FirstRand Limited · JSE:FSR
FirstRand — FY2013 Earnings Presentation
52 slides from FirstRand's earnings presentation, June 2013
Slide 1: Results presentation for the year ended 30 June 2013
Shareholders’ information continued –1– R E S U LT S p rese n t a t i o n for the year ended 30 June 2013
Slide 2: Slide 2
Slide 3: Introduction
FirstRand Group Results presentation 30 June 2013 –1– INTRODUCTION FirstRand has pursued a very consistent growth strategy • To be the African financial services group of choice • By creating long-term franchise value • Through delivering superior and sustainable returns • Within acceptable levels o
Slide 4: Good progress on execution of strategy in SA and rest of Africa
Introduction continued –2– Good progress on execution of strategy in SA… • Strengthened the relative positioning of franchises • FNB’s differentiated customer offering, based on a unique value proposition underpinned by innovative products, channels and rewards programmes • RMB’s CIB strategy to lev
Slide 5: Leveraging SA balance sheet and intellectual capital
FirstRand Group Results presentation 30 June 2013 –3– Leveraging SA balance sheet and intellectual capital • Effective in territories where a physical presence not yet established • Profitable investment and corporate banking franchises can be created in markets without a physical presence • Particu
Slide 6: Corporate action where it makes commercial sense
Introduction continued –4– Corporate action where it makes commercial sense • Small- to medium-sized acquisitions that bring scale, deposit franchise, customers and skills • Critical to apply discipline when deploying capital – transformational deals can dilute returns for a very long time • Physica
Slide 7: Financial review: normalised earnings
FirstRand Group Results presentation 30 June 2013 –5– …and by the Group Normalised earnings* (R million) 18 000 22.2% ROE 16 000 +20% 15 323 14 000 12 000 12 730 10 000 10 117 8 000 8 283 6 000 5 540 4 000 2 000 0 2009 2010 2011 2012 2013 * Normalised earnings shown on a continuing-normalised basis
Slide 8: Performance highlights and key performance ratios
Financial review continued –6– Performance highlights 2013 2012 Change Normalised earnings (R million) 15 323 12 730 20% Diluted EPS (cents) 271.8 225.8 20% Return on equity (%) 22.2 20.7 Net asset value per share (cents) 1 303.1 1 142.4 14% Dividend per share (cents) 136.0 102.0 33% Key p
Slide 9: Economic profit reflects shareholder value creation
FirstRand Group Results presentation 30 June 2013 –7– Economic profit reflects shareholder value creation NIACC* (R million) 7 000 22.2% 23% 20.7% 6 000 18.7% 17.7% >100% 5 947 18% 5 000 13.1% 4 000 4 163 13% 3 000 2 364 8% 2 000 1 594 1 000 3% - ( 474) ( 1(1000) 000) -2% 2009 2010 2011 2012 2013 NI
Slide 10: ROA reflects quality of earnings
Financial review continued –8– ROA reflects quality of earnings % 8 6 3.55 3.54 3.79 3.58 3.27 4 1.73 1.87 2 1.27 1.49 0.88 2.70 2.89 3.03 3.38 3.42 - (2) (3.47) (3.68) (3.52) (3.70) (3.61) (4) (1.23) (0.63) (0.74) (0.69) (0.93) (6) 2009 2010 2011 2012 2013 NIR as % average assets Operating expenses
Slide 11: Consistent strategies are driving performance
FirstRand Group Results presentation 30 June 2013 –9– Consistent strategies are driving performance • diversification Earnings resilience • client franchise businesses and growth (income statement) • appropriate risk appetite • positive operating jaws • appropriate action in new business origination
Slide 12: South Africa still growing strongly
Financial review continued – 10 – South Africa still growing strongly… 2012 2013 1% 1% 9% 9% South Africa International Rest of Africa & corridors 90% 90% …but rest of Africa starting to gain traction Based on gross revenue, excluding Corporate Centre and consolidation adjustments. Revenue growth fr
Slide 13: Segment diversification reflects structure of SA growth profile
FirstRand Group Results presentation 30 June 2013 – 11 – Segment diversification reflects structure of SA growth profile and relative positioning Normalised earnings (R million) 2013 2012 % change Normalised earnings mix# Retail 8 027 6 442 25 Commercial* 2 987 2 823 6 29% Corporate and investme
Slide 14: Client franchise contributes 95% of gross revenue
