Firstrand Limited · JSE:FSR
Firstrand — UBS Conference 2012
23 slides from Firstrand's conference presentation, October 2012
Slide 1: Leveraging resources and platforms to create shareholder value
Leveraging resources and platforms to create shareholder value JOHAN BURGER
Slide 2: Can we flex the existing resources and platforms to generate further value?
Can we flex the existing resources and platforms to generate further value? • Understand existing financial resource allocation • Leverage existing operational resources and platforms
Slide 3: Allocation of scarce financial resources
Allocation of scarce financial resources • Capital • Funding and liquidity • Risk capacity and appetite Enhance returns or redeploy resources
Slide 4: First – understand current resource allocation
First – understand current resource allocation Illustration – Margin attribution (ROA) 4.5% - 4.5% 4.0% 3.5% 3.0% 2.5% Costs Impairments 2.0% Cost of capital 1.5% Economic profit (NIACC positive) Economic loss (NIACC negative) 1.0% 0.5% 0% - 0.0% -0.5% - -0.5% Business Business Business unit A unit
Slide 5: Then – take appropriate action
Then – take appropriate action RMB example Impact of actions to improve ROE ~23% ~(7%) ~0.5% 20-22% ~2% ~3.5% ~16% Base Basel 2.5 and III, Pre-mngmt Business Capital Cost Post-mngmt RMB ROE cost increase action ROE optimisation optimisation optimisation action ROE and expansion range Potential Actio
Slide 6: Can we flex the existing resources and platforms to generate further value?
Can we flex the existing resources and platforms to generate further value? • Understand existing financial resource allocation • Leverage existing operational resources and platforms
Slide 7: Can portfolio gap be addressed with existing platforms and resources?
Can portfolio gap be addressed with existing platforms and resources? FNB Africa Retail - VAF Other Corporate Trading Investing Hedging and structuring Retail - Personal loans Client execution Investment management Corporate - Financing Retail - Mortgages Commercial - Other Retail - Deposits Commerc
Slide 8: Why is investment management a focus?
Why is investment management a focus? • Unbundled Momentum • Fragmented and sub-scale pockets of investment management • Ashburton (Jersey) • RMB Private Bank/FNB Private Clients • RMB • FNB • Increased focus on fee generating activities • Regulatory changes Next steps: where and how?
Slide 9: Where to play and how to play
Where to play and how to play • Savings flows • Opportunity created by regulatory changes • Trends in investment management and our response
Slide 10: First – understand what drives savings flows to platforms
First – understand what drives savings flows to platforms Investors Decision Institutions Decision Investments Levers l Levers ll (AUM) Cash and near cash Pension funds Individuals Economic Economic Money market funds incentives Long term incentives insurance Banks Corporates Corporate bonds Investm
Slide 11: What assets are backing savings
What assets are backing savings Banks Credit – unsecured assets 33% 32% 31% 29% 33% 38% (retail & wholesale) Predominantly Credit – secured assets (retail & wholesale) credit assets Shares 42% 41% 38% 42% 49% 38% Investments, bills & acceptances Cash & liquid assets 18% 19% 19% 17% 10% 14% 7% 8% 8%
Slide 12: SA Inc - liquidity profile of assets and liabilities
SA Inc - liquidity profile of assets and liabilities Illiquid (banks) Long term (savings) Mortgages & asset Pension funds based finance - 14% 17% Loans - 2% Other - 4% PIC Credit card, overdrafts 13% & unsecured - 12% LT insurers 19% Equity 31% Unit trusts 11% Fixed income 23% Banks 39% Cash & depos
Slide 13: However, banks are mismatched
However, banks are mismatched Illiquid (banks) Short term (banks) Mortgages & asset based finance - 14% Loans - 2% Other - 4% Banks 39% Credit card, overdrafts & unsecured - 12% Unit trusts Equity 11% 31% LT insurers 19% Fixed income PIC 23% 13% Pension funds Cash & deposits 17% 13% Liquid (savings)
Slide 14: Where to play and how to play
Where to play and how to play • Savings flows • Opportunity created by regulatory changes • Trends in investment management and our response
Slide 15: Opportunities created by regulatory changes
Opportunities created by regulatory changes • Demand-side regulation (users of financial resources) • Basel • Basel 2.5 (proprietary trading) and Basel lll (capital and liquidity) • CISCA • Hedge fund regulation • Financial market infrastructure • Central clearing • Supply-side regulation (providers
Slide 16: Where to play and how to play
Where to play and how to play • Savings flows • Opportunity created by regulatory changes • Trends in investment management and our response
Slide 17: Trends in investment management…
Trends in investment management… • Search for yield • Risk minimising strategies • Asset liability management • Cheap beta
Slide 18: …play to different product requirement
…play to different product requirement Trends Type of product Search for yield • Credit • Real estate • Infrastructure • Resources • Corporate credit • Dividends Risk minimising strategies • Multi-assets • Guaranteed/structured products • Hedge fund strategies (long/short equity) Asset liability man
Slide 19: FirstRand product capability provide right to compete
FirstRand product capability provide right to compete Trends Type of product FSR business unit Search for yield • Credit • Real estate • Infrastructure Investment Banking • Resources • Corporate credit • Dividends Global Markets Risk minimising strategies • Multi-assets Ashburton (Jersey)/RMB Privat
Slide 20: Our right to compete
Our right to compete • Leverage existing product • Balance sheet • Co-investments/seeding • Guarantees • A track record of incubating new businesses • Recognised franchise in financial services • Leverage distribution platform, but needs build
Slide 21: Leverage existing platforms…current
Leverage existing platforms…current Originators Platforms AM platforms Listed instruments Corporate debt AM product providers Distributors Institutions Project debt Bank platforms Asset managers “Skill” products SWFs, DFI Unlisted equity “Passive” products Wealth Auto loans Retail Homeloans “Active”
Slide 22: Leverage existing platforms…future
Leverage existing platforms…future Originators Platforms AM product providers Distributors Institutions Listed instruments “Skill” products e.g. structured Asset managers AM platforms finance, principal, structured Corporate debt SWFs, DFI Project debt Wealth “Passive” products e.g. ETFs and ETNs Un
Slide 23: Organically growing investment management pillar separate from banking franchises
Organically growing investment management pillar separate from banking franchises FirstRand Investment FirstRand Bank Limited Management Investment Retail and commercial Investment banking Instalment finance management banking Alternative Traditional product long-only Product provider offering produ