Firstrand Limited · JSE:FSR
Firstrand — Debt Investor Presentation (September 2014)
61 slides from Firstrand's debt investor presentation, Sep 9, 2014
Slide 1: Turbo Finance 5 Investor Presentation
Turbo Finance 5 Investor Presentation 9th September 2014 This Presentation does not represent an offer for sale or subscription of any notes. Please read the Important Information attached to this Presentation, and ensure that the Preliminary Prospectus dated 8th September 2014 (and the Risk Factors
Slide 2: Important Information
2 Important Information The attached presentation is a summary of certain proposed terms of an offering of asset backed securities as currently contemplated and has been prepared solely for information purposes and does not purport to be a complete description of all material terms or of the terms (
Slide 3: Purpose and disclaimer
3 Purpose and disclaimer This presentation is being provided to you for information purposes only and on the basis of your acceptance of this disclaimer. This presentation does not constitute an offering document. The information presented herein is an advertisement and does not comprise a prospectu
Slide 4: Purpose and disclaimer, cont.
4 Purpose and disclaimer, cont. Losses to investments may occur due to a variety of factors. Before purchasing any Securities you should take steps to ensure that you understand and have made an independent assessment of the suitability and appropriateness thereof, and the nature and extent of your
Slide 5: Table of Contents
5 Table of Contents • Executive Summary 6 • Transaction Structure and Features 8 • MotoNovo Finance 19 • History, Organisational Structure and Management 19 • Strategy & Market Proposition 22 • Update on 2013/2014 24 • Origination and Underwriting 30 • Servicing and Collections 39 • Transaction Time
Slide 6: Executive Summary
6 Executive Summary • Following on from the successful issuance of four previous Turbo Finance transactions, MotoNovo Finance (“MotoNovo”) is pleased to present its 5th securitisation of prime performing UK auto loan Receivables, Turbo Finance 5 plc (“Turbo 5”): • Sterling denominated pool of primar
Slide 7: Table of Contents
7 Table of Contents • Executive Summary 6 • Transaction Structure and Features 8 • MotoNovo Finance 19 • History, Organisational Structure and Management 19 • Strategy & Market Proposition 22 • Update on 2013/2014 24 • Origination and Underwriting 30 • Servicing and Collections 39 • Transaction Time
Slide 8: Key Transaction Features
8 Key Transaction Features • UK retail auto loan portfolio originated and serviced by MotoNovo • Granular Provisional Portfolio with average auto loan size of £6,364 • Used cars 93.81% / New cars 6.19% Portfolio1 • Individual 94.64% / Company 5.36% • 100% fixed rate auto loans • 2.04% of the portfol
Slide 9: Key Transaction Counterparties
9 Key Transaction Counterparties Servicer Cash Manager Swap Counterparty Account Bank FirstRand Bank BNP Paribas HSBC Bank plc BNP Paribas (MotoNovo) Securities Services Principal Sale of and Originator / Portfolio Issuer interest Seller Turbo Finance Noteholders FirstRand Bank Initial 5 plc Purchas
Slide 10: Revolving Period
10 Revolving Period • The Revolving Period will commence on the Closing Date and ends on the earlier of: • The Payment Date following the Additional Cut-Off Date in [October 2015] • The day on which an Amortisation Event has occurred • No principal will be paid on the Notes during the Revolving Peri
Slide 11: Structural Features
11 Structural Features Capital structure Cash Reserve Account • The Cash Reserve Account will be fully funded at closing from the proceeds of the Assets Liabilities1 sale of the Class D notes to FirstRand Group • The Cash Reserve Account will be required to be funded up to the Specified Cash Reserve
