Firstrand Limited · JSE:FSR
Firstrand — Debt Investor Presentation (November 2024)
38 slides from Firstrand's debt investor presentation, November 2024
Slide 1: Nitro 8 investor presentation
Nitro 8 investor presentation November 2024
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 About WesBank 5 Retail VAF credit origination, performance and risk management 11 Nitro programme and transaction overview 19 • Nitro 8 key transaction features 23 • Nitro 8 capital structure 24 • Provisional portfolio summary 27 Transaction timeline and contact information 31 Annexures – s
Slide 4: Meet the team
Meet the team Richard Pampel CFO: WesBank Dawid Spangenberg Head: Retail Credit Cameron Gough Head: Structuring, FirstRand Group Treasury Melanie Kleinhans Head: FirstRand Debt Office, FirstRand Group Treasury Willem du Plooy Structurer, FirstRand Group Treasury Cynthia Heyneke RMB Debt Capital Mark
Slide 5: About WesBank
About WesBank 5
Slide 6: WesBank is part of FirstRand's portfolio
WesBank is part of FirstRand’s portfolio Retail and commercial banking, insurance and investments Corporate and investment banking Vehicle asset finance and fleet management Listed holding company (FirstRand Limited, JSE: FSR) UK specialist lender and savings bank Asset management Group-wide functio
Slide 7: Market leader in vehicle and asset finance in SA
Market leader in vehicle and asset finance in SA Corporate/commercial Motor (asset-based finance (retail vehicle and full maintenance asset finance) leasing) • Primary activities in instalment credit, fleet management and related services in the retail, commercial and corporate segments in SA • Long
Slide 8: Business update
Business update • Growing vehicle asset finance advances portfolio remains a focus • Remain focused on quality credit origination and pricing for risk appropriately • Continue to grow and develop new and existing alliance relationships • Continued focus on cost management • Collections are well mana
Slide 9: Financial performance
Financial performance* Normalised Normalised profit NPLs as a % of earnings before tax advances R1 387m R1.9bn 4.79% (2023: R1 177m) 18% (2023: R1.6bn) 18% (2023: 4.43%) 36 bps Credit loss ratio Cost-to-income ratio Advances 1.24% 54.9% R171.6bn (2023: 1.20%) 4 bps (2023: 55.6%) 7 bps (2023: R1
Slide 10: Key retail VAF market developments
Key retail VAF market developments Sustained high levels of interest Industry sales stats show Vehicle price inflation rates continue to put customer a drop in vehicle sales remains high affordability under pressure year on year Many new Chinese Consumers shifting to lower Increase in vehicle and As
Slide 11: Retail VAF credit origination, performance and risk management
Retail VAF credit origination, performance and risk management 11
Slide 12: Origination update
Origination update • Margin pressure continued: • Increased competitive activity • Focus on originating lower-risk business • New business origination mix change from fixed-rate to floating-rate business • Dealers remain the main channel for origination VAF portfolio over time 120 15 R billion Billi
Slide 13: Credit scoring system/decision/rating
Credit scoring system/decision/rating • Centralised at WesBank head office 100% Approval ratio (score decision) 74.1% • 80% Automated credit assessment 60% 63.6% 51.4% • Key aspects assessed by the scorecard 40% 20% 30.7% 13.8% include: 0% Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Dec 19 Dec 20 Dec 21 Dec
Slide 14: Credit application process
Credit application process Application • The majority of applications are processed structure through dealers adjusted • Most application are auto scored (>98%) Decline • A small portion of population of customers will Auto score go through a judgemental process – the main reason is that they cannot
Slide 15: Credit performance update
0.5% 1.5% 2.5% 3.5% 4.5% 5.5% 6.5% -0.5% Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Oct 18 Jan 19 Apr 19 Jul 19 Oct 19 Jan 20 Apr 20 Credit performance update Jul 20 Oct 20 Jan 21 Apr 21 Delinquency rates Jul 21 Oct 21 Jan 2
Slide 16: Credit performance update
Credit performance update • The portfolio’s risk profile has gradually shifted towards lower-risk categories • 12-month default rates are reverting to levels seen before the Covid-19 pandemic Risk distribution 12-month default rate 100% 30% 90% 80% 25% 70% 20% 60% 50% 15% 40% 30% 10% 20% 5% 10% 0% 0
Slide 17: Risk management
Risk management Governance and compliance Operations • Centralised product function, aligned to • Collections and administration functions following FirstRand group frameworks and methodologies well-defined guidelines and procedures • FirstRand’s group enterprise risk management • Early collections
Slide 18: Default and collections process
Default and collections process Defaulting accounts are clustered into a Collections value chain group according to differential risk rules The collector will attempt to phone Knowledge the customer to rectify arrears Early management and collections quality assurance Should no rectification take pl
Slide 19: Nitro programme and transaction overview
Nitro programme and transaction overview 19
Slide 20: Nitro programme overview
Nitro programme overview WesBank (as seller and servicer) Programme memorandum FRB Indemnity Indemnity Indemnity General overview and cession Nitro 7 and cession Nitro 8 and cession Nitro 9 of the programme security security security SPV trust SPV trust SPV trust Administrator Nitro Series 7 Nitro S
