FIRSTRAND NORTH AMERICAN INVESTOR ROADSHOW
May 2015
Conversion rates at 30 June 2014:Income statement: USD1 = ZAR10.38, balance sheet: USD1 = ZAR10.63
Introducing FirstRand – financial position and track record
Sources: FirstRand, I-Net
NORMALISED EARNINGS – YEAR ENDED 30 JUNEZAR million
2
8 283
10 117
12 730
15 420
18 663
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
20 000
2010 2011 2012 2013 2014
21%
FINANCIAL HIGHLIGHTSfor the year ended 30 June 2014
ZAR million
USD million
Total assets 945 535 88 950
Normalised net asset value 81 590 7 675
Normalised earnings 18 663 1 798
Normalised ROE 24.2%
Capital adequacy – CET1 ratio 13.9%
KEY OPERATING STATISTICSfor the year ended 31 December 2014 Dec 2014
Employees 39 508
Physical representation points 874
ATMs 7 089
Card-acceptance point-of-sale devices 125 960
• Be the African financial services provider of choice
• Broaden financial services proposition in South Africa (not only banking)
• Build meaningful in-country franchises in chosen markets in the rest of Africa
• Underpinned by our commitment to:
Our growth strategy
Create long-term franchise value
Deliver superiorand sustainable
economic returns within acceptable levels of volatility
Maintain balance sheet strength
BE THE AFRICAN FINANCIAL SERVICES GROUP OF CHOICE
3
Our unique operating model
Group-wide functions Retail and commercial bank Corporate and investment bank Instalment finance Investment management
Listed holding company (FirstRand Limited, JSE: FSR)
4
How we operationalise FirstRand’s strategic objectives
STRATEGIC FRAMEWORK
FIRSTRAND PHILOSOPHY
PERFORMANCE MANAGEMENT FRAMEWORK
RISK MANAGEMENT FRAMEWORK
FINANCIAL RESOURCE MANAGEMENT FRAMEWORK
Str
atco
Cus
tod
ians
hip
man
dat
e
Exe
cutio
n th
roug
h op
erat
ing
fran
chis
es
Owner-manager culture Innovation Entrepreneurship
Financial services in Africa
Franchise value Superior returnsBalance sheet
strength
5
Portfolio provides sustainability through diversification
* Based on gross revenue (excl. FCC).† Based on normalised earnings (excl. FCC, FirstRand company, NCNR preference dividends and consolidation adjustments.)
FirstRand
87%
2% 11%
South Africa
International
Rest of Africa and corridors
Geography*
58%26%
16%
Franchise†
WesBank
FNB
RMB55%
20%
25%
Segment†Retail
Commercial
Corporate and investment banking
Products*
Retail
Commercial
CIB
FNB Africa
6
Net interest income (NII) = 53% Non-interest revenue (NIR) = 47%
28%
6% 5% 5% 5% 4%
30%
4% 4% 3% 4%
1% 1%
Client franchises are significant
Lending
Gro
up T
reas
ury
and
oth
er
FNB
Afr
ica
Dep
osits
Dep
osit
end
owm
ent
Cap
ital e
ndow
men
t
Transactional income*
Inve
stm
ent
ban
king
tr
ansa
ctio
nal i
ncom
e
Insu
ranc
e
Oth
er c
lient
**
Inve
stin
g
Flow
tra
din
g an
d r
esid
ual r
isk
CLIENT FRANCHISE = 94% RISK INCOME AND INVESTING = 6%
* From retail, commercial and corporate banking.** Includes WesBank associates.
Oth
er in
com
e
7
Balance sheet strength and disciplined financial resource allocation
FINANCIAL RESOURCE MANAGEMENT
CAPITALRISK APPETITE ALLOCATION
FUNDING AND LIQUIDITY
8
0%
2%
4%
6%
8%
10%
12%
14%
Column2 X Column1
Strong capital position and expansion buffer
13.1%*
13.8%
Regulatory Economic
R12.3bnsurplus
SARB end-state minimum
requirement8.5%
CET1 target range: 10% – 11%
Target
CET1 ratio
FSR management buffer 2.5%
Economic view of surplus excludes:• Volatile reserves (foreign currency translation
and available-for-sale reserves)• Ring-fenced capital• Known Basel III changes
0.7%
* Includes reissue of BEE shares in January 2015. 9
Pro-active countercyclical provisioning approach
-
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
Dec 13 Dec 14
Portfolio impairments (R million)
Franchise portfolio impairments
Central overlay
Dec 14 Dec 13
Portfolio impairments as % of performing book
1.07% 0.97%
Bad debt charge (%) 0.86% 0.77%
Portfolio impairments (R million)
7 665 6 152
Franchise overlay
25%
10
998
1 621
2 822
3 645
4 383
18.0%
19.5%
22.3%23.4% 24.0%
0%
5%
10%
15%
20%
25%
-
1 000
2 000
3 000
4 000
5 000
Dec 10** Dec 11 Dec 12 Dec 13 Dec 14
NIACC ROE
Franchise has delivered superior shareholder value creation
NIACC* (R million)
* Net income after capital charge.** 2010 comparatives are for FirstRand Banking Group.
