Firstrand Limited · JSE:FSR

Firstrand — FY2022 Earnings Presentation

46 slides from Firstrand's earnings presentation, September 2022

  1. Slide 1: Results presentation for the year ended 30 June 2022

    results presentation ............................................................................................ F OR TH E YEA R EN DED 30 JUNE 2022

  2. Slide 2: Slide 2

  3. Slide 3: Overview of results

    RESULTS PRESENTATION – 30 JUNE 2022 01 overview of results 2 Performance demonstrates full recovery Normalised Pre-provision operating Total distributions (annual earnings profit + special dividend) R32.7bn R53.8bn R26.2bn (2021: R26.6bn) 23% (2021: R50.6bn) 6% (2021: R14.8bn) 78% Return on asset

  4. Slide 4: Disciplined execution of specific strategies shaped growth and ROE outcomes

    02 FIRSTRAND GROUP Overview of results 3 Disciplined execution of specific strategies shaped growth and ROE outcomes Earnings fully recovered • R32.7 billion normalised earnings KEY OBJECTIVES • 17% above peak 2019 level • Carefully price for financial resources Strong economic profit (NIACC*) gener

  5. Slide 5: Sensible balance sheet provisions and coverage maintained

    RESULTS PRESENTATION – 30 JUNE 2022 03 5 Sensible balance sheet provisions and coverage maintained Total provisions (R million) and coverage (% of core lending advances) Total provisions R50 618m Total provisions R47 734m Total provisions R34 162m 45.3% 49.8% 44.7% 11.39% 9.99% 8.98% 1.01% 0.97% 0.7

  6. Slide 6: Consistently high capital generation resulted in 40 bps increase in CET1 ratio

    04 FIRSTRAND GROUP Overview of results 7 Consistently high capital generation resulted in 40 bps increase in group CET1 ratio CET1 ratio* % 17 NAV accretion: +147 bps 16 (172 bps) 15 317 bps 19 bps (17 bps) (112 bps) 14 5 bps 13.9 13.5 13 • Credit ▼82 bps 12 • FX (constant currency) ▼15 bps • Credit

  7. Slide 7: Operating environment: SA macros

    RESULTS PRESENTATION – 30 JUNE 2022 05 operating environment 10 SA macros Headline inflation rate (CPI) Current account balance % y/y % GDP (4qma) 16 6 Increase in global food and 14 4 oil prices has lifted headline 12 CPI considerably 2 10 8 - 6 (2) 4 2 (4) - (6) SA repo rate Credit extended to the

  8. Slide 8: UK macros; unpacking performance against strategy

    06 FIRSTRAND GROUP Operating environment 11 UK macros Retail price inflation rate Bank of England (BoE) policy rate % y/y % 6 12 5 4 10 3 2 8 1 - 6 Unemployment rate 4 % 9 2 8 7 6 - 5 4 (2) 3 Sources: Bloomberg, FirstRand. unpacking performance against strategy

  9. Slide 9: Dynamic financial resource management protected returns

    RESULTS PRESENTATION – 30 JUNE 2022 07 13 Dynamic financial resource management protected returns BALANCE SHEET TILT Origination strategies • Sensible advances growth into sustained recovery • Appropriate risk-adjusted margins • Muted average advances growth • Stronger momentum in second half Fundin

  10. Slide 10: Grew advances cautiously but tactically into an uneven recovery

    08 FIRSTRAND GROUP Unpacking performance against strategy 15 Grew advances cautiously but tactically into an uneven recovery R billion 1 450 8% UK ops: Core client advances: +£676m +R50.4 billion 1 400 1 350 UK ops: +£175m Core client advances: +R30.4 billion 1 300 1 250 1 200 * * * Broader Africa

  11. Slide 11: Sector-specific origination in commercial and corporate

    RESULTS PRESENTATION – 30 JUNE 2022 09 17 Sector-specific origination in both commercial and corporate Other FNB commercial advances +11% 9% Overdrafts 7% 5% • Consistent origination strategy post 18% Commercial pandemic property finance 27% FNB • Deployed balance sheet into sectors  commercial s

  12. Slide 12: Strength of deposit franchise underpins improved cost of funds

    10 FIRSTRAND GROUP Unpacking performance against strategy 19 Strength of deposit franchise underpins improved cost of funds Deposit franchise R billion • Deposit franchise growth driven by 1 400 • Customer acquisition 14% • Good growth in cash investment and 1 200 1 260 transactional products 1 108

