FirstRand Limited · JSE:FSR
FirstRand — H1 2007 Earnings Presentation
80 slides from FirstRand's earnings presentation, December 2006
Slide 1: Unaudited interim results for the six months ended 31 December 2006
powerpoint cover 2/25/07 1:50 PM Page 2 unaudited interim results for the six months ended 31 December 2006 integrated financial services
Slide 2: Agenda
Interim results for 31 December 2006 Agenda • Overview – Paul Harris • Financial review – Johan Burger • Operating review Banking Group – Sizwe Nxasana • Operating review Momentum Group – EB Nieuwoudt • Challenges and prospects – Paul Harris 1
Slide 3: The Group delivers to shareholders
The Group delivers to shareholders Dec ’06 % change R’ bn Normalised earnings 5 539 +26% Dividends per share (cents) 39.5 +23% Return on equity (%) 27.9 Total assets 836 Favourable external environment • Cycle of rising interest rates, stabilising • Solid economic growth • Buoyant equity markets • R
Slide 4: FirstRand: the portfolio in different business life cycles
FirstRand • Federation of many autonomous, owner managed businesses held together by a common value system and business philosophy • Diversified into all niches of financial services • Through alignment and interdependence the whole exceeds the sum of the parts JUGGERNICHE: Juggernaut with a niche m
Slide 5: Greenfields and international providing for future growth
Greenfields and international providing for future growth • Investing in the future • Innovative in new and existing markets • Startup costs and losses •Passionate management team • Driven by business units • Incremental capital allocation • Seek competitive edge • Leverage off local skills and infr
Slide 6: Our outstanding performers
Our outstanding performers Strengthening brand Committed Established Innovative management • Growth in consumer and commercial activity • Market share gains • New products, alliances and improved services • Profit and ROE focus Our outstanding performers Intellectual leadership Entrepreneurial Skill
Slide 7: Solid performers
Solid performers Dominate market at point of sale Great corporate culture Strong management • Pressure on margins • Capital intensive • Market slowing down • Investing in the future: UK and Australia Solid performers Great distribution model Committed Skilled management • Adapted to new environment
Slide 8: Greenfields mean start up costs
Greenfields mean start up costs • Momentum Short Term Insurance • Momentum : Health in Africa • FNB : Aspire with Momentum in new markets • FNB : New card alliances • WesBank : Australia /UK • Discovery: Destiny in the US / PRU Health in UK Agenda • Overview – Paul Harris • Financial review – Johan
Slide 9: Strong growth in earnings & returns
Strong growth in earnings & returns R’ mil Dec ’06 Dec ’05 % change Normalised earnings 5 539 4 407 26 Normalised earnings per share - Basic 98.3 78.5 25 - Diluted 98.2 78.2 26 Headline earnings per share 4 569 3 636 26 - Basic 88.2 71.2 24 - Diluted 85.6 68.7 25 Return on equity (%) 27.9 26.9 Net a
Slide 10: All brands delivered
All brands delivered R’ mil Dec ’06 Dec ’05 % change FNB 2 280 1 807 26 RMB 1 572 898 75 WesBank 538 538 0 FNB Africa 218 174 25 Momentum 635 544 17 Discovery 220 183 20 Group Support 308 451 (32) FirstRand Limited (69) (73) 5 Sub-total 5 702 4 521 26 Less: NCNR preference dividends (163) (114) (43)
Slide 11: Performance to financial targets
Performance to financial targets 50% 45% RMB 40% FNB 35% ROE 30% Africa 25% Momentum 10% plus FirstRand W ACC 20% WesBank 15% Discovery 10% real growth 10% -10% 10% 30% 50% 70% Normalised earnings growth Superior returns from diversified portfolio of brands Return on Equity % 4% 1% 12 % FNB 35 4% RM
Slide 12: Excess over cost of capital continues