20%
ROE
11
12
13
14
15
16
17
00 02 04 06 08 10 12 140
4
8
12
16
20
24
0
4
8
12
16
20
24
79 82 85 88 91 94 97 00 03 06 09 12 15
0.0
2.5
5.0
7.5
10.0
12.5
15.0
0.0
2.5
5.0
7.5
10.0
12.5
15.0
94 97 00 03 06 09 12 15-5
0
5
10
15
20
25
1995 1999 2003 2007 2011 2015 2019
SA’s economy facing headwindsHousehold and government income growth Inflation lifting from cyclical lows
Pro-cyclical monetary policy Constrained credit growth
%Money multiplier (12mma)Repo rate
Ratio
Gross disposable income of government InflationAvailable household resources
% %
Inflation target band
Sources: South African Reserve Bank, Bloomberg, FirstRand
%
% y/y
12
• Sub-par growth
• Structural constraints (incl. electricity, skills shortage, labour market rigidities)
• Faded commodity price tailwind
• Indebtedness
• Inflation lifting from cyclical lows
• Limited room for policy support
• Monetary policy constrained by inflation and (foreign) funding pressure
• Fiscal policy constrained by government indebtedness and ratings pressure
• Expect a gradual lift in interest rates
• Sovereign rating under pressure
• Tail risks remain high
Key themes for South Africa’s macroeconomic outlook
13
• Be the African financial services provider of choice
• Broaden financial services proposition in South Africa (not only banking)
• Build meaningful in-country franchises in chosen markets in the rest of Africa
• Underpinned by our commitment to:
Our growth strategy
Create long-term franchise value
Deliver superiorand sustainable
economic returns within acceptable levels of volatility
Maintain balance sheet strength
BE THE AFRICAN FINANCIAL SERVICES GROUP OF CHOICE
14
Banking revenues dominate mix – therein lies the growth opportunity…
Lending, transactionaland related endowment 72%
Group revenue split
Dec 14
Deposits and liabilities6%
Insurance 4%
FNB Africa 5%
Investing 4%
Other 9%
15
SOUTH AFRICA
CHALLENGEDominant domestic position constrains
ability to significantly outperform nominal GDP and regulatory pressures
RESPONSESAttack new profit pools, diversify,
disrupt through innovation, cross-sell, fix underperformers, efficiencies
InsuranceCorporate
transactionalAsset
management
Investment taking place now for medium- to long-term growth
… especially given dominant position of domestic banking franchise
Grow capital-light business lines ROE
16
Opportunity to further grow transactional franchise
70%
30%
Non-FNB FNB banked
Direct Axis336 763
accounts60%
40%
Non-FNB FNB banked
WesBankMotor681 675
accounts
70%
30%
Non-RMB RMB banked
Primary transactional relationshipRMB top 100
clients
17
• Utilise the capabilities of the South African franchise, particularly the domestic balance sheet, intellectual capital, international platforms and the existing operating footprint in the rest of Africa
• Effective in territories where a physical presence not yet established, e.g. RMB cross-border lending
• Rolling out RMB (CIB offering) in the established FNB subsidiaries
• Start an in-country franchise and grow organically (i.e. greenfields)
• Rolling out FNB SA innovations a priority
• RMB’s merchant banking licence in Nigeria providing some corporate and commercial banking opportunities
• Acquisitions where it makes commercial sense
Growing in new markets – focus on rest of Africa
Three pillars to execution
18
Growing regional presence
19
-
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
Dec 10 Dec 11 Dec 12 Dec 13 Dec 14
Rest of Africa revenues growing across all franchises
22% CAGR.
Rest of Africa gross revenue* (R million)
** WesBank 2010 and 2011 rest of Africa revenues included in FNB figures in the graph above.
Note: All WesBank rest of Africa profits reported under FNB Africa in Analysis of financial results booklet.* Excludes FCC (including Group Treasury).
WesBank**FNB RMB
Overall subsidiaries ROE 21.6%, established subsidiaries ROE 30.8%
20
Rest of Africa still requires meaningful investment to buildin-country franchises
Multi-nationalInternational
In-country balance sheets and franchises
Using home-country resources to conduct cross-border activity
Execution needs to shift given limited runway
Remain disciplined in deployment of capital21
QUESTIONS?
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