OptimaBank — Financial Plan & Projections

The basis of preparation and key assumptions, the projected income statement, balance sheet and cash flow, the key performance ratios, capital adequacy, the scenario and sensitivity analysis and the five-year financial summary.

OptimaBank Business PlanSection 12 › Financial Plan & Projections

Section 12 · Business Plan

Financial Plan & Projections

The basis of preparation and key assumptions, the projected income statement, balance sheet and cash flow, the key performance ratios, capital adequacy, the scenario and sensitivity analysis and the five-year financial summary.

12.1 Basis of Preparation & Key Assumptions

The financial projections cover a five-year horizon and are prepared
on an accrual basis consistent with IFRS as applied by South African
banks. They are built bottom-up from customer, deposit and lending
volumes, with margins, fee ratios, credit losses and cost ratios applied
as set out below. All figures are in ZAR millions unless stated
otherwise.

Key driver Year 1 Year 2 Year 3 Year 4 Year 5
Active customers (’000) 850 2,400 4,600 7,200 10,500
Customer deposits (R m) 18,500 46,000 84,000 132,000 188,000
Gross loans (R m) 9,200 27,500 54,000 96,000 152,000
Loan-to-deposit ratio (%) 49.7% 59.8% 64.3% 72.7% 80.9%
Net interest margin (%) 4.8% 5.1% 5.3% 5.4% 5.4%
Credit loss ratio (%) 3.2% 2.8% 2.2% 1.8% 1.5%
Cost-to-income ratio (%) 128% 92% 64% 54% 49%

12.2 Projected Income Statement

The projected statement of comprehensive income is set out below. The
bank generates operating losses in Years 1 and 2 as it invests ahead of
scale, reaching profitability in Year 3 and growing net profit strongly
thereafter.

ZAR millions Year 1 Year 2 Year 3 Year 4 Year 5
Net interest income 472 1,512 3,366 6,091 9,720
Non-interest revenue 293 1,028 2,491 4,751 7,970
Total operating income 765 2,540 5,857 10,842 17,690
Operating expenses (979) (2,337) (3,748) (5,855) (8,668)
Pre-provision operating profit (214) 203 2,109 4,987 9,022
Credit impairments (294) (770) (1,188) (1,728) (2,280)
Profit / (loss) before tax (508) (567) 921 3,259 6,742
Taxation 0 0 (249) (880) (1,820)
Net profit / (loss) (508) (567) 672 2,379 4,922

12.3 Projected Balance Sheet

The projected statement of financial position reflects the rapid
build-up of the deposit-funded lending book, the liquidity and capital
buffers required under Basel III, and the cumulative effect of capital
raised and retained earnings.

ZAR millions Year 1 Year 2 Year 3 Year 4 Year 5
ASSETS
Cash & balances with SARB 8,794 10,743 14,920 14,625 9,610
Liquid assets & investment securities 6,475 16,100 29,400 46,200 65,800
Net loans & advances 8,788 26,422 52,337 93,581 148,808
Property, equipment & intangibles 1,850 2,100 2,300 2,450 2,600
Other assets 740 1,840 3,360 5,280 7,520
Total assets 26,647 57,205 102,317 162,136 234,338
LIABILITIES & EQUITY
Customer deposits 18,500 46,000 84,000 132,000 188,000
Wholesale & debt funding 1,300 3,500 7,000 12,000 18,000
Other liabilities 555 1,380 2,520 3,960 5,640
Total liabilities 20,355 50,880 93,520 147,960 211,640
Paid-in capital 6,800 7,400 9,200 12,200 15,800
Retained earnings (508) (1,075) (403) 1,976 6,898
Total equity 6,292 6,325 8,797 14,176 22,698
Total liabilities & equity 26,647 57,205 102,317 162,136 234,338
Figure 8.
Figure 8. Balance-sheet growth: total assets and customer deposits, Years 1–5 (ZAR millions).

12.4 Projected Cash Flow Statement

The cash-flow projection below presents flows by activity. Operating
cash flow turns strongly positive as the deposit franchise scales and
the bank becomes profitable; investing flows reflect platform and
infrastructure capital expenditure, concentrated in Year 1; and
financing flows capture the phased capital raises and wholesale-funding
draws.

ZAR millions Year 1 Year 2 Year 3 Year 4 Year 5
Net profit / (loss) (508) (567) 672 2,379 4,922
Add: impairments & depreciation 614 1,150 1,608 2,178 2,760
Operating cash flow (pre working capital) 106 583 2,280 4,557 7,682
Net working-capital / B-S movements 2,825 (425) (1,800) (10,800) (19,600)
Net cash from operating activities 2,931 158 480 (6,243) (11,918)
Net cash from investing activities (2,170) (630) (620) (600) (630)
Net cash from financing activities 8,100 2,800 5,300 8,000 9,600
Net change in cash 8,861 2,328 5,160 1,157 (2,948)
Closing cash & liquidity balance 8,861 11,189 16,349 17,506 14,558
Figure 9.
Figure 9. Cash flow by activity, Years 1–5 (ZAR millions).