Financial review continued – 12 – Client franchise contributes 95% of gross revenue Net interest income (NII) = 49% Non-interest revenue (NIR) = 51% Transactional income* Lending 30% 29% transactional income Investment banking Fair value trading income Group Treasury and other Deposit endowment Capi
Slide 15: Strong topline underpins earnings growth
FirstRand Group Results presentation 30 June 2013 – 13 – Strong topline underpins earnings growth Normalised earnings (R million) 20 000 11% 9% 18 000 4% 2 969 (2 433) 16% 13% 15% 16 000 (67%) 20% (904) 3 195 (709) 475 15 323 14 000 12 000 12 730 10 000 8 000 6 000 4 000 2 000 0 2012 NII Business-
Slide 16: Lending dominates net interest income
Financial review continued – 14 – Lending dominates net interest income NII breakdown Net interest income* (R million) 2013 2012 % change 2% Lending 16 648 13 738 21 9% 9% Deposits 3 753 3 629 3 8% Deposit endowment 2 294 2 117 8 59% 13% Capital endowment 2 337 2 187 7 African subsidiaries 2
Slide 17: True margin improvement impacted by Treasury strategies
FirstRand Group Results presentation 30 June 2013 – 15 – True margin improvement impacted by Treasury strategies As a percentage of average interest-earning banking assets % Normalised margin – June 2012 4.92 Capital and deposit endowment (0.11) Advances 0.26 Changes in balance sheet mix 0.18 Asset
Slide 18: Impairment trend below long run average
Financial review continued – 16 – Strong topline underpins earnings growth Normalised earnings (R million) 20 000 11% 9% 18 000 4% 2 969 (2 433) 16% 13% 15% 16 000 (67%) 20% (904) 3 195 (709) 475 15 323 14 000 12 000 12 730 10 000 8 000 6 000 4 000 2 000 0 2012 NII Business- Merchant NIR Opex Tax
Slide 19: Impairment trend in line with cycle and portfolio expectations
FirstRand Group Results presentation 30 June 2013 – 17 – Impairment trend in line with cycle and portfolio expectations Credit loss ratio (%) Credit loss ratio (%) 2013 2012 3.00 Retail – secured 0.62 0.58 Residential mortgages 0.32 0.56 2.50 VAF 1.14 0.62 2.00 Retail – unsecured 6.20 5.37 Credit ca
Slide 20: NPLs decreasing but shift in product mix reflected in coverage
Financial review continued – 18 – NPLs decreasing but shift in product mix reflected in coverage NPLs (R billion) 40.4% 25 33.8% 40.0% 20 30.0% R18.7bn R17bn 20.0% 15 31% 32% 10.0% 8% 10 NPLs = 3.5% 13% 0.0% of advances NPLs = 2.8% of advances -10.0% 61% 5 55% -20.0% 0 -30.0% 2012 2013 Retail – secu
Slide 21: Breakdown of NPLs illustrates coverage is appropriate
FirstRand Group Results presentation 30 June 2013 – 19 – Breakdown of NPLs illustrates coverage is appropriate RESIDENTIAL MORTGAGES Specific Type R billion coverage ratio Property sold 0.6 27% Litigation 2.3 25% Debt review 1.0 20% Deceased 0.4 19% Non-debt review paying 1.1 17% Other (new NPLs) 1.
Slide 22: Non-interest revenue growth driven by client franchise strategies
Financial review continued – 20 – Strong topline underpins earnings growth Normalised earnings (R million) 20 000 11% 9% 18 000 4% 2 969 (2 433) 16% 13% 15% 16 000 (67%) 20% (904) 3 195 (709) 475 15 323 14 000 12 000 12 730 10 000 8 000 6 000 4 000 2 000 0 2012 NII Business- Merchant NIR Opex Tax
Slide 23: Unpacking transactional NIR by product and segment
FirstRand Group Results presentation 30 June 2013 – 21 – Unpacking transactional NIR by product and segment demonstrates quality R million 2013 2012 % change Retail, commercial and corporate banking 20 946 18 867 11 Bank commission and fee income 16 688 14 957 12 Management fees 952 986 (3) Insuranc
Slide 24: Strong topline results in improved operating jaws
Financial review continued – 22 – Strong topline underpins earnings growth Normalised earnings (R million) 20 000 11% 9% 18 000 4% 2 969 (2 433) 16% 13% 15% 16 000 (67%) 20% (904) 3 195 (709) 475 15 323 14 000 12 000 12 730 10 000 8 000 6 000 4 000 2 000 0 2012 NII Business- Merchant NIR Opex Tax
Slide 25: Total assets dominated by high-quality diversified advances
FirstRand Group Results presentation 30 June 2013 – 23 – Consistent strategies are driving performance • diversification Earnings resilience • client franchise businesses and growth (income statement) • appropriate risk appetite • positive operating jaws • appropriate action in new business originat
Slide 26: Strong growth in VAF and unsecured; risk appetite actions