  13. Slide 13: Group Treasury ALM strategies – protect and enhance earnings

    RESULTS PRESENTATION – 30 JUNE 2022 11 21 Group Treasury ALM strategies – protect and enhance earnings • Natural risk position maintained • ALM objectives • Be countercyclical to operating businesses • Add resilience to group’s balance sheet and risk profile – ALM matching philosophy • Provide the b

  14. Slide 14: Rebound in NIR driven by customer franchise strategies

    12 FIRSTRAND GROUP Unpacking performance against strategy 23 Rebound in NIR driven by strategies to protect customer franchise, customer acquisition and growth in volumes FNB NIR +8% Insurance income +29% • Origination strategies protected transactional 25% reduction in claims and claims reserves cu

  15. Slide 15: Earnings growth across portfolio

    RESULTS PRESENTATION – 30 JUNE 2022 13 25 Earnings growth across portfolio NORMALISED EARNINGS R million 2022 2021 % change FNB 19 636 16 090 22  RMB 8 196 7 006 17  WesBank 1 604 1 306 23  UK operations 2 983 2 743 9  UK operations (£ million) 149 132 13  Centre* 244 (594) >100  Total group 3

  16. Slide 16: RMB's solid performance driven by advances and transactional balances

    14 FIRSTRAND GROUP Operating business highlights 27 RMB’s solid performance characterised by growth in advances and transactional balances on the back of client acquisition Normalised Normalised profit Pre-provision operating earnings before tax profit R8.2bn R11.6bn R11.2bn (2021: R7.0bn) 17% (202

  17. Slide 17: Broader Africa portfolio delivered strong PPOP

    RESULTS PRESENTATION – 30 JUNE 2022 15 29 Broader Africa portfolio delivered strong PPOP driven by customer growth and scaling deposit franchise Normalised Normalised profit Pre-provision operating earnings before tax profit R2 892m R5 650m R5 902m (2021: R2 614m) 11% (2021: R4 828m) 17% (2021: R5

  18. Slide 18: Financial review: key performance metrics

    16 FIRSTRAND GROUP Financial review financial review 32 Key performance metrics – normalised 2022 2021 % change Diluted/basic EPS (cents) 582.3 473.3 23  Dividend per share (cents) 342.0 263.0 30  Earnings (R million) 2019: 27 894 17% 32 663 26 551 23  NIACC (R million) 2019: 10 729 6% 10 112 4

  19. Slide 19: Topline growth delivered same contribution as credit unwind

    RESULTS PRESENTATION – 30 JUNE 2022 17 33 Topline growth delivered same contribution as credit unwind Normalised earnings R million 45 000 8% 6% 40 000 48% 3 382 (3 682) 29% 35 000 (3 513) 23% 6 580 5% Effective tax rate 32 663 30 000 2022: 26.0% 3 345 (2021: 23.9%) 25 000 26 551 20 000 15 000

  20. Slide 20: PBT demonstrates operational performance of portfolio

    18 FIRSTRAND GROUP Financial review 35 PBT demonstrates operational performance of portfolio Normalised PBT R million 30 000 2021 2022 23% 28 442 25 000 23 194 20 000 15 000 17% 10 000 11 615 9 942 5 000 9% >100% 23% 4 081 3 741 3 726 1 077 1 848 2 270 - FNB RMB WesBank Aldermore* Centre** * In

  21. Slide 21: NII growth driven by ALM strategies, deposits and UK loan growth

    RESULTS PRESENTATION – 30 JUNE 2022 19 37 NII growth driven by Group Treasury’s ALM strategies, the deposit franchise and UK loan growth Net interest income* R million  23 837 23 772 2021 2022 7% 17 450 Capital endowment volume impact  >R700m 16 254 Group Treasury impacts  >R1.0bn • Capital endo

  22. Slide 22: Strength of deposit franchise supported lower cost of funds

    20 FIRSTRAND GROUP Financial review 39 Strength of deposit franchise supported lower cost of funds R billion 2021 2022 18% 9% 368 332 15% 318 6% 313 (14% in GBP) 305 298 281 245 16% 198 170 8% 81 8% 75 19% 22% (19% in GBP) 47 44  43 26 21 33 28 28 SA retail SA commercial CIB Broader Afri

  23. Slide 23: Impairment charge shows positive trend

    RESULTS PRESENTATION – 30 JUNE 2022 21 41 Impairment charge shows positive trend Normalised earnings R million 45 000 8% 6% 40 000 48% 3 382 (3 682) 29% 35 000 (3 513) 23% 6 580 5% Effective tax rate 32 663 30 000 2022: 26.0% 3 345 (2021: 23.9%) 25 000 26 551 20 000 15 000 10 000 5 000 - 2021

