FirstRand Limited · JSE:FSR
FirstRand — FY2005 Earnings Presentation
183 slides from FirstRand's earnings presentation, 2005
Slide 1: Financial services: audited results for year ended 30 June 2005
financial services X (2) FIRSTRAND audited results for the year ended 30 June ‘05
Slide 2: Agenda
Agenda Introduction The numbers Banking Group Momentum Looking forward
Slide 3: Another excellent performance
Another excellent performance 2005 %∆ Headline earnings 7 602 32% Headline earnings 7 338 20% (excl foreign currency translation) Headline EPS 146.2 32% ROE 26.7% NAV 26 864 14% DPS 55.1 20%
Slide 4: A favourable economic environment
A favourable economic environment
Slide 5: R6.4bn from the bank
R6.4bn from the bank Strong retail loans and advances growth Margin protection from hedges Further reduction in credit losses plus recoveries Transaction volume growth Positive “jaws” despite investment strategies Good trading and investment realisations Strong top line growth
Slide 6: R1.6bn from insurance
R1.6bn from insurance Strong growth in new business Excellent cost control Slight increase in margins Strong performance of underlying investments (shareholders’ funds) Strong top line growth
Slide 7: Consistent growth strategy
Consistent growth strategy Acquisitions
Slide 8: Organic growth continues
Organic growth continues “Natural” market growth “Man made” growth • Innovation • Collaboration
Slide 9: Quantifying organic growth
Quantifying organic growth Market FirstRand WesBank new business 24% 32% FNB HomeLoans new business 57% 91% FNB Card advances 30% 32% RMB Private Bank advances 20-25% 41% Momentum recurring new business 4% 21% Discovery Life new business 4% 18% Consumer investment products 11% 76%
Slide 10: A culture of innovation
A culture of innovation FNB One Account – R1.3bn book value Million-a-month-account – 155 000 accounts Cellphone R banking – 74 000 customers Travel Card Actual monthly payout to customers 400000 FNB Private 350000 Clients launched in March 2005 300000 RMB 250000 BEE deals 200000 eg Afro
Slide 11: …particularly in banking products
…particularly in banking products FNB One Account – R1.3bn book value Million-a-month-account – 155 000 accounts Cellphone banking – 74 000 customers Travel Card FNB Private Clients launched in March 2005 RMB BEE deals eg Afrox, Makalani WesBank Islamic financing – total new business s
Slide 12: …and insurance products
…and insurance products Momentum Save thru spend Discovery Discovery Card – over 200 000 registered card holders in total New generation RAs
Slide 13: Consistent growth strategy
Consistent growth strategy Acquisitions
Slide 14: Collaboration still driving growth
Collaboration still driving growth Momentum/FNB Consultants • Sales through FNB consultants have overtaken sales through ABSA brokers • 34% increase in new business Momentum/FNB Life • New recurring API sold by FNB Life increased from R73.2m to R83.5m
Slide 15: At all levels
At all levels Mid corporates June 2004 to 2005 Growth (YOY) WesBank (Pay R922m to R1.5bn 64% outs) RMB Private Bank R329m to R450m 37% (new facilities) RMB Structured R44m to R100m >100% Finance (Average assets) RMB Property R852m to R1.4bn 68% Finance (Revenue)
Slide 16: Bancassurance remains meaningful
Bancassurance remains meaningful Retail NPBT from insurance operations up 19% year-on-year June 04 June 05 % change (R’m) (R’m) YOY OUTsurance 161 212 32% FirstLink 60 60 0% WesBank 245 267 9% HomeLoans 56 63 13% FNB Life 9 20 >100% FNB Consultants 32 49 53% Total 563 671 19%
Slide 17: Consistent growth strategy
Consistent growth strategy Acquisitions
Slide 18: Momentum continues to consolidate
Momentum continues to consolidate Load: Sage Holdings Strategic: Advantage Asset Management Sovereign Health Critical mass for African Life Health Momentum
Slide 19: Consistent growth strategy
Consistent growth strategy Acquisitions
Slide 20: Another new age business launched
Another new age business launched New short term insurance license for Momentum Exclusive distribution through Momentum Optimising FirstRand back office Alternative revenue source for intermediaries Pilot September 2005 Launch January 2006
