and ARO. And while CIB South Africa's return on regulatory capital was the most resilient, its starting point was below our cost of equity. Looking at RBB South Africa's components, the lending business declined the most, including cards and personal loans, which I'll cover on the next slide, given significantly higher credit impairments. The insurance and transactional businesses held up better. While earnings declined materially, there were some encouraging aspects. Firstly, there is strong focus on costs, which decreased across all the businesses. Secondly, although overshadowed by higher credit impairments, all the banking businesses generated positive pre-provision profit growth. Lastly, they all performed substantially better in the second half, particularly Everyday Banking. Home loans revenue growth was strong, up 9%, as its net interest margin widened. Costs decreased 2%, producing 17% higher pre-provision profits. Although substantially higher credit impairments reduced earnings materially, home loans earnings were only 8% lower in the second half. Vehicle and Asset Finance also produced strong 10% revenue growth on improving margins, and its costs fell 10%. Despite 33% higher pre-provision profits, it made a large ZAR 1 billion loss given far higher credit impairments. Positively, it's already broke even in the second half. Relationship Banking's net interest income grew 7%, and operating expenses declined 6% given restructuring costs in the base and volume-related savings and cash operations. However, these only partially offset the drag from 12% lower noninterest income and considerably higher credit impairments. Its earnings fell 31% with a slightly lower decline in the second half. Although insurance cluster earnings were the most resilient, decreasing 12%, its second half was a lot weaker than its strong first half. COVID-19 had a substantial impact, reducing new business volumes by 31% and increasing claims by 9%, largely retrenchment and mortality in the life business, and further reserve adjustments of ZAR 200 million were taken in the second half on the back of the second wave of the virus. Everyday Banking costs fell 10%, although 5% lower revenue and a 58% increase in credit impairments saw earnings drop 44%. It was pleasing that its second half rebounded strongly, with earnings up 22% year-on-year. Everyday Banking's lower earnings reflect very different performances across its 3 businesses. Transactional and Deposits produced a very strong showing, with earnings increasing 11%, including 30% growth in the second half. Costs decreased 6%, slightly more than revenue, to increase pre-provision profits 10%, outweighing higher credit impairments on its small overdraft book. Our primary customers decreased to 2.9 million from 3.1 million due to subdued customer activity levels and income during the lockdown. Total customers were fairly stable at 9.5 million, with some attrition in the entry-level segment, while the core middle market was stable, and affluent customers grew 2%. While card broke even for the year, its second half was particularly strong, growing 37% year-on-year. Although pre-provision profits decreased 3%, this was more a function of its already low cost/income ratio as costs fell 23% far more than the 12% decline in revenue, with both impacted materially by the sale of the Edcon portfolio. Card's credit loss ratio was well above through-the-cycle levels. Lastly, personal loans made a sizable loss, although it was profitable in the second half. Despite its book declining 12%, average loans were 8% higher. Modest revenue growth with slightly lower costs resulted in 3% higher pre-provision profits, which only partially offset significantly higher credit impairments. Moving on to CIB, I show all of its components on this slide in line with how it's run on a pan-African basis. CIB's total earnings decreased 17% or 20% in constant currency due to significantly higher credit impairments. Revenue growth of 14% or 11% in constant currency was double its cost growth, resulting in strong 22% higher pre-provision profits. Importantly, its second half earnings grew 6% year-on-year. Despite strong 15% growth in noninterest income, it remains 36% of total revenue, which is below peers and also CIB's stated ambition of 40%. We continue to see growth potential in targeted areas and aim to win primary relationships to increase our transactional revenues and deposits and improve CIB's returns. Looking at CIB's components, all had strong pre-provision profit growth. Investment Banking earnings were also particularly resilient with a notable performance from ARO's investment bank where earnings rose 11%. In total, investment bank earnings grew 1%, while corporate decreased 35%. Corporate South Africa's revenue growth slowed to 6%, largely due to lower transaction and subdued trade revenue, while working capital was strong, particularly in the first half. Costs reduced 2%, producing 22% pre-provision profit growth. Significantly higher credit impairments meant earnings decreased 14% and its return on regulatory capital