  24. Slide 24: Post-pandemic conservatism in origination, playing out in NPLs

    22 FIRSTRAND GROUP Financial review 43 Post-pandemic conservatism in origination, playing out in NPLs… Total NPLs  16% NPLs (excluding UK operations) Paying NPLs (excluding UK operations) R million R million 17% 51 737 13 742 33% 42 958 9 173 2021 2022 2021 2022 Operational NPLs (excluding UK ope

  25. Slide 25: Growth in NIR contributes to overall performance

    RESULTS PRESENTATION – 30 JUNE 2022 23 45 Growth in NIR contributes to overall performance Normalised earnings R million 45 000 8% 6% 40 000 48% 3 382 (3 682) 29% 35 000 (3 513) 23% 6 580 5% Effective tax rate 32 663 30 000 2022: 26.0% 3 345 (2021: 23.9%) 25 000 26 551 20 000 15 000 10 000 5 0

  26. Slide 26: Insurance income reflecting lower claims and claims reserves

    24 FIRSTRAND GROUP Financial review 47 Insurance income reflecting lower claims and claims reserves Insurance income R million 4 500 29% % change 4 000 Insurance risk-related income 3 500 Positively impacted by a reduction in reserves, and decrease in claims in the life 25  3 000 2 373 2 797 51%

  27. Slide 27: Inflationary growth in operating expenses demonstrates cost focus

    RESULTS PRESENTATION – 30 JUNE 2022 25 49 Inflationary growth in operating expenses demonstrates focus on cost management Normalised earnings R million 45 000 8% 6% 40 000 48% 3 382 (3 682) 29% 35 000 (3 513) 23% 6 580 5% Effective tax rate 32 663 30 000 2022: 26.0% 3 345 (2021: 23.9%) 25 000

  28. Slide 28: Platform journey results in faster relative growth in IT costs

    26 FIRSTRAND GROUP Financial review 51 Platform journey results in faster relative growth in IT costs Operating expenses* Operating expenses excluding IT costs* R million R million CAGR: 4.8% CAGR: 3.7% 55 279 51 215 52 130 42 919 49 231 39 604 40 452 40 243 45 745 6% 37 070  7% (6% incl. UK (

  29. Slide 29: Financial review looking ahead: SA inflation and rates

    RESULTS PRESENTATION – 30 JUNE 2022 27 financial review looking ahead 54 SA inflation should turn and rates likely to peak by 2H FY23 Headline inflation rate (CPI) Repo rate % y/y % 15 14 14 12 13 12 10 11 Recent falls in oil prices 10 8 suggest peak in inflation Nominal repo rate 9 is in sight 6 8

  30. Slide 30: Execution on reforms could lift potential growth further

    28 FIRSTRAND GROUP Looking ahead 55 Execution on reforms could lift potential growth further Contribution of structural reforms to potential growth Evidence of reform momentum % • Spectrum auction concluded 4.0 Green arrows = promising signs 0.20 • Renewable energy programme opened for wind and 3.5

  31. Slide 31: FirstRand portfolio has attractive growth prospects

    RESULTS PRESENTATION – 30 JUNE 2022 29 57 FirstRand portfolio has attractive growth prospects • SA advances growth will accelerate as macros improve • Momentum in second half expected to continue • Cautiously increasing credit appetite • Stronger trajectory in SA NIR • Customer growth • Increased vo

  32. Slide 32: Group strategic framework presents distinctive investment proposition

    30 FIRSTRAND GROUP Appendix 59 Group strategic framework presents distinctive investment proposition FirstRand commits to building a future of SHARED PROSPERITY through enriching the lives of its customers, employees and the societies it serves. This is the foundation to a sustainable future and wil

  33. Slide 33: ROE decomposition demonstrates quality of operational performance

    RESULTS PRESENTATION – 30 JUNE 2022 31 61 ROE decomposition demonstrates quality of operational performance ROE (%) 22.8 12.9 18.4 20.6 Gearing (times) 13.0 13.3 13.0 12.2 % 8 7 6 5 2.76 2.39 2.39 2.50 4 3 1.75 1.69 2 1.41 0.97 1 3.78 3.53 3.43 3.50 - (1) (3.38) (3.13) (3.05) (3.15) (2) (3) (0.66) (

  34. Slide 34: Less reliance on institutional funding, term maintained

    32 FIRSTRAND GROUP Appendix 63 Less reliance on institutional funding, term maintained Institutional funding as % of total funding Diversified institutional funding mix and term profile 42% Institutional funding composition Months 100% 45 40% 90% 40 41 38% 80% 39 37 35 36 36% 70% 34 30 34% 60% 25 50

