Firstrand Limited · JSE:FSR
Firstrand — FirstRand Bank — Debt Investor Presentation (October 2024)
42 slides from Firstrand's debt investor presentation, October 2024
Slide 1: Financial and Strategic Update
FINANCIAL AND STRATEGIC UPDATE for the year ended 30 June 2024
Slide 2: Agenda
Agenda 2 Bank overview and financial performance Andries du Toit Financial resource management FirstRand Chief Value Officer Macroeconomic themes Bhulesh Singh Funding, liquidity and capital management FirstRand Group Treasurer South African financial market developments
Slide 3: Bank Overview and Financial Performance
BANK OVERVIEW AND FINANCIAL PERFORMANCE for the year ended 30 June 2024
Slide 4: FirstRand Bank is a wholly owned subsidiary of FirstRand Limited
FirstRand Bank is a wholly owned subsidiary of FirstRand Limited 4 Listed holding company (FirstRand Limited, JSE: FSR) Other wholly owned subsidiaries of FirstRand Limited 100% FirstRand EMA Holdings DEBT ISSUER FirstRand Bank Limited (FRB) (Pty) Ltd (FREMA) SA banking Broader Africa DIVISIONS Firs
Slide 5: FRB is a significant contributor to the group's financial position
FRB is a significant contributor to the group’s financial position 5 Other group legal entities* 28% Other group Group Group legal entities* 42% normalised normalised net asset assets 58% FRB value 72% FRB 2% 2% 4% Other group South Africa legal entities* 35% FRB geographical Broader Africa Group no
Slide 6: SA banking business remains underpin to group's growth
SA banking business remains underpin to group’s growth 6 SOUTH AFRICA BROADER AFRICA UK Platform-enabled integrated financial Build competitive advantage services providing ecosystems that London Branch supports RMB’s and scale to deliver economic create long-term value for clients and broader Afric
Slide 7: The bank supports the group's broader Africa strategy
The bank supports the group’s broader Africa strategy 7 SOUTH AFRICA BROADER AFRICA UK Platform-enabled integrated financial Build competitive advantage services providing ecosystems that London Branch supports RMB’s and scale to deliver economic create long-term value for clients and broader Africa
Slide 8: The bank supports the group's broader Africa strategy
The bank supports the group’s broader Africa strategy 8 SOUTH AFRICA BROADER AFRICA UK Platform-enabled integrated financial Build competitive advantage services providing ecosystems that London Branch supports RMB’s and scale to deliver economic create long-term value for clients and broader Africa
Slide 9: Key performance metrics
Key performance metrics 9 Normalised earnings Cost-to-income ratio Deposit franchise R24.7bn 55.2% R1 076bn (2023: R24.8bn) (2023: 55.5%) 30 bps (2023: R990bn) 9% CET1 ratio Return on equity Normalised net asset value 12.4% 22.6% R114.4bn (2023: 12.6%) 20 bps (2023: 23.5%) 90 bps (2023: R104.4
Slide 10: Financial Resource Management
FINANCIAL RESOURCE MANAGEMENT
Slide 11: Strategic call: Post-pandemic credit thesis
Strategic call: Post-pandemic credit thesis 11 • Recap: – Chose not to originate into post-pandemic rebound, waited for sustained recovery – Risk appetite normalised in December 2021, focused on lower-to-medium-risk – Objective: capture highest market share of good-quality credit – Protect customer
Slide 12: Strategic call: To grow deposit franchise
Strategic call: To grow deposit franchise… 12 R billion 500 13% CAGR 9% CAGR 450 463 400 401 350 300 250 7% CAGR 200 212 150 100 50 - Retail Commercial CIB 2020 2021 2022 2023 2024
Slide 13: Lower reliance on institutional funding
… which resulted in lower reliance on institutional funding composition compared to rest of SA banking sector 13 Institutional funding as % of total funding Institutional funding mix and term profile Months 40% 100% 45 38% 90% 40 41 36% 80% 39 37 35 34% 70% 34 30 60% 29 32% 25 50% 30% 20 40% 28% 15
Slide 14: FRB has maintained balance sheet strength