Slide 21: Using the building blocks
Using the building blocks FirstRand STI Holdings Group 50% 50% 100% Insurance Short-term Company Limited Insurance Company (Insurance license) (Insurance license) WesBank Coverplus WesBank Motor Warrantee FNB Legal 100% Admin Admin services FirstRand STI Administrator services
Slide 22: Financial review
financial review () FIRSTRAND audited results for the year ended 30 June ‘05
Slide 23: Factors influencing the numbers
Factors influencing the numbers Previous period currency losses turned into profits this year Further 1.6% cost of BEE transaction will be reflected in 2005/2006 earnings IFRS will only impact the 2006 financial year
Slide 24: Key numbers
Key numbers Headline earnings 32% Diluted headline earnings per share 33% Diluted headline earnings per share 20% excluding impact of foreign currency translations Dividend per share 20% Return on equity 28%
Slide 25: A track record of top line growth
A track record of top line growth CAGR +21% R 170 CAGR +20% 150 145.9 137.8 130 110 114.7 107.7 100.7 90 90.7 86.9 76.9 70 67.7 63.4 50 54.1 54.1 45.6 45.6 30 1999 2000 2001 2002 2003 2004 2005 Headline earnings (excluding impact of foreign currency translations) Headline earnings
Slide 26: …and dividend growth
…and dividend growth R CAGR +23% 60 55.10 50 46.00 40 35.00 30 28.50 23.75 20 19.00 15.50 10 0 1999 2000 2001 2002 2003 2004 2005
Slide 27: The component parts
The component parts 2004 2005 4% 4% 17% 18% 78% 79% FirstRand Banking Group Momentum Discovery
Slide 28: Financial targets met
Financial targets met 35% FirstRand Bank +20% 30% 25% Discovery +19% +32% ROE Momentum 10% plus FirstRand WACC 20% 15% 10% real growth 10% 0% 10% 20% 30% 40% Headline earnings growth
Slide 29: Banking Group
Banking Group
Slide 30: Building blocks of growth
Building blocks of growth 10% Real EPS Growth Revenue Operational Capital Growth + Leverage + Efficiency = ROE = WACC plus 10%
Slide 31: Building blocks of growth
Building blocks of growth 10% Real EPS Growth Revenue Operational Capital Growth + Leverage + Efficiency = ROE = WACC plus 10%
Slide 32: Key revenue drivers
Key revenue drivers Interest income 6.6% Bad debts 15.2% Non interest income 33.8% Income from associates 49.9% Revenue growth 22.9%
Slide 33: Key revenue drivers
Key revenue drivers Interest income 6.6% Bad debts 15.2% Non interest income 33.8% Income from associates 49.9% Revenue growth 22.9%
Slide 34: Strong organic growth in advances
Continued buoyant market+29% Strong organic growth in advances (New business +32%) 260 41% Growth Ansbacher 250 6 sale .4% 18 24 240 f 25 eo eas 4 230 c r In 14 De cre 220 a se 4 of 2 13 210 .8 % Exceptional growth in Decrease in CDO 226 200 buoyant markets +31% portfolio, low margin 210 (New busine
Slide 35: Unpacking the margin
Unpacking the margin 4.47% 0% 0.21% (0.10%) (0.15%) (0.07%) Margin 4.35% Volume Endowment effect deposits Endowment Hedges Other capital 5% Interest 9% (2%) (2%) income (4%) 8 907 9 497 2004 2005
Slide 36: Unpacking the margin
Unpacking the margin 4.47% 0% 0.21% (0.10%) (0.15%) (0.07%) Margin 4.35% Volume Endowment effect deposits Endowment Hedges Other capital 5% Interest 9% (2%) (2%) income (4%) 8 907 9 497 2004 2005
Slide 37: Asset margins under pressure
Asset margins under pressure Weighting 2005 2005 2004 Asset-backed mortgages 30% 2.55 2.94 Instalment sales & lease debtors 21% 3.69 4.04 Card debtors 3% 7.48 8.12 Overdraft & other loans 5% 5.17 4.47 Personal loans 9% 6.31 6.84 Other advances 3% 1.10 0.53 Cash & short term funds 30% 2.82 2.64 Total
Slide 38: Funding the asset backed growth
Funding the asset backed growth R’bn 2005 Advances growth 25.9 Funded by: Retail 6.9 Corporate 3.3 Professional 15.7 Securitisation – better option
Slide 39: Deposit endowment effect
Deposit endowment effect Weighting 2005 2005 2004 Current & savings 24% 3.93 4.16 Call accounts 9% 1.07 1.26 Notice deposits 6% 1.11 0.91 Fixed deposits 6% 0.55 0.49 Group Treasury 55% Total 100% 1.15 1.21