Excess over cost of capital continues R’ bil 45 CAGR 23% 40 28% 27% 25% 35 25% 25% 25% 23% 23% 30 25 17% 14% 13% 20 13% 12% 13% 16% 15 15% 10 5 0 Jun '01 Jun '02 Jun '03 Jun '04 Jun '05 Dec '05 Jun '06 Dec '06 NAV (excluding dividends) NAV (including dividends) Return on equity Average cost of equit
Slide 13: Capital strategy
Capital strategy • Higher of economic or regulatory capital • Optimal level of capital – maximise ROE – highest credit rating • Most efficient capital structure • Surplus capital is not retained – for acquisitions or large expansions • Capital raising assessed as required – profitability horizon and
Slide 14: Strong organic growth puts core equity under pressure
Strong organic growth puts core equity under pressure Post: June 2004 14.0% 12.0% Lower Tier 2 10.0% Upper Tier 2 Perpetual preference 8.0% Target core equity (8% - 8.5%) 6.0% Core equity 4.0% 2.0% 0.0% Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Managing the scarcity of capital g
Slide 15: Bank delivers on key measures
Bank delivers on key measures Dec ’06 Dec ’05 % change Normalised earnings (R ‘mil) 4 752 3 680 29 Return on equity (%) 31 29 Return on assets (%) 2.04 1.80 Credit loss ratio (%) 0.73 0.48 Cost to income ratio (%) 53 54 14
Slide 16: Portfolio delivers
Portfolio delivers R ’mil Dec ’06 Dec ’05 Growth % FNB* 2 565 2 044 25 RMB 2 054 1 174 75 WesBank 711 704 1 FNB Africa** 412 338 22 OUTsurance 154 130 18 Banking Group Treasury* 400 317 26 Capital centre and group support 333 469 (29) Profit before direct tax 6 629 5 176 28 * Aggregated on reports *
Slide 17: Retail continues to dominate advances mix
Retail continues to dominate R ’mil advances mix 350 300 33% 250 32% 30% 200 9% 9% 9% 150 58% 100 59% 61% 50 0 Dec '05 Jun '06 Dec '06 Retail Commercial Corporate Retail starting to slow down 25.4% Growth R ’mil 200 +11.4% 190 180 +14% 170 160 150 140 Dec '05 June '06 Dec '06 Retail 16
Slide 18: HomeLoans, Card & motor drive retail advances growth
HomeLoans, Card & motor drive retail advances growth R ’mil Advances growth +25% +16% +10% 200 +35% +25% Africa +38% +35% WesBank 150 +31% FNB 100 50 0 Dec '05 Personal HL Card Other Sub-total Motor Personal Africa Dec '06 FNB WesBank Africa Asset backed dominates retail 56% 57% 58% 32% 31% 30% 6% 6
Slide 19: Commercial staying strong
Commercial staying strong R ’mil 50 Advances growth +28% 45 40 29% 28% 35 30 Collaboration 25 New products & 20 market share 15 10 5 0 Dec '05 FNB WesBank Dec '06 FNB WesBank Focus on profitable corporate growth R ’mil 120 Advances growth +43% +100% +29% +46% 100 Capital Collaboration investm ent &
Slide 20: Endowment protects margin
Endowment protects margin Dec ’06 Bps Margin on interest earning assets 454 Volume - Funding 12 Capital 19 Hedges (8) Other (includes IFRS) (17) Margin on interest earning assets 460 Asset margins stabilise Weighting % Dec ’06 June ’06 Dec ’05 Asset backed mortgages 48 2.24 2.27 2.40 Instalment sale
Slide 21: Liability margins improve through endowment benefit
Liability margins improve through endowment benefit Weighting Dec ’06 June ’06 Dec ’05 % Current and savings 38 4.37 4.12 4.13 Call accounts 21 1.33 1.23 1.28 Notice deposits 20 0.98 0.90 0.81 Fixed deposits 10 0.79 0.74 0.70 Other 11 1.64 1.45 1.62 Total 100 2.68 2.30 2.49 Funding margin up 19 bps
Slide 22: Funding strategies
Funding strategies • Securitisation of selected classes of assets • Consumer finance companies to access capital markets • Capital instruments • MTN Program Financial highlights • Net interest income 32% • Credit impairment charge 100% • Non interest revenue 32% • Associate earnings 13% • Operating
Slide 23: As expected, impairments picking up
