Firstrand Limited · JSE:FSR
Firstrand — Debt Investor Presentation (June 2024)
28 slides from Firstrand's debt investor presentation, Jun 5, 2024
Slide 1: Group Treasury technical roadshow
group treasury technical roadshow 3 – 5 June 2024
Slide 2: Presentation team
Presentation team 2 Bhulesh Singh FirstRand Group Treasurer Frederik Kleinhans Head: Capital Management Theuns de Wet Head: Investment Office Kalai Govender Deputy Head: Capital Management Delia Patterson RMB Debt Capital Markets
Slide 3: Macroeconomic themes, sovereign risk assessment and potential paths
macroeconomic themes, sovereign risk assessment and potential paths
Slide 4: Transmission of global and domestic macro themes into business
Transmission of global and domestic macro themes into business 4 • 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 ra
Slide 5: Sovereign risk analysis rigorously considers different paths, likelihood and signals
Sovereign risk analysis rigorously considers different paths, likelihood and signals 5 Government debt to GDP forecasts and actual outcomes • Structurally weak GDP growth Increased fragility as fiscal space eroded constraining the tax base 80 75 • Spending on consumptive activities 70 is high 65 • I
Slide 6: Research on implications of various paths to debt sustainability and different responses
Research on implications of various paths to debt sustainability and different responses 6 Structural increase in GDP growth (economic reforms) Consider the experience of different countries (UK, Brazil, India, China, Argentina, etc.) Fiscal austerity including spending cuts and tax increases, capit
Slide 7: Liquidity conditions and market developments
liquidity conditions and market developments
Slide 8: Liquidity conditions
Liquidity conditions 8 Stylised view of liquidity transmission Short-term rates GovernmentCarry PolicyRate 12% Jibar3m TreasuryBill FXImplied 10% Liquidity Savings flows, funding transmission and availability, scale and 8% efficiency willingness to invest 6% 4% Financing spreads and repricing risks
Slide 9: Liquidity management
Liquidity management 9 FRB funding composition FRB maturity profile R billion 2% 25 5% 13% 27% 20 8% 15 Dec 23 10 14% 31% Deposit 5 franchise 72% - Retail Commercial Corporate Group Treasury deposits Debt securities Other deposits Senior debt Senior inflation-linked debt AT1 and Tier 2 capital AT1 a
Slide 10: FRB comfortably exceeds LCR and NSFR minimum requirements
FRB comfortably exceeds LCR and NSFR minimum requirements 10 Dec Dec % 2023 2022 • FRB manages excess liquidity using a LCR combination of cash, central bank deposits, Regulatory minimum 100 100 treasury bills, government bonds and repos Actual 123 124 Average available HQLA (R billion) 372 349 • Th
Slide 11: SARB market practitioners group (MPG) timeline
SARB market practitioners group (MPG) timeline (published 6 May 2024) 11 January End Q3 June March • ‘Dear CEO’ letters • Publication of • Cash market conventions • Communication around future • ‘ZARONIA first’ cash market ZARONIA published for consultation JIBAR cessation to market • Cash market fa
Slide 12: FirstRand Bank regulatory developments
FirstRand Bank regulatory developments
Slide 13: Regulatory update
Regulatory update 13 Final Basel reforms – proposed 1 July 2025: • Revised approaches for credit risk Output floor: • Standardised and internal-ratings based approaches, 1 July 2025: 60% and credit valuation adjustment 1 January 2026: 65% • Revised approaches for operational and market risk 1 Januar
Slide 14: Elements of resolution framework gaining traction
Elements of resolution framework gaining traction 14 24 March 2023: 1 June 2023: 1 April 2024: Jan 2022: CODI resolution Deposit FLSAA established as framework insurance a legal entity effective operational 2022 2023 2024 Stays and Valuation in Funding in Transfers Flac moratoria resolution resoluti
Slide 15: Flac – new class of instruments subject to bail-in after regulatory capital
Flac – new class of instruments subject to bail-in after regulatory capital 15 What is Flac? • New instrument class, ranking ahead of Tier 2 and behind unsecured • Applicable to domestic systemically important financial institutions with open resolution plans • To provide sufficient loss absorbing a
