Firstrand Limited · JSE:FSR
Firstrand — FirstRand Bank — Debt Investor Presentation (October 2021)
44 slides from Firstrand's debt investor presentation, Oct 20, 2021
Slide 1: Financial and strategic update
financial and strategic update
Slide 2: Agenda
2 Agenda Group overview and strategic update Alan Pullinger Overview of the bank (debt issuer) and financial performance CEO: FirstRand Financial resource management Funding and liquidity Andries du Toit Capital FirstRand Group Treasurer South African financial sector and market infrastructure Alan
Slide 3: Group overview and strategic update
group overview and strategic update
Slide 4: FirstRand's portfolio
4 FirstRand’s portfolio LISTED HOLDING COMPANY (FIRSTRAND LIMITED, JSE: FSR) Retail and commercial Corporate and Vehicle asset UK specialist Asset Group-wide banking, insurance investment banking finance and fleet bank management functions and investments management
Slide 5: Portfolio mix at June 2021 – activity, geography and business
5 Portfolio mix at 30 June 2021 – activity, geography and business Transact UK operations† Investing Other UK operations† Insure Rest of WesBank Save/invest** 10% 10% Africa# 4% 10% Geographic Normalised Revenue split normalised earnings per by activity* earnings mix operating 26% business‡ 60% RMB
Slide 6: Group strategic framework presents distinctive investment proposition
6 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 will preserve the group’s enduri
Slide 7: Shared prosperity – inclusive value creation
7 Shared prosperity – inclusive value creation Underlying business strategies deliver a blend of financial and social outcomes TRUSTED REPOSITORY HOME PRODUCTIVE CAPITAL OF THE NATION’S OWNERSHIP FORMATION AND JOB SAVINGS • Mortgage book: CREATION • Deposits: R1.5 trillion R290 billion • R41.1 billi
Slide 8: Adherence to the pandemic response FRM framework protected the balance sheet
8 Adherence to the pandemic response FRM framework protected the balance sheet and underpinned ROE recovery • FirstRand implemented specific actions in March 2020 to emerge from Covid-19 with limited vulnerabilities and with capital to fully take advantage of the recovery • Anchored business to fina
Slide 9: Key group performance metrics demonstrate strong rebound
9 Key group performance metrics demonstrate strong rebound Normalised Pre-provision operating Dividend per share earnings profit (interim + final) R26.6bn R50.6bn 263 cents (2020: R17.3bn) 54% (2020: R48.3bn) 5% (2020: 146 cents) 80% Return on assets Return on equity Net asset value 1.39% 18.4% R
Slide 10: Overview of the bank (debt issuer) and financial performance
overview of the bank (debt issuer) and financial performance
Slide 11: FirstRand Bank is a wholly-owned subsidiary of FirstRand Limited
11 FirstRand Bank is a wholly-owned subsidiary of FirstRand Limited LISTED HOLDING COMPANY (FIRSTRAND LIMITED, JSE: FSR) OTHER WHOLLY-OWNED SUBSIDIARIES OF FIRSTRAND LIMITED 100% FirstRand EMA Holdings (Pty) Ltd (FREMA) DEBT ISSUER FIRSTRAND BANK LIMITED (FRB) Rest of Africa SA banking FirstRand Int
Slide 12: FRB a significant contributor to group's financial position
12 FRB a significant contributor to group’s financial position 28% 25% Group FirstRand Bank FirstRand Bank normalised Group Other legal entities* Other legal entities* earnings assets 72% 75% 5% 2% 2% 31% Group South Africa FRB normalised FirstRand Bank geographical Rest of Africa net asset Other le
Slide 13: SA banking business remains underpin to group's growth
13 SA banking business remains underpin to group’s growth SOUTH AFRICA REST OF AFRICA UK Platform-enabled integrated financial Modernise, digitise and scale Build competitive advantage services providing ecosystems that to a more valuable UK business and scale to deliver economic create long-term va
Slide 14: The bank supports the group's rest of Africa strategy
14 The bank supports the group’s rest of Africa strategy SOUTH AFRICA REST OF AFRICA UK Platform-enabled integrated financial Modernise, digitise and scale Build competitive advantage services providing ecosystems that to a more valuable UK business and scale to deliver economic create long-term val
Slide 15: UK – MotoNovo integration into Aldermore completed