As expected, impairments picking up 100% Growth Bad debts*(%) +55% +45% 0.48% 0.61% 0.73% Dec '05 June '06 Dec '06 * Calculated as a percentage of average advances for the six months Credit themes • Credit quality remains robust • Normalisation in arrears, non performing loans and bad debts • Actual
Slide 24: Banking portfolio quality remains robust
Banking portfolio quality remains robust Total For the six months ended R ’mil Dec ’06 June ’06 Dec ’05 Gross advances 332 344 297 162 253 167 NPL 4 955 4 211 3 357 I/s charge 1 151 835 576 *Bad debt % 0.73 0.61 0.48 FR rating moved from FR41 to FR43 since June 06 • FR rating for corporate moved fro
Slide 25: Credit themes: non performing loans and bad debts
Credit themes • Credit quality remains robust • Normalisation in arrears, non performing loans and bad debts • Actual versus expected charge off • Risk adjusted margins are carefully monitored Non performing loans and bad debts 1.5 Turbulent:1.60 5.6 1.3 1.1 0.9 Retail 1% 4.3 0.8 0.73 3.5 Long run e
Slide 26: Normalisation of credit cycle drives bad debt charge
Normalisation of credit cycle drives bad debt charge R ’mil 1,400 1,200 5% 1151 87% 1,000 800 7% 1% 600 576 400 +100% 200 0 Dec '05 Volume impact Asset mix Rate impact Centre Dec '06 impact Credit themes • Credit quality remains robust • Normalisation in arrears, non performing loans and bad debts •
Slide 27: Bad debts in line with our projection
Bad debts in line with 1.2% our projection 1.0% 0.8% Long run expected loss: 0.7 Bad debts 0.6% 0.4% Oct Dec Aug Prime rate: 11% 11.5% 12% 12.5% 0.2% 0.0% 30 June '06 '+50 '+100 '+200 '+300 bps Interest rates Lower Expected Upper Our forward looking view 1.2% 1.0% 0.8% 70 -90bps 0.73% Bad debts Long
Slide 28: It's about risk adjusted margins
Credit themes • Credit quality remains robust • Normalisation in arrears, non performing loans and bad debts • Actual versus expected charge off • Risk adjusted margins are carefully monitored It’s about risk adjusted margins December ’06 Average Margin Cost of Risk adjusted Weighting bad debts net
Slide 29: Transactional income dominates NIR
Financial highlights • Net interest income 32% • Credit impairment charge 100% • Non interest revenue 32% • Associate earnings 13% • Operating expenses 29% Transactional income dominates NIR Other R ’mil 10% 6000 Investment 21% 9% 5000 Transactional Fair value 57% 4000 24% 3000 112% 2000 0% 22% 1000
Slide 30: Banking fees comprise 82% of transactional income
Banking fees comprise 82% of transactional income R ’mil 6000 3% 21% 5% Banking fees and 5% commissions 5000 Knowledge based fees 5% 4000 Management fees 3000 Insurance income 120% 82% 2000 Other fee income -10% 22% 1000 0 Transactional Fair value Investment Other 2005 2006 New customers and volumes
Slide 31: RMB's performance behind fair value growth
RMB’s performance behind fair value growth R ’mil 6000 5000 16% RMB 4000 Others 112% 3000 2000 84% -10% 22% -10% 1000 0 Fair value Investment Other Transactional 2005 2006 Favourable market continues Growth 112% R ’mil Combined risk and annuity income 2500 +6% 2000 +82% 1500 1000 500 0 Dec '05 Jun '
Slide 32: Credit and investment activities comprise 80% of capital at risk
Credit and investment activities comprise 80% of capital at risk R ’mil 9000 +33% 8000 O peration al et Mark 7000 12% 6000 O peration Mark al et Investm e 5000 14% nt 24% Investm e 4000 nt 22% Methodology changes 3000 2000 Credit Credit 1000 56% 60% 0 Jun '06 Credit Operational Market Investment Cre
Slide 33: Equity becoming a significant contributor
Equity becoming a significant contributor R ’mil 6000 Forex 5000 16% 4000 Equity 39% 112% 3000 2000 -10% 22% -10% Debt 1000 45% 0 Fair value Investment Other Transactional 2005 2006 Portfolio growing, despite good realisations R ’mil 3687 6000 3017 2492 2567 5000 4000 1288 1070 1098 3000 910 826 791