FRB has maintained balance sheet strength 14 ACTUAL TREND Assets in marketable format R474 billion Marketable liquid assets grew marginally Liquid assets as % of total assets 27.6%* Higher following increase in liquid assets LCR: 121% The bank’s liquidity position remains healthy, with prudential LC
Slide 15: Funding, Liquidity and Capital
FUNDING, LIQUIDITY AND CAPITAL
Slide 16: Liquidity conditions
Liquidity conditions 16 Stylised view of liquidity transmission Short-term rates 10% Liquidity Savings flows, funding 8% transmission and availability, scale and efficiency willingness to invest 6% SAGBCarry SAGB carry 60 months Policy Policy rate 4% Jibar3m 3m JIBAR Financing spreads and repricing
Slide 17: Liquidity management
Liquidity management 17 FRB funding composition FRB maturity profile R billion 2% 25 4% 13% 27% 20 8% 2024 15 14% 10 31% Deposit 5 franchise 73% Retail Commercial Corporate Group Treasury deposits 0 Debt securities Other deposits 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 4
Slide 18: FRB comfortably exceeds LCR and NSFR minimum requirements
FRB comfortably exceeds LCR and NSFR minimum requirements 18 % 2024 2023 • The bank manages excess liquidity through deployment into cash, central bank deposits, LCR treasury bills and government bonds Regulatory minimum 100 100 Actual 121 129 • The group utilises an IMF-based framework to Average a
Slide 19: Capital position remains solid
Capital position remains solid 19 CET1 ratio* % 18 17 CET1 accretion: +88 bps 16 15 (198 bps) 14 295 bps 13 (9 bps) (123 bps) 14 bps 12.6 12 12.4 11 10 2023 Earnings Ordinary Other** RWA Optimisation 2024 dividend * Includes unappropriated profits. ** Includes FCTR, other reserves and regulatory ded
Slide 20: Macroeconomic Themes
FirstRand Bank MACROECONOMIC THEMES
Slide 21: Transmission of global and domestic macro themes into business
Transmission of global and domestic macro themes into business 21 • Increase in sovereign risk premium and lower Global fracturing and reduced capital inflows capital flows • Widening bond spreads and increasing COE • Increasingly difficult to access hard currency from Structurally higher interest r
Slide 22: Sovereign risk analysis considers different paths, likelihood and signals
Sovereign risk analysis considers different paths, likelihood and signals – improving trajectory 22 Government debt to GDP forecasts and actual outcomes • Government addressing limited fiscal % space through combination of: Fiscal space is limited 80 – Spending restraint 75 – Structural growth refor
Slide 23: Structural reform progress supporting modest lift in economic growth
Structural reform progress is supporting a modest but steady lift in economic growth 23 • Removal of the energy generation license threshold in Dec 22 paving the way for a new energy market – 130+ confirmed projects (or 22 500 MW with a value of R390 billion) excluding rooftop solar • Auction of bro
Slide 24: Contribution of structural changes to potential real GDP growth
Contribution of structural changes to potential real GDP growth 24 % 4.0 3.5 0.2 3.0 0.3 2.5 • Removal of the energy generation license threshold 0.6 • Transnet recovery plan 2.0 • Water license applications 0.6 • Work visa regulations 1.5 5G auction • Improvemed labour relations, general regulatory
Slide 25: South African Financial Market Developments
SOUTH AFRICAN FINANCIAL MARKET DEVELOPMENTS
Slide 26: ZARONIA update
ZARONIA update 26 Recent achievements Expected next steps • London Clearing House (LCH) live with • Market Practitioners Group (MPG) ZARONIA* swap clearing (Jul 24) fallback recommendation • LCH test trades conducted (Sep 24) • ZARONIA first derivatives • ‘Dear CEO’ letters have been circulated (Sep
Slide 27: Capital and Flac update
Capital and Flac update 27 Final Basel reforms – proposed 1 July 2025: • Revised approaches for credit risk Output floor: – Standardised and internal-ratings based approaches, and credit 1 July 2025: 60% valuation adjustment 1 January 2026: 65% • Revised approaches for operational and market risk 1