Slide 40: Key revenue drivers
Key revenue drivers Interest income 6.6% Bad debts 15.2% Non interest income 33.8% Income from associates 49.9% Revenue growth 22.9%
Slide 41: Bad debts & NPLs bottom out
Bad debts & NPLs bottom out 1.5 5.6 1.3 Ignoring the effect of listed investment 1.1 transactions 4.3 0.9 3.5 3.6 0.8 2.6 2.4 2.1 0.4 0.4 0.3 2.0 1.7 1.7 1.6 1.4 1.31.1 1999 2000 2001 2002 2003 2004 2005 NPLs (%) Provisions (%) Bad debts (%) Line 4
Slide 42: Long run expected loss
Long run expected loss 1.5 5.6 1.3 1.1 4.3 0.9 3.5 3.6 0.74 0.8 2.6 2.4 2.1 2.0 0.4 0.3 1.7 1.7 1.6 1.4 1.31.1 1999 2000 2001 2002 2003 2004 2005 NPLs (%) Provisions (%) Bad debts (%) Expected loss
Slide 43: Key revenue drivers
Key revenue drivers Interest income 6.6% Bad debts 15.2% Non interest income 33.8% Income from associates 49.9% Revenue growth 22.9%
Slide 44: Key revenue drivers
Key revenue drivers Interest income 6.6% Bad debts 15.2% Non interest income 33.8% Non interest income (excl foreign 25.7% currency) Income from associates 49.9% Revenue growth 22.9%
Slide 45: Non interest income growth across the board
Non interest income growth across the board +26% Other Africa 1% Africa Other 5% 5% 1% RMB RMB 19% 18% WesBank WesBank 8% 9% FNB FNB 66% 68% 2004 2005
Slide 46: Strong NIR growth
Strong NIR growth R’bn 8 25% 7 6 5 4 3 16% 2 79% 37% 1 17% 14% 0 Transactional Trading Investment Insurance Knowledge Other 2004 2005
Slide 47: Driven by FNB
Driven by FNB R’bn Africa 9% 8 WesBank 7 25% 9% 6 5 4 11% 3 2 79% 17% FNB 37% 1 14% 82% 0 Transactional Trading Investment Insurance Knowledge Other 2004 2005
Slide 48: Transaction & customer volumes driving fee income
Transaction & customer volumes driving fee income % 20 Bank commissions and fees 18 16 7.1 14 12 3.5 10 8 8 5 6 Inflation 4 2 4.5 3.5 0 2004 2005 Price New client volume Volumes
Slide 49: Diverse trading income
Diverse trading income R’bn Forex business 29% 8 7 25% 6 5 4 3 Equity & 16% financial markets 2 71% 79% 17% 37% 1 14% 0 Transactional Trading Investment Insurance Knowledge Other 2004 2005
Slide 50: Equity related earnings
Equity related earnings Shareholder funds R’bn 23% 8 25% 7 6 Private equity 77% 5 4 3 16% 2 79% 17% 14% 37% 1 0 Transactional Trading Investment Insurance Knowledge Other 2004 2005
Slide 51: Private Equity – value added
Private Equity – value added R’m 1200 CAGR +19% 1000 800 600 400 200 0 2002 2003 2004 2005 Profit before tax Unrealised profit
Slide 52: Insurance income continues to grow
Insurance income continues to grow R’bn FNB 8 33% 25% 7 6 5 4 WesBank 3 16% 67% 2 79% 37% 1 17% 14% 0 Transactional Trading Investment Insurance Knowledge Other 2004 2005
Slide 53: Key revenue drivers
Key revenue drivers Interest income 6.6% Bad debts 15.2% Non interest income 33.8% Income from associates 49.9% Revenue growth 22.9%
Slide 54: Associate income up 50%
Associate income up 50% R’m 400 +58% 300 +34% 200 +>100% (13%) 100 +>100% 0 OUTsurance WesBank Private Equity Listed Other investments 2004 2005
Slide 55: Key revenue drivers
Key revenue drivers Interest income 6.6% Bad debts 15.2% Non interest income 33.8% Income from associates 49.9% Revenue growth 22.9%
Slide 56: Building blocks of growth
Building blocks of growth 10% Real EPS Growth Revenue Operational Capital Growth + Leverage + Efficiency = ROE = WACC plus 10%
Slide 57: Operational leverage drivers
Operational leverage drivers Operating expenditure 18.0% Taxation 20.1% Expenses growth 18.3%
Slide 58: Operating expenditure
Operating expenditure +18% Other Africa 6% Other Africa 5% 5% RMB 6% RMB 5% 5% WesBank WesBank 12% 12% FNB FNB 72% 72% 2004 2005
Slide 59: Investing for growth
Investing for growth Infrastructure New business Base costs Ansbacher +6% +8% + 6% – 2% 225 191 +18% 339 156 RMB +32% Infrastructure +7% 1207 New business growth 12389 +12% FNB +16% WesBank +20% Origination costs Origination costs +2% 10503 +2% Advertising +2% Infrastructure +3% Profit
Slide 60: Operational leverage – a challenge
Operational leverage – a challenge The challenge 62 60 60 58 56 56 55 1999 2000 2001 2002 2003 2004 2005 Cost to income