Slide 34: RMB businesses dominate associate earnings
Financial highlights • Net interest income 32% • Credit impairment charge 100% • Non interest revenue 32% • Associate earnings 13% • Operating expenses 29% RMB businesses dominate associate earnings 2005 2006 Other Other 4% 4% RMB Private OUTsurance Equity OUTsurance 16% 43% 17% WesBank WesBank 6% 6
Slide 35: Top line growth drives operational leverage
Financial highlights • Net interest income 32% • Credit impairment charge 100% • Non interest revenue 32% • Associate earnings 13% • Operating expenses 29% Top line growth drives operational leverage R ’mil 20000 58% 58% 26% 18000 57% 16000 56% 14000 12000 10000 8000 54% 6000 4000 53% 2000 0 June '0
Slide 36: Improving efficiencies is a focus
Improving efficiencies is a focus Dec ’06 Jun ’06 Dec ’05 Top Cost to Cost to Cost to Cost line income income income growth growth ratio ratio ratio R’m % % % % % FNB 23.6 16.6 59.4 62.3 62.9 WesBank 29.8 33.5 52.3 45.5 50.9 - Local 25.0 20.8 46.9 44.0 48.5 - Offshore 102.4 141.5 102.8 98.5 86.2 RMB
Slide 37: Momentum's performance
Momentum’s performance R ’mil Dec ’06 Dec ’05 % change Normalised earnings 635 544 17 Insurance operations 486 415 18 Asset management operations 149 129 16 Return on equity (%) 24 25 Return on embedded value (%) 30 27 36
Slide 38: Brand earnings up 17%
Brand earnings up 17% R’ mil Dec ’06 Dec ’05 % Insurance operations 486 415 17 • Momentum 495 418 18 • Bancassurance (9) (3) >(100) Asset management operations 149 129 16 • Local 85 101 • Offshore (FRIAM & RMBIAM) 64 28 >100 Momentum group earnings 635 544 17 Existing operations deliver R’ mil 600 +
Slide 39: Acquisitions improve performance
Acquisitions improve performance R’ mil 600 +6% +4% 495 500 +15% +9% 418 -11% -5% 400 300 + 18% 200 100 0 Dec '05 Existing Acquisitions Growth New Markets Other Dec '06 book initiatives business strain Investment in new business & growth initiatives R’ mil 600 +6% +4% 495 500 +15% +9% 418 -11% -5% 4
Slide 40: Good return from markets
Good return from markets R’ mil 600 +6% +4% 495 500 +15% +9% 418 -11% -5% 400 300 + 18% 200 100 0 Dec '05 Existing Acquisitions Growth New Markets Other Dec '06 book initiatives business strain Disappointing performance from asset management R’ mil 160 +17% 149 140 129 +7% 120 -8% 100 80 +16% 60 40
Slide 41: Momentum's performance: embedded value
Momentum’s performance % R ’mil Return on shareholder assets 17 Value of in-force 13 Total increase in embedded value 30 • Buoyant equity markets • Revaluation of strategic investments • Investment income Momentum’s performance % Return on shareholder assets 17 Value of in-force 13 Total increase in
Slide 42: Discovery financial review: strong operational performance
Discovery financial review Strong operational performance Growth R’ mil Dec ’06 Dec ’05 % Discovery Health 342 265 29 Discovery Life 318 246 29 Discovery Vitality 26 16 63 Destiny Health (33) (80) 59 PruHealth (123) (68) (81) Operating profit 530 379 40% After tax profit, before BEE 421* 338 25 Afte
Slide 43: Banking operational review
Agenda • Overview – Paul Harris • Financial review – Johan Burger • Operating review Banking Group – Sizwe Nxasana • Operating review Momentum Group – EB Nieuwoudt • Challenges and prospects – Paul Harris Banking operational review 42
Slide 44: Bank's performance driven by RMB and FNB
Bank’s performance driven by RMB and FNB Profit % before tax R ’mil FNB 2 981 25 RMB 2 054 75 WesBank 711 1 Africa 437 27 43
Slide 45: Successful organic growth strategy