Slide 12: Priority of payments
12 Priority of payments Pre-Enforcement Order of Priority Post-Enforcement Order of Priority Senior Expenses Senior Expenses* Payments to the Swap Counterparty Payments to the Swap Counterparty Interest on Class A Notes Interest and Principal on Class A Notes Interest on Class B Notes Payments to th
Slide 13: Estimated WAL and amortisation profile
13 Estimated WAL and amortisation profile Key assumptions for estimated weighted average life: Class A & Class B Estimated Amortisation profile: 450 100% • The portfolio is subject to a constant annual rate of prepayment 400 90% • The portfolio sold to the Issuer is [£391.7m] 350 80% • The Notes are
Slide 14: Comparison of Turbo Finance transactions
14 Comparison of Turbo Finance transactions Turbo Finance 5 Turbo Finance 4 Turbo Finance 3 Revolving / Static Structure 12 month Revolving Period2 12 month Revolving Period2 Static Class A: 12.8% Class A: 13.3% Class A: 18.1% Note Credit Enhancement1 Class B: 3.8% Class B: 4.3% Class B: 9.6% Excess
Slide 15: Portfolio Summary: Turbo Finance collateral comparison
15 Portfolio Summary: Turbo Finance collateral comparison Turbo Finance 5 Turbo Finance 4 Plc3 Turbo Finance 3 Plc3 Turbo Finance 2 Plc3 Turbo Finance Plc3 Provisional Portfolio1,2 Pricing Date Sep-14 Nov-13 Nov-12 Mar-12 Feb -11 Jurisdiction UK UK UK UK UK Rating Agencies Fitch/Moody’s Fitch/Moody’
Slide 16: Provisional portfolio snapshot (as at 30th June 2014)
16 Provisional portfolio snapshot (as at 30th June 2014) Summary Pool Information 30th June 2014 Borrower Type New/Used Type of Receivable Auto Loans 5.36% 6.19% Outstanding Balance 391,701,211 Number of Receivables 61,548 Weighted Average Current Balance 6,364 Individual Used Weighted Average Effec
Slide 17: Provisional portfolio snapshot (as at 30th June 2014)
17 Provisional portfolio snapshot (as at 30th June 2014) Top 10 Manufacturers Outstanding Principal Outstanding Manufacturer Number of Contracts Number of Contracts (%) Balance (£) Principal Balance (%) VAUXHALL 60 363 891 15.41% 10 997 17.87% FORD 53 081 885 13.55% 9 348 15.19% BMW 38 410 231 9.81%
Slide 18: Table of Contents
18 Table of Contents • Executive Summary 6 • Transaction Structure and Features 8 • MotoNovo Finance 19 • History, Organisational Structure and Management 19 • Strategy & Market Proposition 22 • Update on 2013/2014 24 • Origination and Underwriting 30 • Servicing and Collections 39 • Transaction Tim
Slide 19: MotoNovo Finance history and description
19 MotoNovo Finance history and description • The business was founded in the mid 1970s by Sir Julian Hodge • During the 1980s the business became a division of Julian Hodge Bank Ltd under whose parentage it remained until it was acquired by FirstRand Bank Ltd in July 2006 • From a small regional pl
Slide 20: MotoNovo Organisational Structure & Headcount
20 MotoNovo Organisational Structure & Headcount MotoNovo Finance CEO (Total 3081) Chief Financial Head of Dealer Head of Sales & Head of Customer Head of IT Head of HR Officer Operations Marketing Operations Business Acquisitions Customer Services Dealer Direct (7) IT Department (17) HR Department
Slide 21: MotoNovo Management Team
21 MotoNovo Management Team Mark Standish, CEO Mark has worked within the auto loan industry for 27 years, operating at senior levels within Carlyle Finance, Julian Hodge Bank, Wagon Finance and Capital Bank before joining MotoNovo in November 1999. Aged 47, Mark is the longest serving Head of an in
Slide 22: MotoNovo's market proposition
22 MotoNovo’s market proposition • Historically, MotoNovo had focused on the needs of small to medium sized independent used car and LCV dealers • Thanks to the investment of FRB, particularly in the area of point of sale showroom technology and automated credit scoring techniques, the MotoNovo prop
