Firstrand Limited · JSE:FSR

Firstrand — Non-Deal Roadshow (November 2016)

32 slides from Firstrand's roadshow presentation, November 2016

  1. Slide 1: Non-deal roadshow – Nitro

    Non-deal roadshow – Nitro November 2016

  2. Slide 2: Agenda

    2 Agenda • Funding and liquidity • Regulatory update • Funding plans • Asset-based secured financing • International and local developments • FirstRand principles on securitisations • FirstRand’s securitisation performance

  3. Slide 3: Funding and Liquidity: Regulatory update

    3 FUNDING AND LIQUIDITY Regulatory update

  4. Slide 4: Update on liquidity ratios

    4 Update on liquidity ratios LCR NSFR • Exceed minimum requirements – • Welcome the change to the ASF for FI incorporating a management range deposits <6m • In addressing the LCR FirstRand adopted • We expect volatility in the ratio due to strategies that improve structural liquidity seasonal factor

  5. Slide 5: Group LCR has improved by reporting alignment and execution on balance sheet strategies

    5 Group LCR has improved by reporting alignment and execution on balance sheet strategies 115% 105% 8% 12% 95% 96% 8% 85% 9% 75% 75% 4% 3% 71% 65% 55% 30-Jun-15 Reduction to 31-Dec-15 Operational Contingent Inflows & HQLA Other 30-Jun-16 Dec15 Deposit Haircut Outflows placings FirstRand Group Consol

  6. Slide 6: Recalibration of NSFR impacts R96bn+ in balances for FRB

    6 Recalibration of NSFR impacts R96bn+ in balances for FRB Additional R35 billion ASF 250 30% 26% 27% 24 13 25% 200 21% 46 20% 150 40 8 37 14% 15% 12% 174 100 33 4 66 46 7 10% 36 14 50 15 15 5 8 19 17 5% 7 43 46 7 4 29 26 0 13 0% Transactional Demand 1d-1m 1m-6m 6m+ Retail SME Corporate Govt & Para

  7. Slide 7: FRB funding strategy continues to be anchored in the deposit franchise

    7 FRB funding strategy continues to be anchored in the deposit franchise Deposit franchise +9% Institutional & other +1% +1% 335 339 +14% +9% Jun-15 +5% 180 Jun-16 158 167 153 134 140 Retail Business CIB deposits Institutional funding Source: FRB analysis of financial results, June 2016

  8. Slide 8: Funding and Liquidity: Funding plans

    8 FUNDING AND LIQUIDITY Funding plans

  9. Slide 9: Allocation of savings flows by platform

    9 Allocation of savings flows by platform 100% 2% 3% 5% 9% 11% 13% 90% 15% 17% Non-guaranteed liabilities. 17% 80% 18% 17% Regulatory Relative value pricing, targeted 9% 18% 9% 9% and return hurdles, often based on LDI 70% 12% economic mandates, and real return targets 13% 60% 23% 14% forces will co

  10. Slide 10: Stylised view… risk-return transformation and pricing differentiation

    10 Stylised view… risk-return transformation and pricing differentiation Providers of funds Application of funds Risk-adjusted Risk-adjusted Secured pricing pricing Cash and liquid assets Bank Unsecured intermediation Secured loans and transmission of monetary Subordinated Unsecured conditions (cove

  11. Slide 11: A stylised bank liability structure

    11 A stylised bank liability structure When risk appetite evaporated post Capital and the GFC, the market for FI senior reserves unsecured was closed. Only dual Equity recourse secured funding markets Deeply subordinated remained (AT1)† Subordinated debt Increased (Tier II)† information Senior unsec

  12. Slide 12: SAM introduces a more risk-sensitive framework and constraints on insurers

    12 SAM introduces a more risk-sensitive framework and constraints on insurers • Credit quality steps mapped to PD bands • Internal rating permissible subject to approval 1 Credit risk differentiation • Using instrument rating if available not entity rating • 3% per counterparty, 10% for RSA banks, a

  13. Slide 13: SAM is akin to Basel II foundation approach

    13 SAM is akin to Basel II foundation approach % of value 18% 17.46% BB+ 16% BBB- 13.76% 14% BBB 12% 10.06% BBB- Fully collateralised 10% 8% 6.37% BB+ with OC 6% 4.89% BBB- with OC 4.15% 6.20% 3.41% 4% 4.86% 2% 3.51% 1.64% 2.17% 0% 1.10% 1.37% 1 2 3 5 10 15 20 CQS = 8 (Unsecured) CQS = 9 (Unsecured)

  14. Slide 14: Funding plans

    14 Funding plans • Diversification across segments, source, currency, markets, instrument types and maturities • Flexibility across markets, investors, products, investor risk appetite • Given we expect to exceed the min NSFR, require greater optimisation • Funding levels in the SA market are very h