Successful organic growth strategy Dec ’06 Dec ’05 Net profits before taxation (R’ mil) 2981 2361 26% Non-interest revenue (R’ mil) 5125 4275 20% Advances growth (R’ bn) 157 120 31% Deposit growth (R’ bn) 156 131 19% ROE (%) 35.3 35.1 Cost to income (%) 59.4 62.9 Volumes keep growing Dec ’06 Dec ’05
Slide 46: Advances growth continues
Advances growth continues Consumer 104.3 (+31%) Commercial 18.8 (+28%) Corporate - CTB 1.9 (-7%) Corporate - MM 10.6 (+35%) Mass 3.1 (+63%) Wealth 18.3 (+31%) FNB Total 157.1 (+31%) 0 20 40 60 80 100 120 140 160 R’ bil Successful liabilities strategy Consumer 48.9 (+16%) Commercial 59.0 (+19%) Corpo
Slide 47: Successful segment strategy
Successful segment strategy Dec ’06 Dec ’05 Growth Net profit before indirect tax R ‘mil Consumer 1198 1039 15% Commercial 1107 839 32% Corporate 388 302 29% FNB Other 343 290 18% Wealth 83 51 65% Total FNB 3119 2521 24% Consumer – financial highlights • Advances growth +31% • Deposit growth +16% •
Slide 48: Improved profits from HomeLoans
Improved profits from HomeLoans • Strong profit growth from HomeLoans +26% – Good volumes in profitable new business – Widening margins • Non interest revenue +47% – Strong transactional volumes from One Account • Advances +31% • Deliberate focus on ROE results in loss of new business market share F
Slide 49: Commercial – financial highlights
Commercial – financial highlights • Advances growth +28% • Deposit growth +19% • Interest income +25% • Non interest revenue +21% • Profit before tax +32% Customer innovation is key • Customer centric model • Value add products drove advances growth – Debtors finance – Commercial Property finance –
Slide 50: Corporate – financial highlights
Corporate – financial highlights • Advances growth +26% • Deposit growth +21% • Interest income +21% • Non interest revenue +14% • Profit before tax +29% Corporate strategy paying off • Transactional banking strategy vs vanilla lending • Transaction volumes strong – Electronic channel +33% – Card ac
Slide 51: Private Bank drives Wealth
Private Bank drives Wealth • Wealth segments growth in profits driven largely by RMB Private Bank – Assets under management +51% – Advances +31% – Interest income +34% – Non interest income +27% MASSive customer growth • Mass segment delivered an excellent performance, driven by – Interest income +3
Slide 52: Still investing for growth
Still investing for growth Year on year growth • People Investment +31% • Platforms • Technology • New business Variable +32% • Volumes • Efficiencies Base +14% Organic growth set to continue • High base created, but organic growth remains strong • Resilient lending book to withstand interest rate i
Slide 53: RMB: Successful growth strategy
Successful growth strategy Dec ’06 Dec ’05 Net profits before taxation (R ’mil) 2054 1174 75% ROE (%) 40.9 35.4 Cost to income (%) 39.1 44.7 52
Slide 54: The whole portfolio delivered
The whole portfolio delivered R’ mil 900 Profit before tax 46% 800 700 600 500 400 238% 46% 300 107% 200 97% 64% 148% 119% 100 0 SPJ PTCF Corporate Offshore Treasury Equity Structured Private International Finance Resources Trading Trading Finance Equity Dec 2005 Dec 2006 Investment in Private Equit
Slide 55: Diverse earnings base
Diverse earnings base Credit 20% Investment Structuring 42% 5% Trading 27% Fees 6% Performance reflects strong franchise BEE Strong equity Re- and resources leveraging markets corporate SA Private Equity Equity Trading Corporate Finance Structured Finance PTCF Treasury Trading
Slide 56: Portfolio underpins prospects
Portfolio underpins prospects Investment banking is a reactive business where success is determined by your ability to react to an ever-changing environment • Top team – PWC Peer review • Favourable environment continues – Strong economic growth – BEE – Infrastructure spend – Leveraging of corporate
Slide 57: Profits dampened by investments