Slide 23: Key Performance
23 Industry performance benchmarks 12 Months ending Dec 2013 3 months to March 2014 Independent Captive Independent Captive FLA Benchmarks MotoNovo (Rank) MotoNovo (Rank)1 Average Average Average Average Cost of money 2.20% (4/5) 1.89% 2.23% 2.11% (5/6) 1.58% 1.93% Interest Margin 4.85% (2/5) 5.30%
Slide 24: Key business developments in 2013 / 2014
24 Key business developments in 2013 / 2014 • In February 2013, MotoNovo launched a motorcycle HP product, and by June 2014 had captured c. 10% of the independent lenders available market. NB these loans will not form part of the Turbo 5 transaction • MotoClick, an integrated on-line, point of sale
Slide 25: Progress in 2013/14
25 Progress in 2013/14 • MotoNovo has continued to make good progress throughout 2013/2014 • The resurgence of the UK POS Motor Finance industry that began following the Banking Crisis in 2008 has shown no sign of tailing off with the sector continuing to perform well in comparison with other forms
Slide 26: Financial performance
26 Financial performance MotoNovo Finance (GBP’000) FY 2013/2014 FY 2012/2013 FY 2011/2012 FY 2010/2011 FY 2009/2010 Advances - Motor 1 037 412 806 980 652 612 486 038 342 966 Advances - Business Finance 0 0 0 2 349 8 856 TOTAL AVERAGE ASSETS 1 037 412 806 980 648 649 488 387 351 822 Growth in Motor
Slide 27: Origination performance
27 Origination performance New Business Volumes (GBP’000) New Business Margin 100 000 5.50% 90 000 80 000 5.00% 70 000 60 000 4.50% 50 000 40 000 4.00% 30 000 20 000 3.50% 10 000 0 3.00% JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN 2010-11 2011-12 2
Slide 28: Asset book performance trends
0.00% 0.01% 0.02% 0.03% 0.04% 0.05% 0.06% 0.07% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% Jul-08 Jul-08 Aug-08 Oct-08 Sep-08 Oct-08 Jan-09 Nov-08 Apr-09 Dec-08 Jan-09 Jul-09 Feb-09 Oct-09 Mar-09 Jan-10 Apr-09 May-09 Apr-10 2+ Instalments Down % Jun-09 Jul-10 Jul-09 Oct-10 Aug-09 Sep-09 J
Slide 29: Table of Contents
29 Table of Contents • Executive Summary 6 • Transaction Structure and Features 8 • MotoNovo Finance 19 • History, Organisational Structure and Management 19 • Strategy & Market Proposition 22 • Update on 2013/2014 24 • Origination and Underwriting 30 • Servicing and Collections 39 • Transaction Tim
Slide 30: Origination, underwriting, servicing and collections
30 Origination, underwriting, servicing and collections • All loans are originated through some 1,800 dealers (85% of volume) and 20 brokers (15% of volume) across the UK • An updated credit scorecard was successfully introduced in March 2012 • Additional fraud prevention systems through CallCredit
Slide 31: Dealer & Broker Selection
31 Dealer & Broker Selection • Setup • Regional Management approval for the application • Detailed financial review including searches of companies and directors • 10 point evaluation of dealer quality • Remuneration • Principles follow industry standards with commission and volume bonus structures
Slide 32: Loan documentation
32 Loan documentation • Components of loan application package: • The POS and integration with dealers’ own systems allows the electronic submission of data • Details provided electronically such as the post code and vehicle information are verified against Equifax, CarWeb and Glass’s Guide respecti
Slide 33: The underwriting process
33 The underwriting process Data collection and input Internal rating scoring Asset valuation • Data collection and input • Internal rating scoring • Asset valuation • 95% electronically, 5% via fax • Demographic assessment of • Valuation checked against submission customer’s credit worthiness Glass
Slide 34: The underwriting process (cont.)