Slide 61: Operational leverage drivers
Operational leverage drivers Operating expenditure 18.0% Taxation 20.1% Expenses growth 18.3%
Slide 62: Effective tax rates
Effective tax rates 30% 5.3% 4.5% 15% 24.0% 24.6% 0% 2004 2005 Direct tax Indirect tax
Slide 63: Building blocks of growth
Building blocks of growth 10% Real EPS Growth Revenue Operational Capital Growth + Leverage + Efficiency = ROE = WACC plus 10%
Slide 64: Superior ROE and economic value
Superior ROE and economic value 2005 2004 Return on assets 1.84 1.67 X X Gearing multiple 15.0 15.7 Return on equity 27.6 26.3 - - Cost of equity 12.7 13.6 Shareholder value add 14.9 12.7 Continued shareholder value creation
Slide 65: Momentum Group
Momentum Group
Slide 66: Key numbers
Key numbers Headline earnings 19% Return on equity 25% Return on EV 28%
Slide 67: Key numbers
Key numbers Headline earnings 19% Return on equity 25% Return on EV 28%
Slide 68: All divisions perform well
All divisions perform well R’m 2005 2004 % Insurance operations 685 595 15 Asset management operations 247 175 41 Group operating profit 932 770 21 Investment income on 355 311 14 shareholders’ assets Group headline earnings 1 287 1 081 19
Slide 69: All divisions perform well
All divisions perform well R’m 2005 2004 % Insurance operations 685 595 15 Asset management operations 247 175 41 Group operating profit 932 770 21 Investment income on 355 311 14 shareholders’ assets Group headline earnings 1 287 1 081 19
Slide 70: Positive gearing on local earnings
Positive gearing on local earnings Strong market growth Retail new business +25% Positive gearing Expenses +5%
Slide 71: Local insurance operations +19%
Local insurance operations +19% R’m 900 29% (5%) (8%) 3% 800 19% 700 600 500 400 2004 Existing Momentum New ventures New business 2005 businesses International growth
Slide 72: All divisions perform well
All divisions perform well R’m 2005 2004 % Insurance operations 685 595 15 Asset management operations 247 175 41 Group operating profit 932 770 21 Investment income on 355 311 14 shareholders’ assets Group headline earnings 1 287 1 081 19
Slide 73: Strong performance from domestic asset management
Strong performance from domestic asset management R’m 2005 2004 % Local operations 178 109 63 International operations 69 66 5 Headline earnings 247 175 41
Slide 74: Strong growth in funds under management
Strong growth in funds under management R'bn 15% R'bn 63% 150 12 140 R20 bn 10 R4.6 bn 8 130 6 120 4 110 2 100 0 2003 2004 2005 2003 2004 2005 Institutional Retail
Slide 75: Key numbers
Key numbers Headline earnings 19% Return on equity 25% Return on EV 28%
Slide 76: Return on embedded value growth +28%
Return on embedded value growth +28% Earnings +14% EV growth Shareholder assets +7% “In-force” business +7%
Slide 77: Discovery Group
Discovery Group
Slide 78: Increased diversification
Increased diversification 100% 1 4 9 4 14 15 90% 18 11 80% 2 12 18 2 17 70% 2 2 60% 50% 91 40% 78 72 65 64 30% 20% 10% 0% 2001 2002 2003 2004 2005 Health Vitality Life Destiny Pru New business growth of 35%: R4342m
Slide 79: SA operations exceed R1bn
SA operations exceed R1bn R’m 2005 2004 % Discovery Health 562 521 8 Discovery Life 421 271 55 Vitality 38 50 (24) SA Operations 1 022 842 21 Destiny Health (87) (106) (18) PruHealth (148) (28) - Operating profit 786 708 11
Slide 80: Operating profit
Operating profit R’m 2005 2004 % Operating profit 786 708 11 Investment income & realised profits 159 121 31 Financing costs (54) (47) 15 Forex loss - unrealised (8) (62) (87) Profit before tax 883 720 23 Taxation (307) (299) (3) Minority share of loss 9 (3) - Net profit attributable to shareholders
Slide 81: Capital Management
Capital -|Management
Slide 82: Capital in context
Capital in context Split of main operating companies of capital ROE Banking 75.6% 28% Group Momentum 17.8% 25% Discovery 6.7% 19% 0% 20% 40% 60% 80% 100%
Slide 83: Application of the excess
Application of the excess R’m 7000 6000 5000 1500 2300 4000 3000 1400 4400 2000 1200 1000 500 500 0 Dec-04 Preference BEE Debt Redeem Growth Momentum Dec-05 share Impairment requirement requirement “True” excess is R500m as at 30 June 2005