Financial review continued – 24 – Strong year-on-year growth in VAF and unsecured… R million 2013 2012 % change Retail advances breakdown Residential mortgages 163 046 157 851 3 Retail unsecured 13% 2% 7% Vehicle and asset finance 100 598 81 867 23 4% Credit card 13 001 11 291 15 Personal loans 20 1
Slide 27: New business growth reflects view on macros and risk strategy
FirstRand Group Results presentation 30 June 2013 – 25 – New business growth reflects view on macros and risk strategy R billion Mortgages R billion Card 164 4% 14 16% 162 12 14% 3% 12% 160 10 10% 158 8 8% 2% 156 6 6% 4% 154 1% 4 2% 152 2 0% 150 0% - -2% June '11 Dec '11 June '11 Dec '12 June'13 Jun
Slide 28: Risk appetite actions
Financial review continued – 26 – Risk appetite actions COMMERCIAL Commercial Asset-backed Debtor and property finance Agri finance finance leverage finance Rest of Africa Growing as under- Diversifying Focus on lower risk Focus on banked Leverage growing represented – exposure across and banked cus
Slide 29: Strengthening deposit franchise and proactive liquidity management
FirstRand Group Results presentation 30 June 2013 – 27 – Strengthening deposit franchise and proactive liquidity management LIABILITIES# AND EQUITY (R BILLION) 2013 Deposit franchise +16% Funding +14% 2012 273 239 12% 13% 19% 128 125 130 114 111 109 24% 89 79 41 49* 48* 33 27 29 Retail Commercial FN
Slide 30: CET1 ratio reflects strong capitalisation
Financial review continued – 28 – CET1 ratio reflects strong capitalisation and capacity for expansion CET1 ratio 13.8% 14% 13% R10bn 12% surplus FSR CET1 target range: 10% management buffer 9.5% – 11.0% 2.5% 8% 6% SARB end-state 4% minimum requirement 8.5% 2% 0% Column2 X 2013 Economic view of capi
Slide 31: Strong ROE and capital position enables lower dividend cover
FirstRand Group Results presentation 30 June 2013 – 29 – Strong ROE and capital position enables lower sustainable dividend cover ROE 24% 22.2% 22% 20.7% 20% Target range 18.7% 17.7% 18% 16% 14% 13.1% 12% 10% 2009 2010 2011 2012 2013 Dividend cover lowered to 2.0 times
Slide 32: FNB operating review
FNB operating review – 30 – FNB OPERATING REVIEW Another year of outperformance for the FNB franchise Normalised profit before tax (R million) Characterised by: 35.6% ROE • Strong topline growth 12 000 20% • NII +18% 10 000 • NIR +11% • Continued account acquisition 8 000 • Transactional volumes up
Slide 33: Retail segment fuels the growth
FRANCHISE OPERATING REVIEWS Results presentation 30 June 2013 – 31 – Retail segment fuels the growth Normalised profit before tax (R million) 7 000 38% 2012 2013 6 000 5 000 4 000 0% 3 000 Bus. Bus. Banking Banking 2 000 14% Comm. Comm. 1 000 Banking Banking - Retail Commercial Rest of Africa Retail
Slide 34: Strong account and transactional growth in Commercial Banking
FNB operating review continued – 32 – Strong account and transactional growth in Commercial Banking Commercial Banking profit before tax (R million) • Growth in transactional activity and 2 500 specialised credit driving profitability, 12% despite rise in bad debts 2 000 • Relationship view improves
Slide 35: Gaining market share in targeted customer segments
FRANCHISE OPERATING REVIEWS Results presentation 30 June 2013 – 33 – Gaining market share in targeted, higher VSI customer segments Active accounts (millions)* • Superior customer value proposition driving high quality transactional account growth 18 8% • Active accounts increased by 16 1.1 million
Slide 36: Strong growth in electronic channels
FNB operating review continued – 34 – Strong growth in electronic channels – value for customers and cost benefits for FNB Transactions processed • Strategic shift to electronic channels 13% • Manual transactions down 0.6% • Electronic transactions up 17% • Innovation specifically targets migration
Slide 37: Management actions drive down residential mortgage NPLs
FRANCHISE OPERATING REVIEWS Results presentation 30 June 2013 – 35 – Management actions continue to drive down residential mortgage NPLs NPLs (R million) As a % of advances • Residential mortgage NPLs have reduced by R1.8 billion 10 000 7% • Offered customer solutions 6% • QuickSell (>7 200 properti
Slide 38: Rest of Africa remains a key focus area; Prospects
