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Private and confidential Nigeria Investment Themes Nigeria/South Africa - Doing Business Together Workshop June 2014 Contents 1 Section 1. Introduction to Stanbic IBTC and Standard Bank Group 2. Nigeria – Investment Themes Private and confidential Section 1 Introduction Stanbic IBTC Bank and Standard Bank Group Introduction Key points 3 Stanbic IBTC Group Background Stanbic IBTC Holdings Plc (“Stanbic IBTC Group”) is a financial Institution in Nigeria that offers end-to-end financial services such as: Stanbic IBTC emerged from the merger of Stanbic Bank Nigeria Limited with IBTC Chartered Bank Plc in 2007 – Corporate and investment banking. – Personal and business banking. – Investment management and brokerage. Sola David-Borha Chief Executive Stanbic IBTC Holdings PLC Yinka Sanni Chief Executive Stanbic IBTC Bank PLC Stanbic IBTC Bank Plc is Nigeria's only local bank with a Fitch AAA rating. Stanbic IBTC Bank Plc , a subsidiary of Stanbic IBTC Holdings, is Nigeria's only local bank with a Fitch AAA rating. Its investment banking subsidiary Stanbic IBTC Capital Limited is the leading investment banking franchise in Nigeria with excellent capabilities in advisory and capital markets transactions. Other Stanbic IBTC subsidiaries include the leading equities brokerage firm and the leading pension fund administrator in Nigeria. Combines strong domestic coverage with regional and international reach. Stanbic IBTC Holdings is 53.2% owned by Standard Bank Group and can draw on the deep resources within the group. Key statistics N213.5bn Total assets N763.0bn Average no. of employees 2001 Merged with Stanbic Nigeria and Standard Bank gained control of the combined entity in a US$1bn transaction 2005 Incorporated as Investment Banking & Trust Company Limited and commenced operations as a Merchant bank 2007 Holding Company Structure was adopted. Stanbic IBTC Capital emerged from this process 2012 Listed on the NSE on 25 April 2005 Merged with Chartered Bank & Regent Bank and changed name to IBTC Chartered Bank Plc Vast Branch Network Across Nigeria 176 branches nationwide 2013 Market capitalisation PAT 1989 Obtained Universal Banking Licence in Nigeria N20.8bn 2,077 Stanbic IBTC Bank’s presence Standard Bank is Africa’s largest and leading bank Key Points Premier South African based financial services group with on the ground expertise across Africa 4 Introduction and Overview Premier South African-based financial services group focused on Africa Full service bank offering: – Corporate & Investment Banking (“CIB”) Standard Bank has expertise and specialist knowledge to effectively partner clients in achieving their emerging market expansion ambitions Relationship with ICBC (20.1% strategic equity interest in Standard Bank) provides further international reach and strengthens Standard Bank’s access to what may soon be the world’s largest economy – Personal & Business Banking – Investment Management and Life Assurance Global reach with presence in 31 countries Distribution capabilities in world’s leading financial centers including New York, London and Hong Kong, China and Brazil CIB provides corporate and investment banking services to corporate clients, financial institutions and international counterparties focused on emerging markets around the world Key statistics Market capitalisation – assets over $3.062 trillion Nearly 100 international branches with representation in, Frankfurt, Hong Kong, London, Luxembourg, Macau, Moscow, New York, Seoul, Singapore Listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange 2013 $20bn Total assets $162bn Headline Earnings $1.8bn ROE 14.1% Employees Largest commercial bank in China 48, 808 Africa 18 countries 1 283 branches 9300 ATMs on the African continent Key regional offices Rest of the World 13 countries outside Africa Offices in key financial centres including London, Moscow, New York, Hong Kong, Nairobi, Lagos, Sao Paolo and Dubai Standard Bank – Recent Accolades Key points Global Finance: Best Investment Bank in Africa (2012) 5 Select 2013, 2012 & 2011 Accolades Best Bank for Payments and Collections in Africa Best Foreign Exchange Bank and Provider in Africa Best Investment Bank in Africa Best Debt House in Africa Best Investment Bank in South Africa Best provider of Money Market Funds in Africa Best Sub-Custodian in Nigeria Best Trade Finance Bank in Africa Best Trade Finance Bank in South Africa Country awards for Best FX Provider in Nigeria (Stanbic IBTC) and South Africa African Bond Deal of the Year: Joint Winner for restructuring of Senegal Debut Bond Deal of the Year: Metorex acquisition by Jinchuan Best Bank of the Year – South Africa Best Investment Bank – Africa The Banker: Top Bank in Africa (2012) Project Finance Deal of the Year: Africa Power (2011) Best Bank in Nigeria (2012) Best Bank in Uganda (2012) Best Risk Advisor in Africa (2012, 2011) Best Debt House in Africa (2012, 2011) Best M&A House in South Africa (2012) Best Project Finance House in Africa (2012) Best Private Banking Services overall for Mauritius (2012) Deal of the Year: Namibian debut 10year bond