Slide 84: Capital Management Banking Group
Capital Management Banking Group
Slide 85: Capital by risk type
Capital by risk type Interest rate Market 3% 2% Operational 9% Investment 7% Credit 79%
Slide 86: Capital for growth and dividend
Capital for growth and dividend FirstRand Banking Group Expected Actual ROE 23.0% 28.3% Less: Dividend (2.5x cover) (9.2%) (11.3% ) Therefore Capital available for growth 13.8% 17.0% Actual growth in requirements 22.0% Difference (5.0% ) Surplus used for organic growth
Slide 87: Capital invested in growth
Capital invested in growth R’bn 80 FNB +17% +27% +10% 60 WesBank +17% +29% +12% 40 RMB 20 Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- 04 04 04 04 04 04 04 05 05 05 05 05 05 Growth in RWA of 19%
Slide 88: Capital Management Momentum Group
Capital Management Momentum Group
Slide 89: Capital invested in strategic acquisitions
Capital invested in strategic acquisitions CAR cover As at 30 June 2005 2.2x Less: Sage (0.6x) Add: Aflife transactions 0.1x Net 1.7X Add: Non cumulative non redeemable preference share 0.2x 1.9x Within Momentum CAR cover target range
Slide 90: In summary
In summary Maintain the dividend cover of 2.5 times Board approved share buy-in program as part of capital management Current excess R500million Capacity created for further Tier 2 issue
Slide 91: Slide 91
Slide 92: Simplified structure
Simplified structure Banking Finance, WesBank Group FNB RMB Risk and Treasury Audit
Slide 93: RMB
RMB
Slide 94: Strong financial performance
Strong financial performance PBT R2.2bn Growth 36% % of Group 22%
Slide 95: RMB
RMB ASSET MANAGEMENT RAND MERCHANT BANK \ S
Slide 96: RMB
RMB ASSET MANAGEMENT RAND MERCHANT BANK \ S
Slide 97: RMBAM back on track
RMBAM back on track R’m 250 223 200 +68% 150 100 50 0 2002 2003 2004 2005
Slide 98: Positive inflow of funds
Positive inflow of funds R'bn R'bn 150 12 140 10 R4.6 bn R20 bn 8 130 6 120 4 110 2 100 0 2003 2004 2005 2003 2004 2005 Institutional Retail
Slide 99: Sound investment performance
Sound investment performance Global BIV 3 years to 30 June 2005 Allan Gray 21.1% RMB Asset Management 18.0% OMAM 17.7% Coronation 17.5% Prudential 17.2% Average 16.4% % p.a. Median 16.1% Investec AM 15.8% SIM 15.6% Metropolitan 14.7% Stanlib 13.9% 0% 5% 10% 15% 20% 25% Source : Alexander Forbes – Gl
Slide 100: RMB
RMB ASSET MANAGEMENT RAND MERCHANT BANK \ S
Slide 101: Excellent performance
Excellent performance R’m 1 900 Themes: 1750 • Sustainability +33% • Investing in growth • Emergence as 1250 an equity house 750 250 2001 2002 2003 2004 2005
Slide 102: Diversity of earnings - total
Diversity of earnings - total 100% 100% 5% 8% 9% 80% 80% 25% 36% 60% 70% 60% 17% 4% 40% 40% 50% 51% 20% 20% 25% 0% 0% 1992 2004 2005 Annuity New asset income Risk based Fee income
Slide 103: The portfolio effect
The portfolio effect R’m Net income by division 700 600 500 400 300 200 100 0 Private Corporate SPJI Treasury Equity Project Structured Equity Finance Trading Trading Finance Finance Investment Fee Trading Structuring Credit
Slide 104: The portfolio effect
The portfolio effect R’m Divisional income by driver 700 600 500 400 300 200 100 0 Private Corporate SPJI Treasury Equity Project Structured Equity Finance Trading Trading Finance Finance Investment Fee Trading Structuring Credit
Slide 105: The portfolio effect
The portfolio effect Net income by driver R’m 800 700 600 30% 29% 28% 500 400 300 200 8% 100 5% 0 Investment Fee Trading Structuring Credit
Slide 106: Investing in growth
Investing in growth Costs up 32% People Technology
Slide 107: Emergence as equity house
Emergence as equity house R’m 1200 1000 800 600 400 200 0 2002 2003 2004 2005 Debt Equity
Slide 108: Equity businesses outperform
Equity businesses outperform R’m 600 500 400 300 200 100 0 Equity Trading Corporate Finance Private Equity Actual 2004 Actual 2005
Slide 109: Corporate Finance - leaders in BEE