Profits dampened by investments Net profit before taxation (R ’mil) Dec ’06 Dec ’05 Local operations 776 687 13% International operations (65) 17 >100% Total 711 704 1% Core business shows solid growth Dec ’06 Dec ’05 Net profits before taxation (R’m) 776 687 13% Non interest income (R’m) 679 463 47
Slide 58: Still growing and still efficient
Still growing and still efficient • WesBank has doubled its account numbers in 3 ½ years • Cost to income ratio has improved by 3% • Good production growth in the corporate sector • Continued market share growth Absorbing start-up costs in Australia • WorldMark is an established car care product sup
Slide 59: Turning around in the UK
Turning around in the UK • Acquired Carlyle Finance in June 2006, an existing retail and business asset finance operation • Business currently underperforming from a marketing and efficiency perspective • Major turnaround potential over short to medium term Despite challenges some good opportunities
Slide 60: All subsidiaries performed
Namibia All subsidiaries performed Net profit before taxation (R’ mil) Dec ’06 Dec ’05 FNB Namibia 196 161 22% FNB Botswana 211 165 28% FNB Swaziland 30 19 58% FNB Lesotho - - FNB Africa 437 344 27% 59
Slide 61: Africa came through
Africa came through • Overall profits up 27% • ROE at 31% • All the subsidiaries delivered – strong top line growth – sound cost control • FNB Swaziland continued strong recovery • FNB Lesotho profitable 60
Slide 62: OUTsurance: strong operational performance
Strong operational performance Dec ’06 Dec ’05 Net profits before taxation (R’ mil) 328 278 18% Gross premiums (R’ mil) 1368 1109 23% Expense ratio (%) 15.2 16.1 Claims and OUTbonus ratio (%) 57.8 57.4 Agenda • Overview – Paul Harris • Financial review – Johan Burger • Operating review Banking Group
Slide 63: The Momentum Group story
Momentum operational review The Momentum Group story… Consistently excellent ROEV 39% • Continued sales success 31% 30% 28% • Margin pressure 27% • Disappointing contribution from Asset Management • Investment in new growth initiatives Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 ROEV Earnings Growth 62
Slide 64: Strong insurance new business volumes
Strong insurance new business volumes R’ mil APE 1,600 1,400 1,200 22% 1,000 Recurrings 800 Lump sums 24% 600 400 200 0 2005 2006 Continued market share gains in investment flows Market share inflows - December 2006 16% 14% 12% 10% 8% 6% 4% 2% 0% Momentum D ec ember 2 0 0 6 L I SP A s tatis tic s 63
Slide 65: Sales success but margin pressure
Sales success but margin pressure R’ mil • Improved customer 11,000 value proposition 2.7% 10,000 2.2% • Change in business 1.9% mix 9,000 • Distribution diversification 8,000 Dec '05 June '06 Dec '06 • Statement of intent Present value of premiums New business margin (PV of future premiums) Disappo
Slide 66: Investment in growth initiatives
Enhancing the asset management proposition • Streamlining international offering • Globalisation of fixed income • Hedge fund offering • African opportunities • Optimise synergies between Momentum and RMBAM Focus on investment performance Investment in growth initiatives • Distribution diversificati
Slide 67: Distribution effectively diversified
Distribution effectively diversified Retail recurring premiums 100% 9 18 17 • Bancassurance significant 90% 12 80% 11 13 15 70% • FNB Brokers now the largest 60% 19 21 bank broker channel 22 50% 40% 16 14 30% • Improved contribution from 20% 46 agency force 34 33 10% 0% Jun-05 Jun-06 Dec-06 Independ
Slide 68: Momentum Short-Term Insurance in line with expectations
