Firstrand Limited · JSE:FSR
Firstrand — FirstRand Bank — Debt Investor Presentation (October 2023)
37 slides from Firstrand's debt investor presentation, October 2023
Slide 1: Lehae Programme Transaction 1 Investor presentation
Lehae Programme Transaction 1 Investor presentation October 2023
Slide 2: Important information
Important information The information herein has been prepared solely for informational purposes and does not, nor is it intended to constitute, an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. These
Slide 3: Contents
Contents Executive summary 4 About FNB 5 Business and market update 6 Origination, credit and risk management 9 Collection and scoring 15 Lehae Programme overview 17 Lehae Transaction 1 20 Transaction features 21 Capital structure 22 Provisional portfolio summary 24 Transaction timeline 27 Appendice
Slide 4: Executive summary
Executive summary First National Bank (FNB), Established for faster Lehae Transaction 1 a division of FirstRand Bank execution, time to Secured with a portfolio of Limited (FRB), will be market, standardised R2 000 million of mortgage issuing its first residential documentation and loan agreements a
Slide 5: FNB home loans: strategic overview
FNB home loans: strategic overview A trusted partner to our customer’s home ownership journey Personal segment Private segment ENTRY ENTRY EMERGING MIDDLE AFFLUENT WEALTH WALLET BANKING AFFLUENT R48K R240K R600K R1.2m R1.8m/R15m NAV Pension R600K Affordable Traditional Solar & Eco First Home Develop
Slide 6: Mortgage market landscape
Mortgage market landscape Customer Opportunities Risks Ecosystem confidence & dynamics • Semigration: growth • Country risk: • Rent vs buy: pros/cons • Mortgage originator: opportunities outside the major unemployment rate, key player – expanding metros as a result of hybrid work energy crisis, infr
Slide 7: FNB portfolio composition
FNB portfolio composition* R99bn Home Loans across Traditional Home Loan/Eco/Affordable Housing Applicable to Lehae structure 250 Eco/Solar Loan, 0.6 200 Affordable housing, 20.5 150 R billion 100 Tradition home loan, 187.7 50 41.6 2.3 1.1 0 Home Loan Structured Lending Pension Backed SBL *Excludes
Slide 8: Financial performance – FNB residential mortgages: FY2023
Financial performance – FNB residential mortgages: FY2023 Profit before tax Normalised earnings Advances R2.6bn R1.9bn R259.6bn -15% -14% +7% Cost-to-income ratio Credit loss ratio NPLs 35.7% 18 bps R14.0bn -80bps +16bps +19% NPLs as a % of Coverage ratios Average margin advances 20.2% 1.53% 5.42% +
Slide 9: Origination strategy
Origination strategy • Focused on good quality business with satisfactory returns • Recent expansions have been made to recognise market need: Higher loan-to-value origination on low-risk customers Improved risk versus reward strategy on lower income segments • Margin pressure remains high given
Slide 10: Credit scoring, decisioning and rating
Credit scoring, decisioning and rating • Automated scoring via internal decisioning platforms Risk class Registration 12m • Channel integration across mortgage originators, banker %* vintage* and digital platforms all routed via platform • Consistent monitoring of risk appetite and underwriting perf
Slide 11: Credit performance update
Credit performance update 6% • Subsequent to the start of the Covid- 5% 19 lockdown restrictions: NPL 4% (3+) arrears improved, other % of total book arrears were 3% stable 2% • Restructure arrears increased due to higher 1% request received due to the difficult 0% economic conditions 201201 201204
Slide 12: Product and origination portfolio overview
Product and origination portfolio overview • The portfolio is constructed of ~95% of Home loans • Consistent underwriting flows across the years are evident based on the vintage layers Product distribution Product Distribution Origination Yearyear Origination Distribution distribution 100% 100% 98%
Slide 13: PD and LTV portfolio overview
PD and LTV portfolio overview • The underwriting strategy linked to the PD profile has been stable and centered around a low-risk profile • The average LTV structures at origination have been consistent around 88% • The portfolio construct undergoes an ongoing mark-to-market on the underlying collat
Slide 14: Risk management
Risk management Governance and compliance Operations • Centralisation of functions across • Manage client onboarding and fulfilment customer segments aligning to group ensuring compliance with regulations frameworks and structures and internal frameworks and policies • Oversight from FirstRand Group
Slide 15: Default and collection processes
Default and collection processes Collections value chain Defaulting accounts are given a short window to self-cure. If the accounts don’t cure within the timeframe then they are categorised and contacted. Notifications of the default are systematically sent to the customer. (2) Self-cure (1) Custome
Slide 16: Collections strategies
Collections strategies Market responsive mandates Self service/COP Secure Chat Contextual solutions Collections X Projects Semi- and unassisted collections Optimise through Robotics Sub-segment differentiation Client education Lifestyle changes and prevention Debt consolidation Debicheck Collections
Slide 17: Structure
Structure First National Bank Adivisionof FirstRand Bank Limited. An Authorised Financial Services and Credit Provider (NCRCP20).