Corporate Finance - leaders in BEE R600m acquisition of 7% of R1,4bn acquisition of 7.25% of ABIL by a BEE consortium Disposal of a R7,9bn equity stake Imperial Holdings by a BEE to a BEE consortium consisting consortium including Lereko of Kagiso Trust, MIT and WDB Mobility Adviser and funder to AB
Slide 110: Private Equity – value added
Private Equity – value added R’m 1200 1000 800 600 400 200 0 2002 2003 2004 2005 Profit before tax Unrealised profit
Slide 111: RMB has exciting prospects
RMB has exciting prospects BEE Infrastructure finance R’bn PPP debt funding 6 5 • Gautrain • 2010, etc 4 3 2 1 0 2001 2002 2003 2004 2005 2006 2007
Slide 112: RMB has dominated the PPP market
RMB has dominated the PPP market BEE Infrastructure finance Total Deals led Deals in which number of by RMB RMB has deals participated Toll roads 5 3 5 Power stations 1 1 1 Hospitals 1 1 1 Prisons 2 1 1 Accommodation 1 0 0 Grand total 10 6 8
Slide 113: RMB has exciting prospects
RMB has exciting prospects BEE Infrastructure finance Private equity assets R’m 2,500 2,000 1,500 1,000 500 0 2002 2003 2004 2005 Profit before tax Unrealised profit Assets
Slide 114: RMB has exciting prospects
RMB has exciting prospects BEE Infrastructure finance Private equity assets Relationships
Slide 115: Survey 2005
Survey 2005 BEE Listings M&A Structured Private Forex Bonds & Money Deals & Project Equity Derivates Market Finance 1 RMB RMB RMB RMB RMB Std Bank Std Bank Std Bank & JPM & Ethos 2 Std Bank Deutsche Std Bank RMB RMB ABSA 3 JPM Chase Investec Investec ABSA Investec ABSA ABSA RMB 4 ABSA Std Bank Deuts
Slide 116: RMB has exciting prospects
RMB has exciting prospects BEE Infrastructure finance Private equity assets Relationships Strong equity markets
Slide 117: First National Bank
a First National Bank How can we help you?
Slide 118: FNB aligned around one brand
FNB aligned around one brand Sharpened segment focus Investment in growth
Slide 119: Financial highlights
Financial highlights PBT +18% Excellent advances growth of 26%, particularly in second half Continued reduction in bad debts -20% Strong NIR growth +22% Still investing in growth
Slide 120: Advances – still growing our share
Advances – still growing our share Home loans 13% 21% +34% (includes Wealth) C redit card loans 13% 19% +32% Personal loans 21% +21% (includes microloans and business loans) C orporate term loans -21% 40% +19% Overdrafts -4% 9% +5% Total advances Total Advances 10% 16% +26% -30% -20% -10% 0% 10% 20%
Slide 121: Segment focus
Segment focus Mass Consumer Wealth Branches, Brand, CIO Primary segments and CFO Commercial Corporate Public Sector Shared Services
Slide 122: Banking the emerging market
Banking the emerging market Active account base Debit card turnover market share 60% 50% 3.0 40% No. of accounts (m) 2.2 30% 1.9 2.0 20% 1.0 10% - 0% 2004 2005 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Absa FNB Nedbank Standard Source: FNB Merchant Acquiring
Slide 123: …and deepening the relationship
…and deepening the relationship Total payout Prepaid revenue R’m R’m 200 300 +182% +75% +90% Gross value 150 200 Production 100 100 50 0 0 2004 2005 2004 2005 2004 2005 Microloans Smart Housing Prepaid Plan
Slide 124: Leader in cellphone banking
Leader in cellphone banking 1.9 million InContact customers
Slide 125: Segment focus
Segment focus Mass Consumer Wealth Branches, Brand, CIO Primary segments and CFO Commercial Corporate Public Sector Shared Services
Slide 126: HomeLoans picking up the pace
HomeLoans picking up the pace R’bn 50 Total payout New business market share +78% 40 Payout 30 30% 20 20% 10 0 10% 2004 2005 Jul-04 Sep-04 Nov-04 Jan-05 M ar-05 M ay-05 Absa Nedbank FirstRand Standard Source: Deeds Office
Slide 127: Remarkable performance from Card
Remarkable performance from Card 31% growth in advances R’bn Cardholder turnover Card turnover market share 40 40% +28% 30 Turnover 30% 20 20% 10 - 10% 2004 2005 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Absa FNB Nedbank Standard Source: FNB Merchant Acquiring
Slide 128: …with a little help from our friends
…with a little help from our friends
Slide 129: Who wants to be a millionaire?
Who wants to be a millionaire?
