Firstrand Limited · JSE:FSR
Firstrand — Debt Investor Presentation (May 2019)
24 slides from Firstrand's debt investor presentation, May 2019
Slide 1: Capital and Funding Update
CAPITAL AND FUNDING UPDATE May 2019
Slide 2: Presentation team
2 Presentation team • Frikkie Kleinhans Head: Capital Management • Amit Mohanlal Head: Funding and Liquidity
Slide 3: Financial resource management
3 Financial resource management
Slide 4: Disciplined financial resource management supports strategy
4 Disciplined financial resource management supports strategy Regulatory Macro environment environment Return Competitive FRM Rating environment FRM agency target Growth Risk Aspirations/ Risk business constraints plans Stress testing * FRM is defined as capital, funding and liquidity, as well as ri
Slide 5: FirstRand philosophy on capital and funding
5 FirstRand philosophy on capital and funding CAPITAL FUNDING • Capital planning performed on a forward- • Diversify across business segments, markets, looking basis, not point-in-time currencies, maturities and instrument types • Targets aligned to end-state minimums, • Flexibility across markets,
Slide 6: Capital
FirstRand Bank
Slide 7: Ongoing optimisation of the capital stack
7 Ongoing optimisation of the capital stack % 18.0 16.9 16.0 14.8 3.3 >14.0 14.0 2.2 0.5 2.0 12.0 0.6 1.0 10.0 8.0 13.1 6.0 12.0 11.0 4.0 2.0 0.0 FirstRand FRB Target CET1 AT1 Tier 2 Note: Ratios as at 31 December 2018 including unappropriated profits. FirstRand Bank Limited (FRB) includes foreign b
Slide 8: FirstRand favours a 'multiple point of entry' strategy
8 FirstRand favours a ‘multiple point of entry’ strategy Listed holding company (FirstRand Limited, JSE: FSR) 100% 100% 100% 100% 100% 100% Entities FirstRand EMA FirstRand FirstRand Investment FirstRand Investment FirstRand Bank FirstRand Insurance Holdings (Pty) Ltd International Limited Holdings
Slide 9: Optimal level of capital issuance for the bank
9 Optimal level of capital issuance for the bank ADDITIONAL TIER 1 TIER 2 • Focus on AT1 issuance in FY2019 • US dollar issuance in April 2018 R million • Dollar capital to support cross-border November 2018 2 265 lending and diversify funding base March 2019 2 477 • Remaining old-style Tier 2 instr
Slide 10: Regulatory update
10 Regulatory update • Basel IV reforms • Guidance note 6 of 2018 – Proposed implementation dates for specified regulatory reforms • Draft Financial Sector Laws Amendment Bill published for comment by National Treasury in October 2018 • Proposed amendments to various acts to support and empower the
Slide 11: Funding and liquidity
Funding and liquidity FirstRand Bank 1
Slide 12: Funding spreads remain elevated, with minor curve flattening
12 Funding spreads remain elevated, with minor curve flattening FRB floating rate note spreads (offer bps, transaction size <=R100 million) 250 200 150 100 50 0 12m 24m 36m 60m 120m Spreads have drifted lower (± 20 bps over the 36m to 120m) since April 2017, shorter-dated spreads remain high relativ
Slide 13: Maturity profile of capital market instruments
13 Maturity profile of capital market instruments R billion 22 20 18 16 14 12 10 8 6 4 2 - 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2038 2042 2045 2046 2050 Senior Senior inflation-linked Subordinated debt* Credit-linked notes EMTN senior issuance EMTN subordinated
Slide 14: The bank's focus remains on building a diversified funding base
14 The bank’s focus remains on building a diversified funding base Sources of funding Funding instruments R857bn R885bn R939bn R974bn R1 028bn Deposit franchise: 68% 34% 36% 37% 35% 36% 22% Dec 18 21% 21% 21% 22% 20% 20% 20% 21% 20% 11% 11% 9% 11% 10% 6% 5% 5% 5% 5% Current and savings accounts Call
Slide 15: Funding strategy continues to be anchored in the deposit franchise
15 Funding strategy continues to be anchored in the deposit franchise… R billion Subordinated Deposit franchise +8% Institutional +14% Other funding debt 239 232 228 217 207 196 142 141 128 119 63 52 19 26 Retail Commercial Corporate and Group Treasury Debt Other Subordinated investment deposits sec
Slide 16: Enabling robust deposit growth and market performance
16 …enabling robust deposit growth and market performance Deposit growth vs money supply Market share of retail deposits 2.0 35% 1.9 30% 1.8 1.7 25% 1.6 20% 1.5 15% 1.4 1.3 10% 1.2 5% 1.1 1.0 0% Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17
Slide 17: Funding issuance considerations
17 Funding issuance considerations • Continued focus on optimisation of maturity and liquidity profile to ensure regulatory compliance and efficient funding of the business • Funding levels in the SA market remain elevated • Areas of focus: • Senior issuance • Simple, transparent and comparable secu
Slide 18: Annexures
Annexures FirstRand Bank
Slide 19: FirstRand Bank's credit ratings
19 FirstRand Bank’s credit ratings SOUTH AFRICA FIRSTRAND BANK LIMITED SOVEREIGN RATINGS CREDIT RATINGS FOREIGN CURRENCY LOCAL AND FOREIGN CURRENCY Long term/ Long term/ Long term Standalone outlook outlook national scale credit rating S&P Global BB/Stable BB/Stable zaAA+ bbb- Moody’s Baa3/Stable Ba
Slide 20: Resolution planning - key elements
20 Resolution planning - key elements • Legal obligation on the SARB/Resolution Authority (RA) to develop resolution plans for all banks and non-bank systemically important financial institutions (SIFIs) • Standards and information requirements are being developed • More detailed standards and direc
Slide 21: Resolution blueprint expected in second half of 2019
21 Resolution blueprint expected in second half of 2019 • Bill awaiting promulgation • SARB is working on the completion of a “resolution blueprint” with engagement from international consultants and likely to cover, amongst others: • More context and detail around the elements included in future re
Slide 22: Optimise institutional funding
22 Optimise institutional funding Institutional funding as a % of total funding Institutional funding by term 50% 100% 90% 45% 80% 49% 49% 51% 52% 52% 52% 55% 58% 58% 61% 61% 40% 70% 62% 63% 60% 35% 50% 30% FirstRand Bank, 37% 19% 20% 40% 17% 19% 19% 21% 19% 13% 13% 12% 12% 11% 12% 25% 30% 20% 31% 3
Slide 23: FRB on track to comply with 2019 end-state liquidity requirements
23 FRB on track to comply with 2019 end-state liquidity requirements LIQUIDITY COVERAGE RATIO (LCR) NET STABLE FUNDING RATIO (NSFR) • December 2018 actual: 130% • December 2018 actual: 110% • LCR regulatory minimum requirement effective • PA adopted an available stable funding (ASF) factor 1 January
Slide 24: Disclaimer
24 Disclaimer This presentation does not constitute an offer or invitation to subscribe for or purchase any securities and nothing contained herein shall form the basis of any contract or commitment whatsoever. Any decision to purchase securities in the context of a proposed offering of securities,