34 The underwriting process (cont.) • Timescales in minutes (average over the three months from April to June 2014) • Time to underwrite referred electronic proposal: approx. 12 minutes (zero load time) • When an agreement is confirmed it takes approx. 19 minutes to pay out by BACS or Faster Payment
Slide 35: Overview of the scoring system
35 Overview of the scoring system • Each borrower is separately credit-scored • An automated “good bad” ranking credit scorecard has been developed in conjunction with 20:20 Jaywing and is used to assess all consumer business. Feeding into the card is all application data plus credit bureau search r
Slide 36: The Credit Scorecard
36 The Credit Scorecard Scorecard Development Process The Scoring Process Phase 1 Step 1: Extract application data Step 1: Application scorecard Data Extract • Example of variables analysed: Step 2: Extract performance data • Customer demographic information e.g. Marital status, Residential Step 3:
Slide 37: Fraud Prevention
37 Fraud Prevention • MotoNovo is a member of the Credit Industry Fraud Avoidance Scheme (CIFAS). We report all attempted frauds to add to the database and are allowed access to this database which also forms a standard part of our Equifax search • CallValidate and CallCredit Ownership Fraud alerts
Slide 38: Table of Contents
38 Table of Contents • Executive Summary 6 • Transaction Structure and Features 8 • MotoNovo Finance 19 • History, Organisational Structure and Management 19 • Strategy & Market Proposition 22 • Update on 2013/2014 24 • Origination and Underwriting 30 • Servicing and Collections 39 • Transaction Tim
Slide 39: Servicing overview
39 Servicing overview • Customers receive a welcome call which allows validation of client information (contact information, payment data, etc.) and the opportunity to sell ancillary insurance products and promote ancillary services such as self-service and discount shopping • While a loan is perfor
Slide 40: Arrears management
40 Arrears management • Collections activities are handled by a dedicated collections team based in Cardiff supported by outsourced arrangements with Bluestone Credit Management (BCM), Credit Style (CS) and DWF Solicitors (DWF) • At a high level the MotoNovo team focus on those accounts that are 1 t
Slide 41: Arrears management process
41 Arrears management process • Payment Missed / Direct Debit bounces Day 0 • Text message sent automatically to the borrower from returned Direct Debit file Day 1 • Payment overdue Day 3 • First reminder letter is sent Day 2 - 7 • Placed through externally outsourced supplier for telephone dialler
Slide 42: Collections Process
42 Collections Process • We utilise a combination of recovery agents to ensure that geographically we have national coverage throughout the UK mainland • Agents go through a rigorous selection process in terms of compliance and commerciality • Through strict Service Level Agreements we ensure that a
Slide 43: Late Stage Delinquencies: Outsourced Arrangements
43 Late Stage Delinquencies: Outsourced Arrangements • Bluestone Credit Management (“BCM”) is the market leader in auto loan collections and is utilised by competitors such as Santander and Blackhorse • BCM undertake intensive telephone activity (maximum 7 days) • If contact is made, a scheduled app
Slide 44: Table of Contents
44 Table of Contents • Executive Summary 6 • Transaction Structure and Features 8 • MotoNovo Finance 19 • History, Organisational Structure and Management 19 • Strategy & Market Proposition 22 • Update on 2013/2014 24 • Origination and Underwriting 30 • Servicing and Collections 39 • Transaction Tim
Slide 45: Transaction Timeline
45 Transaction Timeline • Road Show [10th – 11th] September 2014 • Launch / Pricing [] September 2014 • Settlement [] September 2014 This document may not be distributed in the United States or to US persons, as defined in Regulation S of the U.S. Securities Act of 1933, as amended, or in Canada
Slide 46: Contacts
46 Contacts MotoNovo Finance FirstRand Bank (London Branch) FirstRand Bank (Treasury) Mark Standish Derek Coetzee Gill Raine (Chief Executive Officer) (Treasurer) (Funding and Liquidity) T +44 (0)292 039 3605 T +44 (0)20 7939 1780 T +27 (0)11 282 8124 mark.standish@motonovofinance.com derek.coetzee@
Slide 47: Table of Contents
47 Table of Contents • Executive Summary 6 • Transaction Structure and Features 8 • MotoNovo Finance 19 • History, Organisational Structure and Management 19 • Strategy & Market Proposition 22 • Update on 2013/2014 24 • Origination and Underwriting 30 • Servicing and Collections 39 • Transaction Tim
Slide 48: Summary of key historical performance
48 Summary of key historical performance Static Cumulative Default Rates (all vehicles) 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20 Q21 Q22 Q23 Q24 Q25 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 2005 Q1 2005 Q2 2005 Q3 2005 Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007
Slide 49: Recoveries as % of principal amount
49 Summary of key historical performance (MNF Pool) Dynamic Delinquancies1 Dynamic Recoveries 4.0 80% Total principal amount of loans defaulted 3.50% Recoveries as % of principal amount 3.5 70% 3.00% 3.0 60% 2.50% 2.5 50% (GBP’m) 2.00% 2.0 40% 1.50% 1.5 30% 1.00% 1.0 20% 0.50% 0.5 10% 0.00% 0.0 0% 1
Slide 50: Voluntary terminations
50 Voluntary terminations VT Experience (MotoNovo Finance vs. Industry) MotoNovo VT Losses as % of Average Balances £3 000 0.35% 0.06% 0.30% £2 500 0.05% 0.25% £2 000 0.04% 0.20% £1 500 0.03% 0.15% £1 000 0.02% 0.10% £500 0.01% 0.05% £0 0.00% 0.00% 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 201
Slide 51: Turbo Finance 2 plc: Early Redeemed
51 Turbo Finance 2 plc: Early Redeemed • Turbo Finance 2 was early redeemed on 22nd August 2014 Delinquency trends following the redemption of the Class A tranche in July 2014 1.00% 30-60 days 60-90 days 90+ days • CPR at maturity was 32.08%, averaging 27.47% over the 0.90% duration of the transacti
Slide 52: Turbo Finance 3 plc: Performance update
52 Turbo Finance 3 plc: Performance update • Turbo 3 has performed well with a cumulative net loss of Delinquency trends 0.52% at the end of July 2014 0.60% 30-60 days 60-90 days 90+ days • CPR currently stands at 27.95%, lower in comparison to Turbo 0.50% 2 at the same stage. Average CPR to date is
Slide 53: Turbo Finance 4 plc: Performance update
53 Turbo Finance 4 plc: Performance update • Turbo 4 has performed well since closing in October 2013 with Delinquency trends cumulative net losses at 0.22% as at the end of July 2014 0.50% 30-60 days 60-90 days 90+ days • CPR is currently lower at 21.01% compared to the previous Turbo transactions.