declined to 12.5%. South African Investment Banking earnings decreased 2% to ZAR 2.2 billion due to substantially higher credit impairments. Its return on regulatory capital reduced slightly to 11%. Revenue growth of 19% was well above 1% higher costs, producing strong 40% pre-provision profit growth. As mentioned, global markets revenue rebounded off a low base, while Commercial Property Finance grew 37% and banking 10%. Large negative fair value adjustments weighed on noncore private equity revenue. CIB ARO's earnings fell 30% or 37% in constant currency to ZAR 1.9 billion. Its return on regulatory capital reduced to 19%, with the investment bank very high at 38% and corporate at 14%. ARO's corporate earnings dropped 46% to ZAR 1.1 billion due to incremental rand costs and significantly higher credit impairments. Revenue grew 11%, reflecting strong net interest income growth driven by trade and working capital as well as the weaker rand. ARO's Investment Banking franchise was one of our best performers with 11% earnings growth or 4% in constant currency off a relatively high base. Revenue grew 24% or 18% in constant currency given a strong performance in global markets. ARO's investment bank benefited from not having a loan book, so credit impairments are negligible. Its costs grew 32% or 29% in constant currency due to materially higher incremental rand costs. ARO's revenue grew 8% or 2% in constant currency given a slower second half. However, ARO's top line growth has enhanced our group revenue growth over the past 2 years, particularly since revenue in South Africa was unchanged during this period, following 4% in 2019. Thus, ARO has increased to 25% of group revenues. Despite this revenue growth, ARO's earnings decreased 56% or 65% in constant currency to ZAR 1.6 billion. Before COVID-19, I flagged that we were cautious on ARO's earnings this year given its low 2019 credit charge and higher incremental rand costs after separating from Barclays. Clearly, COVID-19 exacerbated this by increasing credit impairments significantly and slowing revenue growth. ARO's pre-provision profits still grew 3% year-on-year, predominantly due to rand weakness since its jaws were negative. Excluding higher incremental rand costs and restructuring costs, ARO's expense growth was below inflation. The main drag was credit impairments more than trebling. I covered CIB ARO earlier. RBB ARO lost ZAR 161 million despite 6% higher pre-provision profits as its credit impairments more than doubled. We see considerable potential to reduce its high 71% cost/income ratio medium term as we reshape this franchise now that the separation from Barclays is complete. This restructuring commenced towards the end of last year as we incurred ZAR 500 million restructuring charge. We also see scope to further grow our CIB franchise across the continent. As I said throughout last year, we focused on preserving capital and liquidity and protecting our balance sheet and client franchise rather than on growth during this period. Our group core equity Tier 1 ratio decreased to 11.2% from 12.1%, although it remains within our Board target range of 11% to 12% for 2020 and comfortably above regulatory requirements. The decline was largely due to paying our final 2019 dividend of ZAR 5.1 billion and risk-weighted asset growth, which outweighed reduced internal capital generation. Our RWAs grew 5% to ZAR 915 billion as credit risk RWAs rose 6%, largely due to CIB South Africa increasing 15%, reflecting loan growth and default grade migrations. RBB South Africa grew 2% and benefited from the well-timed disposal of the Edcon store card portfolio, which freed up ZAR 9 billion in RWAs. Other includes the phasing-in of IFRS 9, which was completed in January 2021, plus a reduction in the available-for-sale reserve and an increased intangible deduction. Given the weak and uncertain economic outlook, we have increased the top end of our CET1 target range to 12.5%, with a view to maintaining CET1 broadly at the midpoint of the new range on a sustainable basis. Finally, I'll finish with our 2021 guidance, starting with our latest estimates of the macro prospects. There remains substantial uncertainty about the global economic outlook, which depends on the rollout of effective vaccines and additional policy support. The IMF expects global real GDP growth of 5.5% in 2021. We forecast 3.1% growth in South Africa during 2021, although we only expect absolute GDP to recover to 2019 levels by 2024. The timely rollout of an appropriate vaccination program is critical. In any event, we think that the employment and consumer spending will remain under pressure and business confidence and investment is likely to recover slowly. Additional episodes of load shedding are likely this year as well as further waves of COVID-19 infections, with a particularly strong third wave expected in the second quarter. We think that the reserve bank will leave the repo rate unchanged for this year before increasing it by 75 basis points in 2022 and potentially another 50 basis points in 2023. We expect our ARO countries