  35. Slide 35: Quality of FNB transactional franchise supported by platform strategy

    RESULTS PRESENTATION – 30 JUNE 2022 33 65 Quality of FNB transactional franchise supported by platform strategy and unique customer propositions Customers Digital (app, online and USSD) eBucks Retail 7.86m +5% Volumes +14% Rewards earned • R2.1 billion in FY22 Commercial 1.20m +6% Annual logins (1.6

  36. Slide 36: Improved performance in FNB broader Africa

    34 FIRSTRAND GROUP Appendix 67 Improved performance in FNB broader Africa as mature subs remain resilient and growth subs scale Normalised PBT R million • Broader Africa PBT +43% 3 000 20% 2 780 • Tanzania exit completed 2 500 2 000 2 309 • Credit-driven performance • Impairment decline on improved

  37. Slide 37: RMB broader Africa reflects resilient in-country performance

    RESULTS PRESENTATION – 30 JUNE 2022 35 69 RMB broader Africa reflects resilient in-country performance, offset by credit normalisation on the cross-border book Broader Africa* normalised PBT Banking R million • Strong cross-border advances growth with increased 3 500 momentum towards the end of H2 3

  38. Slide 38: Aldermore acquisition – value accretive

    36 FIRSTRAND GROUP Appendix 71 Aldermore acquisition – value accretive R million £ million (rand equivalent) Investment at acquisition (March 2018) @ spot rate (£1 = R16.68) 1 098 18 311 Aldermore excluding MotoNovo: earnings for the three months ended 30 June 2018 16 June 2018 adjusted NAV @ spot r

  39. Slide 39: Almost all portfolios showing lower charge and below TTC

    RESULTS PRESENTATION – 30 JUNE 2022 37 73 Almost all portfolios showing lower charge and below TTC IMPAIRMENT CHARGE 49.8 2022 2021 R million 2022 2021 CLR% CLR % 44.7 45.3 Retail – secured 1 461 2 474 0.44 0.76 42.8 43.1 5.0 Residential mortgages 46 577 0.02 0.26 4.5 WesBank VAF 1 415 1 897 1.42 1.

  40. Slide 40: Residential mortgages: breakdown of core lending advances and provisions

    38 FIRSTRAND GROUP Appendix 75 Improved stage composition driving lower impairments (rate) Core lending advances Coverage Impairment charge R billion % R million 9% 7 080 1 311 1 208  16% 51 49.80% 2022 61 113  1% 111 Write-offs, 45.30% 2021 modification * loss and other Stage 3 12 720 and other

  41. Slide 41: Breakdown of core lending advances and provisions: FNB

    RESULTS PRESENTATION – 30 JUNE 2022 39 77 Breakdown of core lending advances and provisions Advances Provisions (R million) and coverage (%) Credit loss ratio R billion % 31 33 4 683 4 361 4.65 3.34  5% 7% 4 4 2 FNB card 3 78.5% 71.0% 25 27 27.8% 24.6% 3.5% 4.2% 2021 2022 2021 2022 * Including Dir

  42. Slide 42: Breakdown of core lending advances and provisions: WesBank, RMB

    40 FIRSTRAND GROUP Appendix 79 Breakdown of core lending advances and provisions Advances Provisions (R million) and coverage (%) Credit loss ratio R billion % 17% 0.58 0.03 10% 956 795 41 45 WesBank corporate 1 1 5 4 39.5% 46.1% 36 39 5.1% 4.0% 0.6% 0.5% 2021 2022 2021 2022 17% 5% 0.47 (0.14) 7

  43. Slide 43: Operating business cost growth includes investment spend

    RESULTS PRESENTATION – 30 JUNE 2022 41 81 Operating business cost growth includes investment spend 47% 7% 4% 12% 9% FNB 12% WesBank 7% 4% 88% 96% 7% Group 8% 6% 21% 3% 10% 88% 11% 6% UK RMB operations* 9% 11% 90% Run Change 89% 12% 8% Note: Run costs includes fixed, variable and prior

  44. Slide 44: FirstRand Group

    42 FIRSTRAND GROUP STUDIO®)

  45. Slide 45: 18471_FR results book • Proof 10B • 8 September 2022 D

    18471_FR results book • Proof 10B • 8 September 2022 2022 FIRSTRAND ANALYSIS OF RESULTS D

  46. Slide 46: www.firstrand.co.za

    ............................................................................................ WWW.FIRSTRAND.CO.ZA

FirstRand — FY2022 Earnings Presentation on 6ix