Slide 130: Segment focus
Segment focus Mass Consumer Wealth Branches, Brand, CIO Primary segments and CFO Commercial Corporate Public Sector Shared Services
Slide 131: A wealth of opportunity
A wealth of opportunity Leverage structured lending and asset management of into R’bn Advances Assets under management 20 16 +41% +49% 12 8 4 - 2004 2005 2004 2005 Strong pipeline in FNB Private Clients
Slide 132: Segment focus
Segment focus Mass Consumer Wealth Branches, Brand, CIO Primary segments and CFO Commercial Corporate Public Sector Shared Services
Slide 133: A future growth engine
A future growth engine Mid Corporate segment profit growth of 46% Aligned business model behind Business and Agric segments Commercial Property Finance payout of R364m and breakeven
Slide 134: Segment focus
Segment focus Mass Consumer Wealth Branches, Brand, CIO Primary segments and CFO Commercial Corporate Public Sector Shared Services
Slide 135: A mixed picture in Corporate
A mixed picture in Corporate Lending • Subdued market growth • Not chasing market share Transactional • Established dedicated new business team • Most improved electronic banking platform (BMI Tech 05) and 35% market share • Leaders in Merchant Acquiring with 31% market share Primary focus remou
Slide 136: Segment focus
Segment focus Mass Consumer Wealth Branches, Brand, CIO Primary segments and CFO Commercial Corporate Public Sector Shared Services
Slide 137: Banking the public sector
Banking the public sector Frat Blark’s pesnion tor frencial Pesind tna teat’ Dor for our chant, the Unemploymom ireuraroo Fund (WIR, and the consthucroy it sara. ‘Theough our busirass pamnersh’p LIF grant roubients wil coon have their banat paymams tranathrred slectronically directly ito their ban a
Slide 138: Segment focus
Segment focus Mass Consumer Wealth Branches, Brand, CIO Primary segments and CFO Commercial Corporate Public Sector Shared Services
Slide 139: Branches - extreme makeover
Branches - extreme makeover Repositioning branch infrastructure • 24 new traditional and 21 new portable branches • 12 closures Improving retail design • 121 revamps Creating sales and service specialisation Mobile sales Performance-based remuneration
Slide 140: Prospects
Prospects High base created, but… • Organic growth will be strong • Volume growth should offset reduction in endowment • Well positioned in growing black market
Slide 141: Well-positioned in growing black market
Well-positioned in growing black market 100% 16% 90% 24% 80% 52% 54% 70% 62% 63% 61% 60% 78% White 50% 84% 40% 76% Black 30% 48% 46% 20% 38% 37% 39% 10% 22% 0% FNB Other FNB Other FNB Other FNB Other Banks Banks Banks Banks Mass Consumer Wealth Business R0-60K R60 – R750K R750K+ R60k – R400m Other b
Slide 142: Prospects
Prospects High base created, but… • Organic growth will be strong • Volume growth should offset reduction in endowment • Well positioned in growing black market Still investing for growth with a cost focus
Slide 143: A balancing act
A balancing act CAGR 17% CAGR 16% 8865 2002 2003 2004 2005 7658 Revenue Opex Bad debt benefit ending 3-year plan to improve CIR ’06: Still investing for growth
Slide 144: Investing in growth
Investing in growth 436 5% of cost growth from 72 investment in growth (R378m) 319 8865 129 97 8865 152 7660 7658 Growth costs Salary Adverts Other 5% 4% 1% 6% 2004 Origination Increase in Other Salaries & Advertising Other 2005 staff growth benefits operating costs costs
Slide 145: Prospects
Prospects High base created, but… • Organic growth will be strong • Volume growth should offset reduction in endowment • Well positioned in growing black market Still investing for growth with an increased cost focus Positioned at lower end of fee range
Slide 146: Positioned at lower end of fee range
Positioned at lower end of fee range
Slide 147: WesBank
WesBank Put us to the test : FirstRand Bank tta
Slide 148: WesBank still in a sweet spot
WesBank still in a sweet spot PBT +34% Advances +29% New business written +31.6% R4bn new business written in June NIR increased 34% Cost-to-assets down 5.5% (from 2.72% to 2.57%) Cost to income down from 48.8% to 46.8% Still the market leader at 33%
Slide 149: What has happened to costs?
What has happened to costs? 3.2 55 3 Cost to Income % Cost to Assets % 50 2.8 2.6 45 2.4 2.2 40 2001 2002 2003 2004 2005 2006 Budget Cost to Assets Cost to Income
Slide 150: So what drove performance?
So what drove performance? New partners in the corporate and motor markets Innovation continues (in our DNA) Process efficiency Performance-linked remuneration
Slide 151: Where to from here?