Slide 16: Proposed level requirement and composition
Proposed level requirement and composition 16 bMFR Base minimum CAR (8%) + Pillar 2A (1%) – consistent for all SA banks • Base CAR excludes combined buffers (capital conservation, domestic systemically Requirement (MFR)* important bank and countercyclical (CCyB) buffers) • Function of resolution ris
Slide 17: Total loss absorbing stack – capital and Flac to be managed holistically
Total loss absorbing stack – capital and Flac to be managed holistically 17 For illustrative purposes, excludes bank-specific requirements and management buffer 23% 23% 3% • Flac requirement anchored 5% Flac: to RWA 33.33% 9% minimum 6% Flac • Management buffer and 9% Pillar 2B impacts iMFR 9% Total
Slide 18: Flac across the industry – reliance on resolution plans critical
Flac across the industry – reliance on resolution plans critical 18 Estimated Flac issuance R billion • Flac issuance required for designated 300 institutions subject to open resolution R266 billion 250 • Issuance programme amendments to 70 cater for Flac from issuance entity 200 (holding company) 1
Slide 19: Way forward: Flac issuance platforms
Way forward 19 New issuance programme Listed holding company (FirstRand Limited, JSE: FSR) Current issuance 100% 100% 100% 100% 100% 100% Platforms FirstRand Bank FirstRand EMA Holdings FirstRand International FirstRand Insurance FirstRand Investment FirstRand Investment Limited (FRB) (Pty) Ltd (FRE
Slide 20: Key Flac considerations
Key Flac considerations 20 Resolution balance sheet Flac pricing, Bail-in issuing entity playbooks and investors Key Flac considerations Idiosyncratic Regulatory Flac changes requirement Regulatory compliance Source: FirstRand.
Slide 21: Appendix
appendix FirstRand Bank
Slide 22: Bank has strengthened its balance sheet
Bank has strengthened its balance sheet 22 ACTUAL TREND Assets in marketable format R479 billion Marketable liquid assets grew marginally Liquid assets as % of total assets 28.5%* Higher following increase in liquid assets LCR: 123% The bank’s liquidity position remains healthy, with LCR and NSFR NS
Slide 23: FRB credit ratings
FRB credit ratings 23 SOUTH AFRICA FIRSTRAND BANK LIMITED SOVEREIGN RATINGS CREDIT RATINGS FOREIGN CURRENCY COUNTERPARTY RATING* 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 Aaa.za
Slide 24: Qualifying criteria for Flac instruments
Qualifying criteria for Flac instruments 24 Issuer Other features • External Flac instruments issued by • Fully paid and unsecured holding company • Not subject to set-off or netting • Internal Flac instruments issued by • Minimum initial maturity of 24 months but minimum designated institution to h
Slide 25: Liquidity risk regulatory update
Liquidity risk regulatory update 25 • PA published Directive 11/2022 on 14 December 2022 addressing items of national discretion relating LCR • Inclusion of foreign currency denominated level 1 HQLA for purposes of domestic currency LCR, withdrawn as of 31 December 2024 • PA published Directive 1/20
Slide 26: ZARONIA vs repo vs 3m Jibar
ZARONIA vs repo vs 3m Jibar 26 9.00 This graph includes data up to 27 May 2024 8.50 8.00 7.50 7.00 6.50 6.00 5.50 5.00 4.50 4.00 JIBAR 3M ZARONIA SA REPO ZARONIA observation ended at the beginning of November 2023 – the rate is available for use in the market Sources: Bloomberg and https://www.resba
Slide 27: Summary of recommended ZARONIA conventions
Summary of recommended ZARONIA conventions 27 Convention Derivatives market Money market Bond market Loan market Daily overnight rate is Daily overnight rate is Daily overnight rate is Daily overnight rate is Calculation usage and compounded over the compounded over the compounded over the compounde
Slide 28: Disclaimer
Disclaimer 28 This presentation is supplied to you solely for your information and may not be reproduced, redistributed, referenced, expanded upon, interpreted or passed on to any other person or published in whole or in part for any other purpose. This presentation does not constitute an offer or i