Slide 18: Overview
Overview FNB FNB (as Originator and Servicer) (Registration of Cession of Lehae Programme (RF) Ltd (Issuer) Covering Bond) FirstRand Indemnity & Indemnity & Cession Indemnity & Mortgage Cession Cession Company (FMC) Lehae Lehae (indemnity Lehae Programme Programme bond) Programme Security Security L
Slide 19: Lehae Programme features
Lehae Programme features • Single newly-established Issuer SPV company Issuer • Issuer SPV enters one or more transactions as specified in the relevant Applicable Transaction Supplements • For each transaction, a Security SPV will be established, which will hold, realise security for the benefit of
Slide 20: Lehae Transaction 1 – key transaction counterparties
Lehae Transaction 1 – key transaction counterparties Servicer Administrator Trustee Swap counterparty Account bank Quadridge Corporate FNB FRB (Treasury) Fiduciary and FRB FNB Secretarial Services Originator / seller ISSUER Principal and Sale of portfolio interest Initial consideration Lehae Program
Slide 21: Structural features of capital structure
Structural features of capital structure Assets Liabilites1 Credit enhancement • Note subordination 40% nominal Class A • Redraw Reserve and Cash Reserve CE 63% [Aaa.za] • Benefits from an estimated average excess spread at closing of roughly 0.4%2 Residential home loan assets Reserves • Redraw Rese
Slide 22: Capital structure
Capital structure National scale Issuance Credit Expected Legal final JSE Tranche rating amount enhancement WAL1 maturity Coupon Status tenor listing (Moody’s) (R million) (%)2 tenor A [Aaa.za] [800] 63 2.69 20 years 5 years 3m JIBAR + [●] Listed Offered B [Aaa.za] [1 000] 13 8.84 20 years 11.75 yea
Slide 23: Weighted average life and amortisation profile
Weighted average life and amortisation profile Key assumptions for estimated weighted Class A Bal Class B Bal Class C Bal average life (WAL): Class D Bal Class A CE (RHS) Class B CE (RHS) Class C CE (RHS) Class D CE (RHS) 2.50 100% Billions • Portfolio is subject to a constant annual rate of 90% 2.0
Slide 24: Provisional pool summary
Provisional pool summary Segment split Consumer Total capital balance (30 June 2023) R2 183m 31% Number of accounts 1,604 FNB Private Clients 48% RMB Private WA (weighted average) capital balance R1.36m Bank 2% Total original loan amount R2 485m FNB Private Wealth WA original loan amount R1.77m 19%
Slide 25: Provisional pool summary (continued)
Provisional pool summary (continued) Payment method Non-FNB banked Largest borrower concentration 0.21% 6% Number of borrowers 1,598 WA yield Prime - 0.40% FNB banked 94% WA current LTV 70.10% WA original LTV 90.52% Seasoning WA original term 238 mo Current Capital Balance Number of Loans 80% WA sea
Slide 26: Provisional pool summary (continued)
Provisional pool summary (continued) Original LTV Geographical split by province Current Capital Balance Number of Loans EC WC 4% 40% FS 30% 26% 20% 2% 10% 0% [25-30) [30-35) [35-40) [40-45) [45-50) [50-55) [55-60) [60-65) [65-70) [70-75) [75-80) [80-85) [85-90) [90-95) [95-100) [100-105) NC 1% NW C
Slide 27: Transaction timeline and auction details
Transaction timeline and auction details • Roadshow: 9 – 12 October 2023 • Target price guidance: [tbc] • Target issuance size: [R2bn] • Target auction: [14 November 2023] • Target settlement: [21 November 2023] (T+5) • Auction will be uniform price sealed bid on issue margin relative to 3-month JIB
Slide 28: Contacts
Contacts First National Bank (FNB) Rand Merchant Bank FirstRand Group Treasury Paul Dreyer Cynthia Heyneke Cameron Gough (CFO: FNB Private Segment) (Distribution) (Structured Finance Manager) T 011 282 1205 [email protected] Dawid Spangenberg Kireshan Royan (Head: FNB Retail credit risk) (Fu
Slide 29: Appendix
Appendix First National Bank division of FirstRand Bank Limited. An Authorised Financial Services and Credit Provider (NCRCP20).
Slide 30: Main eligibility criteria
Main eligibility criteria Not in arrears for more than 30 days or more than 1 instalment Not related to vacant land Current LTV ≤ 100% Max total outstanding balance per loan <= R5m Seasoning ≥ 12 months Not an employee of FRB Not be subject to an active application for a Further Lending or a Re-adva
Slide 31: Indemnity bond structure
Indemnity bond structure Sale of Assets Limited Guarantee FNB Administration FirstRand Limited Guarantee Agreement Mortgage Company (Pty) Ltd Home Loan SPV Customer Indemnity 31
Slide 32: Programme and Transaction Information
Programme and Transaction Information Credit enhancement • Credit enhancement for Class A to Class C notes provided by the reserves, note subordination and available excess spread. PROGRAMME • Credit enhancement for Class D note provided by the cash reserve and available excess spread. DOCUMENTATION
Slide 33: Portfolio arrears (FNB portfolio)
Portfolio arrears (FNB portfolio) 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Partial Arrears (Missed Part of Instalment) 1 month in Arrears 2 months in Arrears Default 33
Slide 34: Cumulative defaults (FNB portfolio)
Cumulative defaults (FNB portfolio) Cumulative defaults per quarter by origination cohort 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 (till Q2) 34
Slide 35: Cumulative recoveries (FNB portfolio)
Cumulative recoveries (FNB portfolio) Cumulative recoveries per quarter by default cohort 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Slide 36: Cumulative losses (FNB portfolio)
Cumulative losses (FNB portfolio) Cumulative losses per quarter by origination cohort 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 2012 2013 2014 2015 2016 2017 2
Slide 37: Cumulative prepayment (FNB portfolio)
Cumulative prepayment (FNB portfolio) Cumulative prepayments per quarter by origination cohort 60% 50% 40% 30% 20% 10% 0% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 (till Q2) 37
FirstRand Bank — Debt Investor Presentation (October 2023) on 6ix