Slide 54: Table of Contents
54 Table of Contents • Executive Summary 6 • Transaction Structure and Features 8 • MotoNovo Finance 19 • History, Organisational Structure and Management 19 • Strategy & Market Proposition 22 • Update on 2013/2014 24 • Origination and Underwriting 30 • Servicing and Collections 39 • Transaction Tim
Slide 55: UK motor finance industry
55 UK motor finance industry • New and used car financing grew strongly through 2014 buoyed by improving economic conditions, returning consumer confidence and healthy levels of vehicle sales, particularly in the new car market. The growth has been accompanied by good lending margins, robust arrears
Slide 56: UK motor finance industry (cont'd)
56 UK motor finance industry (cont’d) • UK Consumer Motor New Business Origination Rolling 12 months Period Hire Purchase Personal Contract Purchase Personal Loans Total Total % Growth New cars to June 2013/2014 (As at April 2014) 2,921m 9,142m 234m 12,297m 26.00% 2012/2013 2,714m 7,204m 295m 10,213
Slide 57: Market size and split for 2014
57 Market size and split for 2014 New Business (Retail) Captives (Prior Year) Independents (Prior Year) Total (Prior Year) MotoNovo (Market Share) New Cars £11.8bn (£9.3bn) £1.5bn (£1.2bn) £13.3bn (£10.5bn) £0.03bn (1.7%) Used Cars £4.2bn (£3.4bn) £3.9bn (£3.3bn) £8.1bn (£6.7bn) £0.49bn (12.3%) LCV
Slide 58: Table of Contents
58 Table of Contents • Executive Summary 6 • Transaction Structure and Features 8 • MotoNovo Finance 19 • History, Organisational Structure and Management 19 • Strategy & Market Proposition 22 • Update on 2013/2014 24 • Origination and Underwriting 30 • Servicing and Collections 39 • Transaction Tim
Slide 59: About FirstRand and FirstRand Bank
59 About FirstRand and FirstRand Bank Bloomberg ticker: FSR:SJ • FirstRand Bank Limited (“FRB” or the “Bank”) is a wholly owned subsidiary of FirstRand Limited (“FirstRand”, together with its subsidiaries, the “Group”). The Bank provides a comprehensive range of retail, commercial, corporate and inv
Slide 60: FirstRand Bank is one of South Africa's "Big 4" banks
60 FirstRand Bank is one of South Africa’s “Big 4” banks Assets (R’bn) Gross advances (R’bn) Instalment debtors (R’bn) 4 022 238 3 172 810 94 836 1 017 665 67 801 626 46 688 28 585 Industry FRB ABSA NED SBK Industry FRB ABSA NED SBK Industry FRB ABSA NED SBK Deposits (R’bn) Core equity Tier 1 - Dec
Slide 61: Portfolio of operating franchises
61 Portfolio of operating franchises Listed holding company (FirstRand Limited, JSE: FSR) Group-wide Retail and commercial bank Corporate and investment bank Instalment finance Investment management functions • FirstRand Bank Limited operates in the UK as a registered overseas company and carries on
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