FirstRand Limited · JSE:FSR
FirstRand — FY2006 Earnings Presentation
17 slides from FirstRand's earnings presentation, Sep 23, 2006
Slide 1: 2006 Year End Results Presentation
2006 Year End Results Presentation
Slide 2: Strategic Issues and Prospects
Strategic Issues and Prospects • Regulation and consumerism • Transformation • International • Focus on ROE • Prospects
Slide 3: Regulation and consumerism remain powerful agents of change
Regulation and consumerism remain powerful agents of change • Regulatory and compliance costs – National Credit Act – FICA & FAIS – Competition Commission – Basel II – Changes in accounting standards and reporting • Bank charges under scrutiny • Financial services must get “house in order” • Win the
Slide 4: Strategic Issues and Prospects
Strategic Issues and Prospects • Regulation and consumerism • Transformation • International • Focus on ROE • Prospects
Slide 5: A holistic approach to Transformation
A holistic approach to Transformation • Contributing to a better macro environment • Redress investment imbalances • Employment Equity • Facilitate the emergence of black businesses • Facilitate equitable ownership and control
Slide 6: Strategic Issues and Prospects
Strategic Issues and Prospects • Regulation and consumerism • Transformation • International • Focus on ROE • Prospects
Slide 7: FirstRand will not replicate itself internationally
FirstRand will not replicate itself internationally • FirstRand is a collection of businesses operating in Financial Services • Each unit has a business proposition focusing on a specific market segment • Market segments are diverse and range from large corporates requiring sophisticated services to
Slide 8: Therefore strategy driven at business unit level
Therefore strategy driven at business unit level • FirstRand acts as an enabler, facilitator and catalyst to business units that have a competitive advantage to look for growth across geographical borders • Only business units that have a competitive advantage can look internationally • Performance
Slide 9: Growing our international presence
Growing our international presence • WesBank • Momentum – Australia – Africa – UK – UK • RMB • Discovery – Dublin – USA – Australia – UK – UK • Ashburton • FNB – Channel Islands – Namibia – Botswana • FirstRand Bank – Lesotho – Dubai – Swaziland
Slide 10: Strategic Issues and Prospects
Strategic Issues and Prospects • Regulation and consumerism • Transformation • International • Focus on ROE • Prospects
Slide 11: Strong growth, but declining returns
Strong growth, but declining returns 2004 2005 2006 2007 Assets Capital ROA
Slide 12: Competitive pricing erodes margin
Competitive pricing erodes margin 4.0% 3.54% 3.55% 3.5% -0.76% 3.0% -1.34% 2.5% 2.0% 2.78% 1.5% 1.0% 2.10% 0.5% 0.0% Dec '03 Jun '04 Dec '04 Jun '05 Dec '05 Jun '06 bps Core Margin Margin net of discount
Slide 13: HomeLoans currently below target ROE
HomeLoans currently below target ROE Analysis of HomeLoans % incremental new business margin Core margin 3.45 Average client discount 1.35 Margin 2.10 Adjusted for costs 1.59 - Liquid asset costs 0.21 - Expected loss 0.35 - Origination costs 0.43 - Processing costs 0.23 - Admin costs 0.16 - Tax char
Slide 14: Strategic Issues and Prospects
Strategic Issues and Prospects • Regulation and consumerism • Transformation • International • Focus on ROE • Prospects
Slide 15: All our businesses were well positioned
All our businesses were well positioned Lower Emerging interest Black BEE transactions rates consumer 9 9 9 9 9 9 9 9 9 9 9 9 9
Slide 16: Going forward it's a balancing act
Going forward it’s a balancing act + - Organic growth Increase in bad debts Increased volatility Slow down in economy Decrease in variable costs Equity markets decline Natural hedges Fixed cost base Increase in cost of equity
Slide 17: Going forward it's a balancing act
Going forward it’s a balancing act + - Organic growth Increase in bad debts Increased volatility Slow down in economy Decrease in variable costs Equity markets decline Natural hedges Fixed cost base Diversified portfolio Increase in cost of equity Balance sheet management