15 UK – MotoNovo integration into Aldermore completed SOUTH AFRICA REST OF AFRICA UK Platform-enabled integrated financial Modernise, digitise and scale Build competitive advantage services providing ecosystems that to a more valuable UK business and scale to deliver economic create long-term value
Slide 16: Key performance metrics (normalised)
16 Key performance metrics (normalised) 2021 2020 % change Earnings (R million) 19 032 13 762 38 Pre-provision operating profit (R million) 37 366 35 778 4 Net interest margin (%) 4.72 4.65 Credit loss ratio (%) 1.23 2.00 Cost-to-income ratio (%) 54.0 54.8 Return on equity (%) 19.1 14.6
Slide 17: Earnings close to pre-pandemic levels, ahead of expectations
17 Earnings close to pre-pandemic levels, ahead of expectations Normalised earnings Credit impairment charge R million R million 25 000 10% 18 269 39% 20 000 21 152 38% 11 115 19 032 8 460 15 000 2019 2020 2021 13 762 Credit loss ratio 10 000 % 2.00 5 000 1.23 0.95 0 2019 2020 2021 2019 2020 2021
Slide 18: Lower impairments are largest driver of earnings growth
18 Lower impairments are largest driver of earnings growth Normalised earnings R million 27 000 24 000 3% 1% 81% 39% 1 102 (647) 21 000 (3 670) 38% 7 154 18 000 Effective tax rate 19 032 2021: 25.5% 3% (2019: 24.4%) 15 000 1 331 13 762 12 000 9 000 6 000 3 000 0 2020 NII Impairments NIR Opex T
Slide 19: Provisioning strengthened balance sheet further
19 Provisioning strengthened balance sheet further Provisions and coverage Total provisions R37 772m R40 031m R38 469m Coverage % 46.2% 44.7% 46.4% 11.34% 13.25% 12.00% 1.03% 1.10% 0.97% Jun 20 Dec 20 Jun 21 Stage 1 Stage 2 Stage 3/NPLs
Slide 20: Declining advances trend started to reverse in FNB in second half
20 Declining advances trend started to reverse in FNB in second half R billion 1 000 1% 950 900 850 Dec 20 vs Jun 20 Jun 21 vs Dec 20 2% ▲1% 800 750 Jun 20 FNB WesBank RMB RMB repos Other* Dec 20 FNB WesBank RMB RMB repos Other* Jun 21 * Includes UK operations, GTSY and other, and currency impact.
Slide 21: Deposit franchise growth resulted in improved funding mix
21 Deposit franchise growth resulted in improved funding mix Deposit franchise R billion • Strong deposit growth across all operating 900 businesses 8% 800 • Driven by precautionary savings, 792 compelling savings propositions and 700 736 customer acquisition 600 • Slight contraction in advances 50
Slide 22: Financial resource management
financial resource management
Slide 23: Disciplined approach to financial resource management
23 Disciplined approach to financial resource management • Strong capital position Capital management • Appropriate buffers in excess of minimum Balance sheet strength • Distance-to-trigger/default Assets • Quality Liabilities • Integrated funding and liquidity • Quality Earnings resilience, volatil
Slide 24: FirstRand's philosophy on funding and capital
24 FirstRand’s philosophy on funding and capital FUNDING CAPITAL RISK APPETITE MEASURES • Diversify across business, • Capital planning performed • Regulator – comfortably markets, currencies, maturities on forward-looking basis, exceed minimum prudential and instrument types not point-in-time requi
Slide 25: FirstRand Bank funding and liquidity
FirstRand Bank funding and liquidity
Slide 26: FRB exceeds LCR and NSFR requirements
26 FRB exceeds LCR and NSFR requirements LIQUIDITY COVERAGE RATIO (LCR) NET STABLE FUNDING RATIO (NSFR) • June 2021: 117% • June 2021: 122% • Effective 1 April 2020, temporary COVID-19 relief • In addressing the LCR, the bank adopted strategies measures introduced, reducing the LCR minimum to reduce
Slide 27: Continued focus on optimising the funding base
27 Continued focus on optimising the funding base… Sources of funding Funding instruments R885bn R974bn R1 065bn R1 095bn R1 155bn 32% 27% 36% 35% 36% Deposit franchise*: 73% 24% 21% 22% June 2021 21% 21% 23% 20% 20% 21% 23% 11% 11% 11% 11% 14% 5% 5% 5% 6% 6% 6% 8% 6% 6% 6% 2017 2018 2019 2020 2021
Slide 28: Strength of deposit franchise supported lower institutional issuances
28 Strength of deposit franchise supported lower institutional issuances… Funding liabilities 4.0% 2020 2021 7% 9% 305 313 286 288 7% 203 19% 174 162 26% 165 132 105 3% 8% 45 47 28 26 Retail Commercial CIB Group Treasury Debt securities Other deposits AT1 and T2 capital deposits Deposit fran
Slide 29: Resulting in lengthening of term