Slide 28: Total loss absorbing stack – capital and Flac managed holistically
Total loss absorbing stack – capital and Flac to be managed holistically 28 For illustrative purposes, excludes bank-specific requirements and management buffer 23% 23% • Flac requirement anchored to RWA 3% 5% Flac: 9% • Management buffer and 33.33% 6% Pillar 2B impacts institution- minimum specific
Slide 29: Flac across the industry – reliance on resolution plans critical
Flac across the industry – reliance on resolution plans critical 29 Estimated Flac issuance R billion 300 • Flac issuance required for designated institutions R266 billion subject to open resolution 250 70 • Issuance programme amendments to cater for Flac 200 from issuance entity (holding company) 1
Slide 30: Exiting the FATF grey list a key marker for reform progress
Exiting the FATF grey list will be a key marker for institutional and governance reform progress 30 Final 6 items due by January 2025 • Proactively identify and take action against unlicensed cross-border money or value transfer services (MVTS) • Demonstrate that all AML/CFT supervisors apply and mo
Slide 31: Conclusion
Conclusion 31 • South Africa continues to make progress on key initiatives • Market functioning • Economic reforms • Growth reforms • Progress on fiscal discipline • Significant progress on FATF requirements • Basel reforms pending finalisation and incorporated in planning • Developing a holdco debt
Slide 32: Annexures
ANNEXURES
Slide 33: FRB credit ratings
FRB credit ratings 33 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/Stable Baa3/Stable
Slide 34: SARB market practitioners' group (MPG) timeline
SARB market practitioners’ group (MPG) timeline (published 6 May 2024) 34 January End Q3 June March • ‘Dear CEO’ letters • • • Communication around future Publication of Cash market conventions • ‘ZARONIA first’ cash market ZARONIA published for consultation JIBAR cessation to market • ‘No new JIBAR
Slide 35: Summary of recommended ZARONIA conventions
Summary of recommended ZARONIA conventions 35 Convention Derivatives market Bond market Money market Loan market Market alignment Calculation method Daily overnight compounded Daily overnight compounded Daily overnight compounded Daily overnight compounded Lookback 0 business days 5 business days
Slide 36: Exiting the FATF grey list a key marker for reform progress
Exiting the FATF grey list will be a key marker for institutional and governance reform progress 36 South Africa's World Bank worldwide governance SA worldwide governance index components indicator (percentile) (percentile) 80 1 Control of corruption 0.9 70 0.8 Progress markers: 60 Rule of law • Ene
Slide 37: Group Overview and Strategy
GROUP OVERVIEW AND STRATEGY
Slide 38: FirstRand's portfolio
FirstRand’s portfolio 38 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 functions
Slide 39: Portfolio mix at 30 June 2024 – activity, geography and business
Portfolio mix at 30 June 2024 – activity, geography and business 39 Other Transact UK operations† Investing UK operations† FNB Insurance Broader 11% WesBank 12% Save/ Africa# invest** RMB 5% 14% Geographic Normalised Revenue split normalised earnings per by activity* earnings mix operating 58% 25% b
Slide 40: Group strategic framework
Group strategic framework 40 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 enduring promise to create long-term value and su
Slide 41: Important notice
Important notice 41 The information, statements and opinions contained in this presentation do not constitute a public offer under any applicable legislation or law or an offer or solicitation of an offer to buy or sell securities or financial instruments or any advice or recommendation to buy such
Slide 42: Important notice (continued)
Important notice (continued) 42 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 2024) on 6ix