Slide 21: Nitro programme features
Nitro programme features Issuer Security SPV Co-mingling Programme Transaction Transaction • Security SPV holds security for the • Assets and liabilities will be identified • Single issuer SPV company benefit of secured creditors per in the accounting records of the issuer • Multiple transaction cap
Slide 22: Key counterparties
Key counterparties Servicer Administrator Trustee Swap counterparty Account bank WesBank FRB Quadridge Trust Services FRB FRB Originator/seller Sale of portfolio ISSUER Principal and interest Nitro Programme (RF) Ltd Noteholders WesBank Initial consideration Purchase price for the notes (Nitro 8) Ro
Slide 23: Nitro 8 key transaction features
Nitro 8 key transaction features High quality Robust structure Servicer strength collateral* • Portfolio originated and serviced by WesBank • Participating assets are transferred to Nitro 8 • FirstRand Bank Limited is currently rated Baa3 (Aaa.za)/P-3 (P-1.za) by Moody’s • Granular retail portfolio
Slide 24: Nitro 8 capital structure
Nitro 8 capital structure Assets Liabilities* Credit enhancement on the Class A to B notes • Cash reserve, note subordination and available excess spread [20]% nominal Class A • Estimated average excess spread at closing of roughly [3.13%]** CE [81]% • Structured to pay interest and principal sequen
Slide 25: Nitro 8 capital structure
Nitro 8 capital structure Credit enhancement to the Class A to Class D notes will be provided by excess spread, a cash reserve funded at inception with the proceeds of the Class E note and note subordination National Issuance Credit Weighted Legal final Listed on Tranche scale rating amount enhancem
Slide 26: Nitro 8 note amortisation profile
Nitro 8 note amortisation profile Key assumptions •Portfolio subject to a constant annual rate of prepayment •Portfolio sold to the Issuer amounts to [R2 000 million] •Original outstanding balance of each class of notes is equal to principal amount based on the provisional portfolio and capital stru
Slide 27: Provisional portfolio
Provisional portfolio* Summary pool information at 12 September 2024 Receivable type Auto loans Borrower type New/used Outstanding balance R1 999 991 544 10% Private Individual New Number of receivables 9 293 Self-employed Used private individual 43% Average current balance R216 473 57% 90% Weighted
Slide 28: Provisional portfolio snapshot
Provisional portfolio snapshot Top 10 manufacturers* Outstanding principal balance Number of contracts R million % Number % Suzuki 212.0 10.63% 1 297 14.04% Hyundai 208.1 10.43% 983 10.64% Ford 159.5 8.00% 746 8.07% Renault 158.9 7.97% 883 9.56% Nissan 152.4 7.64% 696 7.53% Kia 138.7 6.95% 651 7.05%
Slide 29: Provisional portfolio snapshot
Provisional portfolio snapshot Geographical distribution* Outstanding principal balance Contracts R million % Number % Gauteng 935.6 46.92% 4306 46.61% KwaZulu Natal 304.0 15.24% 1362 14.74% Western Cape 297.0 14.89% 1563 16.92% Mpumalanga 111.6 5.60% 467 5.05% Eastern Cape 110.2 5.53% 510 5.52% Lim
Slide 30: Portfolio summary – Nitro portfolio comparison
Portfolio summary – Nitro portfolio comparison Nitro 8 Nitro 5 Nitro 6 Nitro 7 provisional pool* Receivables (R million) 2 400 2 040 2 000 2 000 Number of agreements 19 541 12 183 11 562 9 239 Average outstanding capital balance (R) 122 819 185 881 172 980 216 472 New/used split - New 40% 36% 21% 43
Slide 31: Transaction timeline and auction details
Transaction timeline and auction details • Roadshow: 4 – 6 November 2024 • Auction announcement: [11 November 2024] • Target price guidance: [15 November 2024] • Target issuance size: [R2bn] • Target auction: [27 November 2024] • Target settlement: [4 December 2024] • Auction will be uniform price s
Slide 32: Annexures
Annexures 32
Slide 33: WesBank retail VAF – historical performance summary
WesBank retail VAF – historical performance summary* Static cumulative default rates (all vehicles) Static cumulative default rates (new cars) 15% 15% 10% 10% 5% 5% 0% 0% Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20 Q21 Q22 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15
Slide 34: WesBank retail VAF – historical performance summary
WesBank retail VAF – historical performance summary* Dynamic delinquencies Dynamic prepayments 30% 100 6% Delinquency rate % 25% 5% R billion 80 20% 4% 60 15% 3% 40 10% 2% 5% 20 1% 0% 0 0% 2008 Q1 2008 Q4 2009 Q3 2010 Q2 2011 Q1 2011 Q4 2012 Q3 2013 Q2 2014 Q1 2014 Q4 2015 Q3 2016 Q2 2017 Q1 2017 Q4
Slide 35: Nitro 5
Nitro 5 Delinquency trends • Clean-up call for Nitro 5 was exercised in September 2018, 6% with the final redemption of all outstanding notes due on 20 September 2018 4% • CPR averaged 24.33% over the duration of the transaction 2% • Nitro 5’s cumulative net write offs were 0.55% at the end 0% of th
Slide 36: Nitro 6
Nitro 6 Delinquency trends • Clean-up call for Nitro 6 was exercised in March 2022, 8% with the final redemption of all outstanding notes due 6% on 22 March 2022 4% • CPR averaged 20.55% over the duration of the transaction 2% • Nitro 6’s cumulative net write-offs were 1.47% at the end 0% of the tra
Slide 37: Nitro 7
Nitro 7 Delinquency trends • Clean-up call for Nitro 7 was exercised in September 2023, 6% with the final redemption of all outstanding notes due on 5% 4% 20 September 2023 3% • CPR averaged 20.02% over the duration of the transaction 2% 1% • Nitro 7’s cumulative net write-offs were 1.42% at the end
Slide 38: Notes
Notes 38
FirstRand — Debt Investor Presentation (November 2024) on 6ix