Firstrand Limited · JSE:FSR
Firstrand — FirstRand Bank — Debt Investor Presentation (June 2017)
38 slides from Firstrand's debt investor presentation, June 2017
Slide 1: Financial and Strategic Update
FINANCIAL AND STRATEGIC UPDATE June 2017
Slide 2: Agenda
2 Agenda Overview of the FirstRand group Overview of FirstRand Bank (debt issuer) Alan Pullinger, Group Deputy CEO FirstRand Bank financial performance Macroeconomic environment Financial sector and market infrastructure Andries du Toit, Group Treasurer Funding and liquidity Capital
Slide 3: Overview of the FirstRand Group
3 OVERVIEW OF THE FIRSTRAND GROUP
Slide 4: Introducing the FirstRand group – financial position and track record
4 Introducing the FirstRand group – financial position and track record FINANCIAL HIGHLIGHTS ZAR USD NORMALISED EARNINGS – YEAR ENDED 30 JUNE for the year ended 30 June 2016 million million ZAR million Total assets (normalised) 1 149 326 78 399 25 000 Normalised net asset value 99 794 6 807 22 855 N
Slide 5: FirstRand's operating model
5 FirstRand’s operating model LISTED HOLDING COMPANY (FIRSTRAND LIMITED, JSE: FSR) Retail and commercial bank Corporate and investment bank Instalment finance Investment management Group-wide functions Customer-facing Stakeholder management
Slide 6: FirstRand's statement of intent
6 FirstRand’s statement of intent • FirstRand’s portfolio of leading financial services franchises: • provides a universal set of transactional, lending, investment and insurance products and services • seeks to operate in markets and segments where franchises can deliver competitive and differentia
Slide 7: Group strategic framework presents broader opportunities for growth
7 Group strategic framework presents broader opportunities for growth South Africa Rest of Africa Other (UK, Channel Islands and India) Protect and grow banking franchises Protect and diversify Broaden financial services offering Portfolio approach to capitalise on long-term growth opportunity
Slide 8: Overview of FirstRand Bank (Debt Issuer)
8 OVERVIEW OF FIRSTRAND BANK (DEBT ISSUER)
Slide 9: FirstRand Bank is a wholly-owned subsidiary of FirstRand Limited
9 FirstRand Bank is a wholly-owned subsidiary of FirstRand Limited… LISTED HOLDING COMPANY (FIRSTRAND LIMITED, JSE: FSR) 100% OTHER WHOLLY-OWNED SUBSIDIARIES OF FIRSTRAND LIMITED DEBT ISSUER FIRSTRAND BANK LIMITED FirstRand EMA (Pty) Ltd (FREMA) DIVISIONS Banking subsidiaries in the rest of Africa R
Slide 10: A significant contributor to the group's financial position
10 … and a significant contributor to the group’s financial position FirstRand normalised earnings FirstRand normalised assets 11% 22% FirstRand Bank FirstRand Bank Other legal entities* Other legal entities* 78% 89% FirstRand normalised net asset value FRB geographical advances split 2% 3% 3% 21% S
Slide 11: Protecting and growing SA banking franchise key to group's growth
11 Protecting and growing SA banking franchise key to group’s growth Other Insure • Growing and retaining customers across all Save and segments invest • Cross-sell and up-sell key to growth in retail and commercial franchises • E-migration underpins sustainability of retail transactional franchise
Slide 12: Diversification in UK still presents growth opportunities for the bank
12 Diversification in UK still presents growth opportunities for the bank Other markets (incl. UK and India) Rest of Africa 4% 10% • Continued growth in motor distribution footprint • Investing in product diversification • Funding strategies still supportive of growth plans • Origination strategies
Slide 13: FRB normalised performance highlights
13 FRB normalised performance highlights Dec 2016 Dec 2015 % change Profit before tax (ZAR million) 12 269 10 661 15% Earnings (ZAR million) 9 081 7 712 18% Return on equity (%) 22.6 21.1 Return on assets (%) 1.75 1.57 Credit loss ratio (%)* 0.79 0.79 - Cost-to-income ratio (%) 53.8 55.4 T
Slide 14: Macroeconomic Environment
14 MACROECONOMIC ENVIRONMENT
Slide 15: The macroeconomic cycle has turned
15 The macroeconomic cycle has turned Economic growth at cyclical lows Trade balance has pushed the CA deficit % y/y % GDP 7 6 4 6 2 5 0 4 -2 -4 3 -6 2 -8 1 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep 94 95 96 97 99 00 01 02 04 05 06 07 09 10 11 12 14 15 16 0 -1 Net i
Slide 16: Government debt has lifted; households have delevered
16 Government debt has lifted; households have delevered Government debt to GDP ratio Government debt service costs % GDP % 55 12.8 50 12.6 45 12.4 40 12.2 35 12.0 11.8 30 11.6 25 11.4 20 11.2 1994 1997 2000 2003 2006 2009 2012 2015 2018 2016/17 2017/18f 2018/19f 2019/2020f Government: gross debt to
Slide 17: Financial Sector and Market Infrastructure
17 FINANCIAL SECTOR AND MARKET INFRASTRUCTURE
Slide 18: Further strengthening the SA financial system
18 Further strengthening the SA financial system • SA benefits from world class market infrastructure in payments, exchanges and securities clearing • SA benefits in financial stability from the closed rand system • SA is adopting the Twin Peaks model of financial sector regulation • Prudential Auth