  15. Slide 15: Market developments

    15 Market developments • Strate and Clearstream collateral management JV has gone live in SA, enables: • Efficient collateralization • A secured square-off between clearing banks • Improving the liquidity of SA NT TBs • Proposals are with SARB, FMLG, and NT • London clearing house (LCH) • Funding mo

  16. Slide 16: Funding and Liquidity: Secured funding

    16 FUNDING AND LIQUIDITY Secured funding

  17. Slide 17: Simple, transparent and comparable ABS (STC)

    17 Simple, transparent and comparable ABS (STC) • In July 2015, BCBS and IOSCO published criteria to identify STC securitisations1 in response to calls made by the industry and regulators to simplify and standardise securitisation to improve credit risk transmission and unfreeze lending • 14 criteri

  18. Slide 18: Simple, transparent and comparable ABS (STC) (continued)

    18 Simple, transparent and comparable ABS (STC) (continued) • Following the published criteria, the BCBS published an update to the revised securitisation capital framework to be introduced in 20181 • The update carried with it preferential capital treatment for securitisations that meet the STC cri

  19. Slide 19: Securitisation task group (NT)

    19 Securitisation task group (NT) Industry requirements Task group response • Transparency • Review and commentary on the updated Basel • What will assist you with the securitisation framework investment case • Review and update of the Securitisation • Credit work Exemption Notice under the followin

  20. Slide 20: SA securitisation market 2015/2016

    20 SA securitisation market 2015/2016 • Issuance in the local securitisation market by banks has remained subdued in 2015/16, mainly due to the big four banks ability to source funding relatively cheaper in the local bond market • Nedbank’s Greenhouse and FRB’s Nitro 5 have been the only bank issuan

  21. Slide 21: Complete and robust markets combine bank and market-based financing

    Complete and robust markets combine bank and market-based financing AFME European Market Statistics Private non-financial corporate issuance Source: AFME, Securitisation Data Report, Q2 2016 Source: Bank of England, Financial Stability Report, July 2016 • UK has historically been a successful securi

  22. Slide 22: FirstRand principles on securitisations

    22 FirstRand principles on securitisations • Transaction structure is simplified with principal pass-through to note holders • The securitisation SPV is an insolvency remote vehicle • Securitisation is primarily used for funding • Assets are originated under the bank’s approved credit processes • Fi

  23. Slide 23: Investor reporting

    23 Investor reporting • SA Securitisation Forum http://sasf.co.za/investorreporting.htm • RMB website http://www.rmb.co.za/globalmarkets/nitro.asp • Offering circular, investor presentation • Rating agency pre-sale reports • Investor reports

  24. Slide 24: Nitro 4: Clean-up call exercised

    24 Nitro 4: Clean-up call exercised • The Clean-up call for Nitro 4 was exercised in April 2015, with Delinquency trends the final redemption of all outstanding notes due on the 14th 6.00% Between 31 and 60 days Between 61 and 90 days May 2015. Between 90 and 120 days Greater than 120 days 5.00% Cla

  25. Slide 25: Nitro 5: performing within expectations

    25 Nitro 5: performing within expectations • Having closed in June 2015, the Class A notes have Delinquency trends redeemed within the 1 year maturity. Class B has begun 6.00% Between 31 and 60 days Between 61 and 90 Days amortising in line with the underlying portfolio, with 72% Between 90 and 120

  26. Slide 26: Nitro note redemptions

    26 Nitro note redemptions • Nitro 4 note redemptions were managed to meet a target maturity • Nitro 5 note redemptions are fully pass-through based on the prepayment characteristics of the underlying pool Nitro 4 – Note redemptions Nitro 5 – Note redemptions 400 350 Millions Millions 350 300 300 250

  27. Slide 27: Appendix

    APPENDIX FIRSTRAND BANK 27

  28. Slide 28: Appendix: SAM

    Appendix: SAM Credit quality Probability Rating step of default (S&P LC, IS) Collateral LGD 1 0.01% AA+ Fully cash covered with regular MTM of the 2 0.02% AA 5.0% collateral 3 0.03% AA- 4 0.06% A+ Significantly over collateralised 18.0% 5 0.09% A 6 0.11% A- Fully collateralised 35.0% 7 0.16% BBB+ 8

  29. Slide 29: Glossary of terms

    29 Glossary of terms Term Definition ASF Available Stable Funding EL Expected loss FI Financial Institution LCR Liquidity Coverage Ratio NCOF Net Cash Outflows NSFR Net Stable Funding Ratio RSF Required Stable Funding TB’s Treasury Bills FMLG Financial Markets Liaison Group CLF Committed Liquidity F

  30. Slide 30: Notes

    30 Notes

  31. Slide 31: Notes

    31 Notes

  32. Slide 32: Notes

    32 Notes

FirstRand — Non-Deal Roadshow (November 2016) on 6ix