to recover faster than South Africa, with 4.5% GDP weighted growth in 2021. Those countries that depend more on tourism, such as the Seychelles, Mauritius and Botswana, are expected to recover slower than the more diversified East African ones. Policy rates are likely to rise during 2020, and public finances will remain a focus among policymakers in several countries. Based on these assumptions and excluding further major unforeseen political, macroeconomic or regulatory developments, our guidance for 2021 is as follows: On average, we expect the rand to be stronger in 2021, translating to a 2% to 3% growth headwind. We expect low to mid-single-digit growth in net interest income given improved customer loan growth. Although noninterest income growth is expected to improve, it's likely to remain low. We'll continue to manage operating expenses carefully while maintaining investments in systems and digitization. And despite increased variable and performance costs, we expect low single-digit cost growth overall. As a result, we expect flat operating jaws in 2021, although the first half is likely to be negative. Our cost/income ratio is likely to be in line with 2020's 56%. Thus, we expect positive but slower pre-provision profit growth, particularly in the first half. After 2020 substantial build in coverage, credit impairments are expected to decrease substantially, particularly in the first half, resulting in a 2021 credit loss ratio only slightly above our through-the-cycle range of 75 to 100 basis points. Consequently, we expect our ROE to improve materially, particularly in the first half, to low double digits for the year, although it will probably remain below our cost of equity. At this stage, we expect to exceed our cost of equity in 2023, and this remains heavily dependent upon GDP forecasts. We will look to provide more detailed medium-term guidance once there is less economic forecast risk. It's pleasing that our performance so far this year, including earnings, has been stronger than we expected. In line with our previous guidance, we did not declare ordinary dividends for 2020. On our capital outlook and dividend policy, we will follow a balanced approach between retaining sufficient capital for growth, resuming dividends and a period of capital accretion to build and then maintain a position of broadly the midpoint of our 11% to 12.5% group CET1 target range. We expect to gradually resume paying dividends from interims 2021, starting with a dividend payout ratio of 30% and increasing to 50% over the medium term. In the absence of appropriate loan growth, we would return excess capital to shareholders as we've done in the past. Thanks very much for your attention. I'll hand you back to Daniel.

Thank you, Jason. Before we take your questions, I'd like to update you on the strategy review that we completed last year and that context that informs the strategic decisions that we have taken. When I joined Absa in January 2020, I agreed with the Board that I would review the implementation of the 2018 strategy. 2020 would turn out to be a year of a lot of changes for business as the world grappled with the COVID-19 pandemic, which fundamentally changed the way we work and the way we think about serving our customers whose behavioral patterns, needs and expectations have been changing rapidly. In undertaking the review, we understood that our window of opportunity to think about how to accelerate our transformation efforts was going to have to be during the pandemic, at the same time as we were managing the crisis. The strategy review process looked into changes in the market, our performance gaps and what was needed to thrive post the crisis. This was a group-wide initiative and collaborative effort that leveraged our internal resources and extend our thought leadership with regards to 7 specific focus areas that were part of the review. The review process concluded that while our strategic choices from the 2018 strategy remain relevant, the world in which we seek to achieve them has changed. As a consequence, some shifts and accelerations are required to modernize our business, not only to maintain relevance in the new and next normal but to thrive and advance as a business. As a result, we have refreshed our strategy to address the implications of our evolving operating environment and, in particular, areas that we need to accelerate to support the growth of our business. This will happen as we continue to consolidate elements of our 2018 strategy that have been showing traction. Key to that is refining our go-to-market strategy and accelerating our ability to execute with agility and speed, keeping the customer at the heart of everything we do. New value will be created by solving for customers and client-specific needs, offering them solutions that go beyond traditional banking services and leveraging alternative platforms which present opportunities for new fee-based revenues. We continue to improve our digital landscape and harness the power of cloud computing, data analytics, artificial intelligence, machine learning