Slide 19: SA is progressing on G20 reforms and alignment
19 SA is progressing on G20 reforms and alignment Source: FSB.
Slide 20: IMF Review: South Africa's financial stability assessment
20 IMF Review: South Africa’s financial stability assessment • Financial sector operates in challenging economic environment • Relatively high capital buffers as well as sound regulation and supervision have helped mitigate risks • Stress tests confirm the capital adequacy resilience of banks and in
Slide 21: FirstRand Bank's credit ratings
21 FirstRand Bank’s credit ratings SOUTH AFRICA FIRSTRAND BANK LIMITED SOVEREIGN RATINGS CREDIT RATINGS FOREIGN CURRENCY LOCAL AND FOREIGN CURRENCY Long term/ Long term/ Standalone National scale outlook outlook credit rating S&P Global BB+/Negative BB+/Negative zaA bbb Moody’s Baa3/Negative Baa3/Ne
Slide 22: Protect and enhance market access
22 Protect and enhance market access • Protect the balance sheet • Within our external balance sheet consider both liquidity risk and business risks • Rating downgrade risk had been reflected in stress testing, credit origination and balance sheet strength • Protect the counterparty status • FRB is
Slide 23: Funding and Liquidity
FUNDING AND LIQUIDITY FIRSTRAND BANK
Slide 24: FRB's funding and liquidity strategy anchored to growing the deposit franchise
24 FRB’s funding and liquidity strategy is anchored to growing the deposit franchise and improving balance sheet liquidity Funding composition (ZAR billion) Balance sheet growth Liquid asset* growth and mix ZAR billion ZAR billion 17.15% of 1 000 200 total assets 1 200 900 CAGR 11% 180 180 800 1 000
Slide 25: Update on liquidity ratios
25 Update on liquidity ratios LCR – 104% (Dec 2016) NSFR – effective Dec 2018 • LCR phase-in requirements continue with • SARB adopted an ASF for FI deposits <6m of minimum requirement 35%, considering regulatory and economic • 2017: 80% and 2018: 90% barriers that prevent liquidity from flowing out
Slide 26: Stylised view of FirstRand's external debt philosophy
26 Stylised view of FirstRand’s external debt philosophy … Solvency Net asset value Sustainability Asset quality Structural borrowing limit Liquidity risk Cash flow and earnings profile Structural borrowing capacity of all SA entities Debt level Liquidity limits Liquidity mismatch SA Inc’s repayment
Slide 27: FirstRand's philosophy results in a sustainable FX balance sheet structure
27 FirstRand’s philosophy results in a sustainable FX balance sheet structure Assets Short-term trading assets Liquid trading assets Trade and working capital MotoNovo vehicle finance facilities Interbank placing Short-term Long-term lending FX liquidity buffers Cross-border acquisition bridge finan
Slide 28: Capital
CAPITAL FIRSTRAND BANK 28
Slide 29: Solid CET1 ratio as at December 2016
29 Solid CET1 ratio as at 31 December 2016 CET1 RATIO 14.1% 13.7% 14% ZAR15.7bn 12% surplus CET1 target range: 10% Management 10% – 11% buffer 2.5% 8% 6% SARB end-state minimum 4% requirement 8.5% 2% 0% Target Column2 Regulatory X actual Economic actual Column1 Appropriately positioned for future re
Slide 30: Superior returns and strong capital position maintained
30 Superior returns and strong capital positioned maintained 30% 24.3% 25% 22.9% 22.6% 21.1% 20% 15% 13.6% 13.6% 13.6% 14.1% 10% 5% 0% Dec 2013 Dec 2014 Dec 2015 Dec 2016 CET1 capital* ROE * Reflects FRB including foreign branches. Ratios include unappropriated profits.
Slide 31: Domestic market already embracing new generation instruments
31 Domestic market already embracing new generation instruments; language aligned to Basel III TIER 2 ISSUANCE IN SOUTH AFRICA FRB TIER 2 ISSUANCE R billion 2014 4.4 FRB: 30% 2015 4.4 2016 4.9 Remaining Total 13.7 banks = 2.4% of RWA • Tier 2 issuance since 2014; limited AT1 issuance • Well understo
Slide 32: South Africa evolving resolution regime
32 South Africa evolving resolution regime • Broadly in line with FSB’s Key Attributes of Effective Resolution Regimes for Financial Institutions • White paper jointly released in September 2015, Strengthening South Africa’s Resolution Framework for Financial Institutions • Concept of point of resol
Slide 33: A framework to differentiate between issuers
33 A framework to differentiate between issuers • Strong capital position Capital • Appropriate buffers in excess of minimum management Balance sheet • Distance-to-trigger/default strength Assets • Quality Liabilities • Integrated funding and liquidity • Quality Earnings resilience, volatility and g
Slide 34: Conclusion
CONCLUSION FIRSTRAND BANK
Slide 35: In summary, FirstRand Bank is well positioned for the cycle
35 In summary, FirstRand Bank is well positioned for the cycle • Strong financial position • Proactively provided for credit cycle • Strong capital position • Integrated funding and liquidity management • Pre-emptive action was taken to in the event of a downgrade: • Protect market access • Diversif
Slide 36: Important notice
36 Important notice THIS PRESENTATION IS NOT AN OFFER OR SOLICITATION OF AN OFFER TO BUY OR SELL SECURITIES. IT IS SOLELY FOR USE AT AN INVESTOR MEETING AND IS PROVIDED FOR INFORMATION ONLY. THIS PRESENTATION IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, INTO AUSTRALIA, CA
Slide 37: Important notice (continued)
37 Important notice (continued) This presentation does not constitute an offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities of FRB nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment wh
Slide 38: www.firstrand.co.za
www. firstrand.co.za FIRSTRAND BANK
FirstRand Bank — Debt Investor Presentation (June 2017) on 6ix