transaction (2012) First in Corporate Banking in South Africa First in Foreign Exchange Trading in South Africa (peer ranking) First in Listings in South Africa (peer ranking) First in Money Markets in South Africa (peer ranking) Accugas – African Midstream Oil & Gas Deal of the Year Nordstream – European Midstream Oil & Gas Deal of the Year Pulkovo–European Airport Deal of the Year PA Resources – African Upstream Oil & Gas Deal of the Year Africa's top bank in The Banker magazine's annual ranking of the world's top banks. Standard Bank was ranked 112 out of the world's top 1000 banks (2012) Deal of the Year: Bonds: Joint bookrunner for Namibia’s debut USD500 million 10 year 5.50% Eurobond (2012) Deal of the Year: Loans: Sole Lead Arranger and Bookrunner for Helios Towers Tanzania USD85 million financing (2012) Most Innovative Bank from Africa (2012) Africa's top bank in The Banker magazine's annual ranking of the world's top banks. Standard Bank was ranked 112 out of the world's top 1000 banks (2012) Deal of the Year: Bonds: Joint bookrunner for Namibia’s debut USD500 million 10 year 5.50% Eurobond (2012) Deal of the Year: Loans: Sole Lead Arranger and Bookrunner for Helios Towers Tanzania USD85 million financing (2012) Most Innovative Bank from Africa (2012) Best cash management services in Africa Best Investment Bank in Africa Best Bank Malawi Best Investment Bank in Angola Best Investment Bank in Namibia Best Investment Bank in Nigeria (awarded to Stanbic IBTC Bank) Best Investment Bank in Zambia Best Local Investment Bank in South Africa Accugas – African Midstream Oil & Gas Deal of the Year (2011) Deal of the Year: Africa Mining (2011) Deal of the Year: Africa Oil & Gas (2011) Deal of the Year: Africa Power (2011) Deal of the Year: Africa Renewables (2011) Nordstream – European Midstream Oil & Gas Deal of the Year (2011) Private and confidential Section 2 Economic Overview of Nigeria Nigeria: An Overview Overview Strong economic growth forecast for Nigeria in spite of recent challenges Nigeria is the largest economy in Africa Africa’s largest consumer market with a population of 171 million people Africa’s largest oil producer and 12th largest in the world, producing high-value, low-sulfur content crude oil Government policy has been focused Third-largest recipient of FDI on stabilizing the financial services Oil & Gas reserves: 1,080MMbbl & 1.69tcf, 2013 production sector, privatization approx 1.8MM bpd of key industries Sovereign Ratings (2012): Fitch: BB-, S&P: BB-, Moody’s: and stimulating Ba3 growth 7 Investment rationale Largest population in Africa with positive demographic trends Large proven oil and gas reserves Generally constructive fiscal and monetary policies Relatively low levels of government indebtedness Major banking sector reforms have improved health of the financial sector Policies encouraging investment in key sectors FX reserves (USD bn) : 36.9 The business environment Good economic growth – over 6.5% annually Focus on oil & gas and agricultural potential USD 31bn trade surplus Increased FDI Key challenge is administration’s ability to deliver Economic change and implement structural reforms Political Hampered by bureaucratic bottlenecks Population is young and growing High unemployment Increased internet connectivity and mobile phone Socio-cultural Technological usage Key risks Economy remains heavily dependent on recycling oil earnings through fiscal channels Onshore oil production remains vulnerable to security disruptions in the delta Weak political / judicial institutions and physical infrastructure Ethnic and religious differences continue to divide the country Physical security and crime remain problematic 8 Nigeria Remains a Key Strategic Market in Sub-Saharan Africa A regional hub for Western Africa Southern Africa Increasingly friendly business environment Within West Africa: • Nigeria’s population is the largest on the African continent and eight largest in the world • Largest GDP in Africa • US$37 billion in foreign reserves • Huge hydrocarbon resources, the largest producer of crude oil in Africa with the second largest oil resources base in Africa and 8th largest gas reserve base globally • Nigeria is the emerging economic locomotive of the African continent East Africa West Africa Note: Size of bubble reflects relative GDP of each country C-Re locations Increasing population Sources: IMF World Economic Database, Standard Bank Group Economics, EIU. Key Economic Reform Initiatives GDP growth trajectory alone is unlikely to deliver the overall uplifts desired in quality of life for consumers Persistent inequality of distribution and the apparent lack of upward mobility Economic inefficiencies that give rise to a sustained high cost of living need to be tackled in order to elevate and unshackle the consumer 9 Power Sector Government has concluded its divestiture of assets from the PHCN; most were handed over on 1 November 2013 Introduction of appropriate pricing regime - ongoing Contracting out the management of the Transmission Company of Nigeria (TCN) NIPP asset sales; preferred bidders identified, payments have begun Implementation