Where to from here? 320 1000000 300 900000 280 800000 260 700000 240 600000 220 500000 200 400000 2005 2009 2005 2010 GDFI Total new vehicle market Business confidence riding wave Slowdown in economic growth – no? Robust economy will ensure growth in car sales – You can do nothing without whee
Slide 152: Opportunity 1: A new market has emerged
Opportunity 1: A new market has emerged R’bn 18 16 21 fold growth 14 12 10 8 6 4 2 0 1994 2004 2005 2010 Projection of black market
Slide 153: Shifting the mix
Shifting the mix % 90 80 85 70 75 60 % 60 50 40 40 30 20 25 10 15 0 White Black 1998 2005 2010
Slide 154: Opportunity 2: Funding transformation in the motor industry
Opportunity 2: Funding transformation in the motor industry R’bn 3 2.5 d te ec oj 2 Pr 1.5 1 0.5 0 2005 2010
Slide 155: Opportunity 3: International
Opportunity 3: International Strong Leverage off Differentiated Partnerships existing value structures proposition
Slide 156: The beginnings of international
The beginnings of international Australia • Motor One • WorldMark (Net consolidated PBT contribution of R19m) United Kingdom • Broking operation
Slide 157: Exploring Africa
Exploring Africa WesBank in neighbouring territories Penetrate corporate markets through our partners Funding secured (RMB) Deal flow $35m • Zambia • Zambia • Nigeria • Angola • Angola • Zambia • Kenya • Gabon
Slide 158: Slide 158
Slide 159: OUTsurance OUTperforms
OUTsurance OUTperforms Growth in headline earnings of 46% to R297 million Continued strong organic growth BUSINESS gained good traction was successfully launched ESSENTIAL Still significant market share to be gained in SA
Slide 160: Momentum
omentum
Slide 161: Strong organic growth
Strong organic growth New recurring premium business +21% Linked product inflows +65% Single premium endowments +18% Strong market growth Business mix improved profit margin from 17.3% to 18.7%
Slide 162: Positive gearing on earnings
Positive gearing on earnings Strong stock market growth Retail new business +25% Positive gearing Expenses +5% Effective expense control
Slide 163: Consolidation – a core competency
Consolidation – a core competency Sage Cost per policy -10% Revenue +10% Increase in recurring new business due to agents +15% Advantage Assets under management +225% Operational costs as % of AUM -15% Sovereign and ALH Principal members +240 000
Slide 164: Value for money
Value for money Past legacies Future solutions Innovation
Slide 165: Past legacies
Past legacies Historically RA penetration modest New age products increased our market share Launched Investo in 2000
Slide 166: Future solutions
Future solutions The right new age products Switching legacy customers to Investo range Latest innovation: Save Thru Spend As and when commission ensures sustainability Situation on RA’s is still fluid
Slide 167: Growth themes
Growth themes Middle market JV with FNB Consolidation in healthcare market Short term insurance offering Turnaround of investment in start-up operations
Slide 168: Momentum and FNB go for middle market
Momentum and FNB go for middle market Product skills Distribution Middle market
Slide 169: Fragmented health market
Fragmented health market No. of % of total schemes beneficiaries >200 000 4 40% beneficiaries Between 100 000 and 12 27% 200 000 beneficiaries <100 000 120 33% beneficiaries Total 136 100%
Slide 170: Turnaround in start-ups
Turnaround in start-ups 2005 Investment International R59m Funds at Work R11m Health initiative R9m Multiply R12m Other R5m ______ Total R96m Break-even budgeted for 2006
Slide 171: Future focus
Future focus Strong top line growth Provide value for money • Continued innovation required • Good cost control • Consolidation and integration skills Prepared to confront issues
Slide 172: Looking forward
Looking forward
Slide 173: Looking forward
Looking forward International Challenges Cyclical vs structural Conclusion
Slide 174: Our international end game
Our international end game Cannot replicate FirstRand internationally Key principles apply • JVs • Brand and distribution • Long time horizon Driven at business unit level – working reasonably well, but… Centre needs to play a more active role Emerging markets remain attractive
Slide 175: Africa opportunistic entry strategy
Africa opportunistic entry strategy Conventional where appropriate Unconventional wherever possible • Celpay • AIFH
Slide 176: FNB Africa – getting more focus
FNB Africa – getting more focus Satisfactory results +16% PBT Performance can be improved through better alignment with FNB Appointment of Africa and EM CEO will fast track this
Slide 177: Looking forward
Looking forward International Challenges Cyclical vs structural Conclusion
Slide 178: There are significant challenges
There are significant challenges Consumerism • Onslaught on insurance companies • Bank charges • Provide value for money Bad debt improvement “as good as it gets” Overseas competition – “bar has been lifted” Regulatory and compliance costs Greater efficiency required
Slide 179: Looking forward
Looking forward International Challenges Cyclical vs structural Conclusion
Slide 180: How long will the party last? Cyclical vs structural
How long will the party last? Cyclical vs structural
Slide 181: Looking forward
Looking forward International Challenges Cyclical vs structural Conclusion
Slide 182: We’re in good shape
We’re in good shape Group’s well diversified earnings base Robust economy will provide good natural growth Achieving good market share gains Continue to invest for the future Focus on value for money through innovation and cost control Pursue international – patience and discipline requi
Slide 183: Financial services: audited results for year ended 30 June 2005
financial services X (2) FIRSTRAND audited results for the year ended 30 June ‘05