Momentum Short-Term Insurance in line with expectations 6,000 600% 5,000 500% 4,000 400% 3,000 300% 2,000 200% 1,000 100% 0% Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Net premium income Operating loss as a % of premium Become cash-flow positive by February 2
Slide 69: Exciting pipeline in Africa
Exciting pipeline in Africa • Footprint in 8 countries (excluding SA) • Demand for integrated group health products • Optimistic about government tenders Agenda • Overview – Paul Harris • Financial review – Johan Burger • Operating review Banking Group – Sizwe Nxasana • Operating review Momentum Gro
Slide 70: Challenges & prospects
Challenges & prospects Challenges • Competition Commission and regulation • Transformation • Search for greater cost efficiency • Funding the growth • Focus on improving ROE 69
Slide 71: In summary
Well positioned diversified portfolio Re-leverage New Black Corporate BEE New Markets consumer SA In summary Investing in future growth + A well diversified portfolio + Great franchises + Great team Excellent results 70
Slide 72: Performance to financial targets
Financial review annexure Performance to financial targets 35% 10% real growth 82% Banking Group (ROE +31%) 30% 25% 14% Momentum Group (ROE +24%) ROE 20% 10% plus FirstRand WACC 4% Discovery Group (ROE +16%) 15% 10% 0% 10% 20% 30% 40% Normalised earnings growth 71
Slide 73: Normalised vs Headline
Normalised vs Headline R ’mil Dec ’06 Dec ’05 % Banking group headline earnings 4 321 3 364 28 Adjusted for: 431 316 Private equity realisations 308 294 IFRS 2: Share based payments 123 - Inter-divisional transfer - 22 Banking group normalised headline earnings 4 752 3 680 29 Conservative coverage 6
Slide 74: Banking group portfolio quality remains robust
Banking group portfolio quality remains robust Total For the six months ended R ’mil Dec ’06 June ’06 Dec ’05 Gross advances 332 344 297 162 253 167 NPL 4 955 4 211 3 357 I/s charge 1 151 835 576 *Bad debt (%) 0.73 0.61 0.48 * Calculated as a percentage of average advances for six months FR rating m
Slide 75: Banking group portfolio quality remains robust
Banking group portfolio quality remains robust Retail continued R ’mil Dec ’06 June ’06 Dec ’05 Home Loans % % % - Arrears 7.72 6.60 5.42 - NPL 1.0 0.8 0.7 - Loan To Book Value 77.3 77.7 77.8 - Loan to Market Value 56.6 53.9 50.3 Credit Card - Arrears (including special arrangements) 9.54 10.22 10.4
Slide 76: Banking group portfolio quality remains robust
Banking group portfolio quality remains robust WesBank For the six months ended R ’mil Dec ’06 June ’06 Dec ’05 ** Gross advances 93 120 81 330 72 314 NPL 1 149 945 710 NPL % 1.2 1.2 1.0 I/s charge 452 411 222 *Bad debt % 1.04 1.07 0.65 * Calculated as a percentage of average advances for the six mo
Slide 77: Key income statement credit impairment ratios
Key income statement credit impairment ratios by segment Percentage of average advances Dec ’06 Dec ’05 Portfolio Specific Total Portfolio Specific Total % % % % % % FNB 0.20 0.63 0.83 0.08 0.34 0.42 WesBank (0.02) 1.06 1.04 0.04 0.61 0.65 RMB* 0.00 0.00 0.00 0.00 0.00 0.00 Africa 0.37 0.52 0.89 0.0
Slide 78: The drivers of bank earnings and returns
The drivers of bank earnings and Interest returns 3.07% margin Non interest 3.91% Income 7.34% income 2.00 % Associate 0.36% income Less Return on 2.00% Assets Bad debt 0.49% charge Expenses 3.85% Equity multiplier X 15.71 Tax, etc 0.78% Return on Cost / 31.36% 52.4% Equity Income Minorities 0.22% &
Slide 79: Headline earnings analysis
Headline earnings analysis R’m Dec ’06 Dec ’05 % Momentum group headline earnings 652 652 - Adjusted for: - IFRS2: Share based payments 18 8 - Listed property adjustments 129 66 - National treasury settlement - 27 Momentum normalised earnings 799 731 9 78
Slide 80: www.firstrand.co.za
powerpoint cover 2/25/07 1:50 PM Page 1 www.firstrand.co.za