of National Gas master plan, in order to enhance fuel-to-power capabilities Agricultural Transformation Contributes 22%% of Nigeria's GDP; employs 70% of the population in agriculture and related agro-business. Identification of 10 key crops in which Nigeria is deemed to have a competitive advantage and supporting the build out of value chains Policy of promoting local production through tariffs, quotas on imports, with focus on key commodities (rice, cassava, sorghum, cocoa and cotton) Backward integration underway by large firms such as UAC, Dangote, Flour Mills, Olam Oil and Gas Sovereign Wealth Fund Accounts for 90% of foreign exchange earnings,70% of government revenues The spirit behind the SWF was to replace the ECA, which is yet to occur Introduction of Local Content Act 2010. Resulting in divestment of IOCs from onshore asset operations to more technologically intense offshore assets The fund now stands at $1.55bn The Nigeria Sovereign Investment Authority (NSIA) is meant to invest excess crude revenues in three funds: Local content policies for services companies. Skills development occurring across the value chain The Future Generations Fund (32.5%) Nigerian Infrastructure Fund (32.5%) Development of refining capacity necessary to reduce import bill Stabilization Fund (20%) Petroleum Industry Bill yet to be passed. This will result in a revision on how royalties are paid on exploited oil. Source: Stanbic IBTC Research Other Key Investment Areas Nigeria's fundamentals will provide long-term demand for infrastructure Government policies focused on manufacturing growth to provide employment, reduce import bill Emerging consumer sector needs to be served with appropriate goods, retail experience and communication links 10 Infrastructure Manufacturing Nigeria's fundamentals will provide long-term demand for infrastructure growth. A population of170mn with a growing middle class will demand more houses, more power and better transport links. Historically under-developed sector – 70% of goods consumed in Nigeria are imported Government pursuing a policy of promoting local manufacturing through tariffs, quotas on imports. Huge infrastructure deficit Many efforts underway (private, public, PPPs) to bridge the gap Assembly of automobiles by major OEMs expected to commence in 2014 Projects underway include ports, highways, bridges, airport, light rail 40% of sovereign wealth fund is dedicated to infrastructure FMCG and Retail Nigeria’s growing affluent population has appetite for well-produced consumer goods Success seen by well-executed brands that meet local needs and tastes (e.g. Indomie Noodles) Nigeria significantly underserved with formal retail Enabling real estate emerging slowly. Malls in major ciities: Lagos (Ikeja and Palms), Abuja, Enugu, Port Harcourt, Enugu Interesting potential in serving mass market with formal retail Source: Stanbic IBTC Research Telecoms and Technology One of the great success stories of Nigeria’s economic transformation; MTN Nigeria now larger than MTN South Africa Market well-penetrated with voice; focus is on data, broadband links, quality of service High adoption of digital services, forcing change on traditional formats of banking and retail Expect significant investments in upgrading IT services and infrastructure Conclusions 11 Nigeria Continues to be an Attractive Investment Market As Africa’s largest economy with a high growth rate, investors cannot afford to ignore Nigeria’s economy and potential The headlines surrounding the rebasing of the economy and Nigeria’s status as the Africa’s largest economy have refocused investor interest on Nigeria Economic reforms have resulted in strong historical growth and are likely to continue to deliver similar performance going forward Power reforms will change the face of Nigeria its just a question of timing Successfully addressing structural bottlenecks that sustainably reduce the cost of living and allow for more diversified consumer expenditure is key to the development of the Nigerian consumer in our opinion Security concerns have had a limited impact on economic growth, to this point Foreign investors continue to have a meaningful role to play in spurring and supporting economic growth. Disclaimer 12 This presentation is provided for information purposes only on the express understanding that the information contained herein will be regarded as strictly confidential. It is not to be delivered nor shall its contents be disclosed to anyone other than the entity to which it is being provided and its employees and shall not be reproduced or used, in whole or in part, for any purpose other than for the consideration of the financing or transaction described herein, without the prior written consent of a member of the Standard Bank Group. The information contained in this presentation does not purport to be complete and is subject to change. This is a commercial communication. This presentation may relate to derivative products and you should not deal in such products unless you understand the nature and extent of your exposure to risk. 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