FNB operating review continued – 36 – Rest of Africa remains a key focus area • Continue to leverage established subsidiaries • Namibia, Botswana, Swaziland, Lesotho • Normalised profit before tax up 16.4% • Visa and Momentum sales affect results in prior year • Growing subsidiaries still require in
Slide 39: RMB operating review
FRANCHISE OPERATING REVIEWS Results presentation 30 June 2013 – 37 – RMB OPERATING REVIEW Record performance for RMB Normalised profit before tax (R million) Characterised by: 7 000 24.8% ROE • Management actions to restore ROE and improve quality of earnings 6 000 23% delivering 5 000 • Good contri
Slide 40: Highest year of earnings and improved quality of earnings
RMB operating review continued – 38 – Highest year of earnings and improved quality of earnings 2007 2013 Client activities 3% 13% Investment activities 29% 39% Proprietary trading activities Asset management Based on gross revenue. Excludes RMB Corporate Banking, legacy and head 84% office portfoli
Slide 41: Financing and execution drive client franchise
FRANCHISE OPERATING REVIEWS Results presentation 30 June 2013 – 39 – Financing and execution drive client franchise Gross income* (R million) 2012 5 000 2013 4 000 3 000 2 000 1 000 - Advisory Financing & Capital raising Structuring Client Flow trading Asset Investing deposit taking and solutions ex
Slide 42: Financing and execution drive client franchise
RMB operating review continued – 40 – Financing and execution drive client franchise Gross income* (R million) 2012 5 000 2013 4 000 3 000 2 000 1 000 - Advisory Financing & Capital raising Structuring Client Flow trading Asset Investing deposit taking and solutions execution and residual management
Slide 43: Contribution from rest of Africa increasing
FRANCHISE OPERATING REVIEWS Results presentation 30 June 2013 – 41 – Contribution from rest of Africa increasing Gross income* (R million) 2012 5 000 2013 Rest of Africa 4 000 3 000 2 000 1 000 - Advisory Financing & Capital raising Structuring Client Flow trading Asset Investing deposit taking and
Slide 44: RMB prospects; WesBank operating review
RMB operating review continued – 42 – Prospects underpinned by consistent strategies • Slowing domestic environment though good momentum in rest of Africa and India • Continue to grow client franchise through: • Continued growth in balance sheet • Building franchise and deal flow across key markets
Slide 45: WesBank's performance reflects market leadership position
FRANCHISE OPERATING REVIEWS Results presentation 30 June 2013 – 43 – WesBank’s performance reflects market leadership position Normalised profit before tax (R million) Characterised by: 32.8% ROE 4 500 • Solid new business origination 10% 4 000 • Sustained interest margins 3 500 • Good cost manageme
Slide 46: Retail secured lending remained resilient
WesBank operating review continued – 44 – Retail secured lending remained resilient Normalised profit before tax (R million) • Good growth in balance sheet 6% 2 500 at good margins 2 000 • Increased portfolio provisions • New business showing slower growth 1 500 • Maintained appropriate overall risk
Slide 47: Corporate secured lending gaining momentum
FRANCHISE OPERATING REVIEWS Results presentation 30 June 2013 – 45 – Corporate secured lending gaining momentum Normalised profit before tax (R million) • Corporate showing book growth, 500 58% and good new business volumes • Impairments and arrears have 400 improved 300 • Good growth in FMR and col
Slide 48: Cost-to-income ratio improves; prospects
WesBank operating review continued – 46 – Cost-to-income ratio continues to improve R million Cost-to-income ratio 5 000 55% 4 000 50% 3 000 45% 2 000 40% 1 000 35% 0 30% 2008 2009 2010 2011 2012 2013 Total costs Cost-to-income ratio Cost-to-income ratio (excl. profit share) Prospects driven by econ
Slide 49: Conclusion
FirstRand Group Results presentation 30 June 2013 – 47 – CONCLUSION In conclusion • Difficult macroeconomic environment expected to continue • Group will maintain its focus on: • Producing good organic growth in SA • Customer acquisition and transactional volumes at FNB • Client activities at RMB •
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Slide 51: FirstRand Group Results presentation 30 June 2013
FirstRand Group Results presentation 30 June 2013 – 49 –
Slide 52: Shareholders' information continued
Shareholders’ information continued – 50 – w w w. f i r s t r a n d . c o . z a