12.5 Key Performance Ratios

The trajectory of the bank’s principal performance ratios
demonstrates the operating leverage inherent in the model: the
cost-to-income ratio falls sharply, net interest margin expands
modestly, credit losses normalise, and return on equity rises into the
high-teens to low-twenties by Year 5.

Figure 10.
Figure 10. Key performance ratios, Years 1–5 (%).
Ratio Year 1 Year 2 Year 3 Year 4 Year 5
Return on equity (%) -8.1% -9% 7.6% 16.8% 21.7%
Return on assets (%) -1.91% -0.99% 0.66% 1.47% 2.1%
Net interest margin (%) 4.8% 5.1% 5.3% 5.4% 5.4%
Cost-to-income (%) 128% 92% 64% 54% 49%
Credit loss ratio (%) 3.2% 2.8% 2.2% 1.8% 1.5%
Loan-to-deposit (%) 49.7% 59.8% 64.3% 72.7% 80.9%

12.6 Capital Adequacy

OptimaBank is capitalised to remain comfortably above the SARB’s
Basel III minimum capital requirements throughout the plan. South Africa
applies minimum capital levels that are, in several respects, more
stringent than the global Basel minimum. The bank maintains a total
capital adequacy ratio and a CET1 ratio above regulatory minima in every
year, with capital raised in phased tranches to support the growing
risk-weighted asset base.

Figure 11.
Figure 11. Capital adequacy ratios vs. regulatory minimum, Years 1–5 (%).
Capital metric Year 1 Year 2 Year 3 Year 4 Year 5
Risk-weighted assets (R m) 12,234 32,261 61,260 105,872 164,648
Total qualifying capital (R m) 6,942 8,075 12,297 20,176 31,698
Total capital adequacy ratio (%) 56.7% 25% 20.1% 19.1% 19.3%
CET1 ratio (%) 41.6% 15.9% 12.4% 12.3% 13.1%

12.7 Scenario & Sensitivity Analysis

The base case above assumes orderly customer acquisition, normalising
credit losses and the achievement of the targeted cost-to-income
trajectory. Management has stress-tested the plan against adverse
movements in the key value drivers:

  • Credit-loss shock: A sustained 100–150
    basis-point increase in the credit-loss ratio would defer profitability
    by approximately one year and reduce Year-5 ROE by an estimated 4–6
    percentage points, absorbed within existing capital buffers.
  • Slower acquisition: A 20% shortfall in customer
    and deposit growth would slow income build-up and require tighter cost
    control, but the variable component of acquisition spend provides a
    natural offset.
  • Cost overrun: A failure to reach the target
    cost-to-income ratio (e.g. settling at 55–58% rather than ~49%) would
    compress Year-5 net profit but leave the bank profitable and adequately
    capitalised.
  • Rate environment: A downward rate cycle
    compresses asset yields but also lowers funding costs; the bank’s
    liability-sensitive early balance sheet provides partial
    protection.

In each adverse scenario modelled, the bank remains above regulatory
capital minima, underscoring the prudence of the phased capitalisation
strategy.

12.8 Scenario Summary

The table below summarises the directional impact of each stress on
the headline outcomes relative to the base case.

Scenario Break-even Year-5 ROE Capital adequacy
Base case Year 3 ~22% Above minimum
Credit-loss shock (+100–150bps) Year 4 16–18% Above minimum
Slower acquisition (–20%) Year 3–4 18–20% Above minimum
Cost overrun (CIR ~55–58%) Year 3 17–19% Above minimum
Combined moderate stress Year 4–5 13–16% Above minimum

12.9 Five-Year Financial Summary

For convenience, the principal financial outputs of the model are
consolidated below.

ZAR m unless % Year 1 Year 2 Year 3 Year 4 Year 5
Total operating income 765 2,540 5,857 10,842 17,690
Operating expenses (979) (2,337) (3,748) (5,855) (8,668)
Credit impairments (294) (770) (1,188) (1,728) (2,280)
Profit before tax (508) (567) 921 3,259 6,742
Net profit / (loss) (508) (567) 672 2,379 4,922
Total assets 26,647 57,205 102,317 162,136 234,338
Customer deposits 18,500 46,000 84,000 132,000 188,000
Total equity 6,292 6,325 8,797 14,176 22,698
Return on equity (%) -8.1% -9% 7.6% 16.8% 21.7%
Cost-to-income (%) 128% 92% 64% 54% 49%
CET1 ratio (%) 41.6% 15.9% 12.4% 12.3% 13.1%

Confidential — this business plan is provided to prospective investors and lenders for evaluation purposes only and may not be reproduced or distributed without the written consent of OptimaBank Africa Group (Pty) Ltd.