and emerging technologies to build capabilities that can be scaled across our business and into third-party ecosystems while ensuring robust technology and cybersecurity measures. To drive execution, we are evolving the 3 strategic priorities and 3 enablers that were pillars of our 2018 strategy into 4 strategic imperatives and 4 strategic enablers that work in concert to deliver new and shared value going forward. The 4 strategic imperatives are: first, lead with purpose and deliver shared value to a broad range of stakeholders; second, address customers' intrinsic needs throughout their life journey with differentiated customer propositions that are personalized and are delivered with a high level of consistency and quality and at the right moment; third, deliver propositions through digital-first distribution channels that match and adapt to our customers' behavioral patterns as they evolve; and fourth, establish a diverse market footprint that best meets our customers' expectations. The 4 strategic enablers are: first, continue to invest in strategic capabilities that drive market leadership; continue to build a modernized technology architecture that powers digital transformation; evolve our execution model to one that drives fast lane innovation; and continue to develop and nurture the entrepreneurial mindset of our employees. This strategy refresh better positions us to become a business that sustainably creates shared value, plays a meaningful role in our customers and clients' life journeys, empowering them to achieve more and encouraging them to recommend us to family, friends and business associates. Our refreshed strategy ensures that we have a relevant and competitive business model that will see us emerge from this crisis as a strong and resilient business for our colleagues, customers, clients and shareholders. While uncertainty remains, Absa holds an optimistic view of the future. We will continue to bolster operational and financial resilience while focusing on protecting our colleagues, supporting our clients and customers, showing solidarity with the communities we serve and creating value for our stakeholders. We'll continue to deepen our ESG activities, which have already seen upside becoming a founding signatory of the UN Principles for Responsible Banking, publishing a sustainability policy and being the first South African listed company to voluntarily include a climate change resolution at our AGM in June, with the resolution being supported by almost 100% of our shareholders. I'm proud of the fact that we have shown resilience through this crisis and emerged strong and well positioned for the future. Many things attracted me to join Absa: a strong and admired brand, its regional footprint, strong client franchise and the opportunity to be part of its strategic ambition. Over the past year, I have also got to know that we have a loyal and committed workforce invested in the success of the group. I continue to believe that we can leverage all these strengths to unlock our full potential. Thank you for your attention, and Jason and I will now take your questions.

Well, thanks, Daniel. We do have a few questions here on Slido, which we'll deal with now. The first one is anonymous. It goes as follows: You've been growing your retail book quite aggressively, particularly in the second half. How much of that growth is at the expense of quality considering that your CLR is still quite high versus your other peers that reported recently? Are you comfortable with the level of risks that you've taken? The answer is as follows: If you look at where we have been growing, it's been very targeted. So if you look at mortgages, for instance, our flow of new business moved from 21% to 22%, so we wouldn't necessarily call that aggressive. We call that being responsive to the market that is out there. There's a fairly buoyant level of demand at the moment from first-time homebuyers, and that also speaks to the existing strategy that we've had in place in mortgages and probably vehicle and asset finance as well now, partnering with mortgage originators and building out our dealer networks and these types of things. So with respect to quality, the vintages have been performing absolutely in line with our expectations. And it is also worth noting that in terms of pricing for risk, I've been pleased to see the contribution of mortgage and Vehicle and asset finance pricing coming through quite strongly and contributing to the group margin overall. The next one is also anonymous. Please, can you provide some guidance on the runoff of the interest rate hedge into the income statement over the coming years? So we've got -- as at December, we had ZAR 4.2 billion worth of reserves on the balance sheet after tax. That would amortize into the income statement broadly over 5 years, all else being equal. So a fairly material level of support still remains with respect to that structural interest rate hedging program. And of course, it was also a tailwind in our results for last year. Like I said, all else being equal, that will amortize to the