29 …resulting in lengthening of term Institutional funding as % of total funding Diversified institutional funding mix and term profile 45% Institutional funding composition Months 100% 45 43% 90% 40 36 37 41 41% 80% 33 34 35 39% 31 70% 30 37% 60% 25 50% 35% 20 40% 33% 15 30% 31% 10 20% 29% 10% 5 27
Slide 30: FirstRand Bank capital
FirstRand Bank capital
Slide 31: Strong increase in CET1 ratio – sufficient capacity to support growth
31 Strong increase in CET1 ratio – sufficient capacity to support the group’s growth CET1 ratio* % 16.0 NAV accretion: 153 bps 15.0 ▼84 bps ▲37 bps 14.5 14.0 ▲258 bps ▼21 bps ▲27 bps 13.0 12.0 12.3 11.0 10.0 Jun 20 Earnings Interim Other reserves RWA FRM optimisation Jun 21 dividend and regulatory s
Slide 32: Financial sector and market infrastructure
financial sector and market infrastructure
Slide 33: Regulatory update
33 Regulatory update • South African resolution framework contained in the Financial Sector Laws Amendment Bill is still pending parliamentary promulgation • Full scope, timeframe and impact of resolution planning is unclear at this point • To date, the South African Reserve Bank (SARB) has released
Slide 34: Proposed implementation dates – final Basel III reforms
34 Proposed implementation dates – final Basel III reforms 2022 2023 onwards 1 January 2022 1 January 2023 • Large exposures framework • Revised standardised approach for credit risk • Total loss absorbing capacity (TLAC) holdings framework • Revised internal ratings-based approach framework • Revis
Slide 35: FRB credit ratings
35 FRB 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 Ba2/Negative Ba2/Negative
Slide 36: Looking ahead
FirstRand 2021 fies for the year ended 30 June
Slide 37: What is required to unlock potential growth in SA
37 What is required to unlock potential growth in SA Real GDP per capita (2010 prices) Contribution of structural change to potential growth* Rand % y/y 58 000 3.5 56 000 3.0 54 000 2.5 52 000 Forecast 50 000 2.0 48 000 1.5 46 000 1.0 44 000 0.5 Spectrum Eskom Transnet 42 000 Transnet 0.0 40 000 Cur
Slide 38: Looking forward, the group is well positioned to deliver growth and superior returns
38 Looking forward, the group is well positioned to deliver growth and superior returns • Modest credit cycle expected to form in SA – advances will build on Q4 pick-up • Rest of Africa portfolio benefiting from commodity cycle • As UK government support is withdrawn, NPLs are expected to remain ele
Slide 39: Appendix
FirstRand Bank aooendx
Slide 40: Continued improvements to balance sheet liquidity
40 Continued improvements to balance sheet liquidity Balance sheet growth Liquid asset growth and mix R billion R billion 1 600 300 287 1 385 CAGR 1 400 250 ▲12.1% CAGR 1 200 ▲6.8% 996 200 1 000 162 800 150 600 100 400 50 200 0 0 2016 2021 2016 2021 Cash and central bank deposits Government bonds an
Slide 41: Covid-19 regulatory update
41 Covid-19 regulatory update LCR The PA temporarily reduced the LCR • Proposed directive released (1 September 2021) to requirement from 100% to 80%, withdraw the temporary relief measures and phase in the effective 1 April 2020 LCR requirement as follows: • 1 January 2022: minimum LCR of 90% • 1 A
Slide 42: Resolution blueprint – proposed hierarchy in insolvency
42 Resolution blueprint – proposed hierarchy in insolvency CURRENT AMENDED Secured Secured • Allows for setoff up to the value of security held (up to the (up to the • Residual claims rank pari passu with all other unsecured creditors value of value of security) security) • Assets under repo GMRA, I
Slide 43: Important notice
43 Important notice The information, statements and opinions contained in this presentation do not constitute a public offer under any applicable legislation or an offer or solicitation of an offer to buy or sell securities or financial instruments or any advice or recommendation to buy such securit
Slide 44: Important notice (continued)
44 Important notice (continued) The information in this presentation is given in confidence and the recipients of this presentation should not engage in any behaviour which would or might amount to market abuse for the purpose of Regulation (EU) 596/2014 (the Market Abuse Regulation). This presentat
FirstRand Bank — Debt Investor Presentation (October 2021) on 6ix