income statement. Next one is also anonymous. Your CET1 ratio of 11.2% in the context of not paying an FY '20 dividend still looks low. Can you comment on whether the cash flow hedging reserve of ZAR 5 billion is included in your CET1 ratio calculation? Thank you. So no, it's not included. So the cash flow hedging reserve forms part of the net asset value of the company, but it isn't included in the CET1 ratio. With regards to the comment on the actual ratio at 11.2% and our decision not to pay a dividend, I think it's fair to say that we expect the CET1 ratio to show a period of accretion quite nicely this year. We've had a good start to the year from a capital supply perspective, and we guided them with respect to interims that we would look to resume dividends, and because I'm fairly comfortable that the profile of accretion of capital will be fairly strong for the rest of this year. The next one is also -- the next -- please explain your more constructive view on the CLR for FY '21 versus peers when your NPL ratios are higher and coverage appears somewhat lower. A couple of things. So similar to the first question, we're very comfortable with our appetite, where we're growing, which we targeted and well collateralized. If you look at -- there's some definitional differences, of course, between Absa and the peers in South Africa. We still use the U.K. PRA rules with respect to movement of accounts into stage 2 and stage 3, in particular, related to accounts that are showing forbearance tendencies. So in simple terms, we move accounts into stage 2 quicker and stage 3, and then they stay there for longer given the definitions we use. In fact, coverage, from our perspective, improved materially last year. And I guess we've seen the results of FirstRand and Standard Bank come out. FirstRand has the strongest coverage. It looks like we're second and Standard Bank is third. And we'll see the others -- Nedbank and others' prints later. But in terms of the overall coverage we've got, we're absolutely comfortable with that level. Then we've got one from Charles Russell from Citi. Can you please comment on the performance of loans written subsequent to June 2020, i.e., the front book versus older vintages back book, making distinction between RBB and CIB? Well, thanks for that question, Charles. It's quite similar to the first one that I answered. Absolutely comfortable with the new vintages we've been writing. In RBB, very much only in the secured space. If you look at unsecured in Retail Banking South Africa, of course, we have tightened appetite there, and you've seen that there's no growth there anymore. So we've kind of stabilized at the 12% market share. So very, very small market share, in fact, for Absa. Those new vintages are coming through just in line with our expectations. So we're pleased with that. With respect to CIB, look, we've had no growth, no real front book growth in CIB last year. Where there was a little bit of it, it was probably in Commercial Property Finance, which was absolutely well targeted again. Our CPF portfolio is pretty small in the context of our balance sheet in terms of share. And we wrote pretty good loans there. If you look at -- even specific impairments coming through CPF for us are negligible. So the only portfolio impairments we booked -- the only impairments we booked, sorry, for CPF had been portfolio impairments. We haven't got individual exposures as we sit here that we're worried about. Dan, I'm going to pass the next one on to you. It's around strategy.

Thank you, Jason. The question we've got here is from anonymous. And it's, have you identified any key expansion or consolidation opportunities in the rest of Africa regions? I guess I'll preface my answer by saying that we are still determined to deliver on our aspiration of being a leading bank on the continent. So growth will continue to shape our thinking and drive our planning. We looked at, as part of our strategy review, also at our footprint, and we'll continue to monitor the landscape and take advantage of any opportunities that may present themselves. So our growth ambitions will be fulfilled through both organic and inorganic measures as and when we see those opportunities. But having said that, we are also quite clear that within our existing footprint, there are still opportunities to go for. And -- but we certainly won't miss out on some of the new revenue pools that we haven't been able to tap into previously. So the answer is that we'll continue to be on the lookout, and our ambition to obviously evolve into a fully pan-African bank still stands. You will know that we are well represented in Eastern and Southern Africa but somewhat light when it comes to West Africa and North Africa. So that continues to be part of our plan, and we'll opportunistically take advantage of any opportunities that present themselves and support our overall strategy.

Okay. I think we're out of questions now. We appreciate all of you attending our call this morning, and I'm sure we're going to see many of you over the next couple of days. Thank you.