FirstRand Limited · JSE:FSR
FirstRand — Merger or Acquisition (November 2017)
14 slides from FirstRand's merger presentation, Nov 6, 2017
Slide 1: Proposed Aldermore acquisition
Proposed Aldermore acquisition Investor presentation, 6 November 2017
Slide 2: Group strategic framework
2 Group strategic framework FirstRand’s aims to create long-term franchise value, ensure sustainable and superior returns for shareholders within acceptable levels of volatility and maintain balance sheet strength DELIVERED THROUGH CURRENT STRATEGIES: INCREASE DIVERSIFICATION – ACTIVITY AND GEOGRAPH
Slide 3: UK – building blocks for a sustainable business
3 UK – building blocks for a sustainable business • MotoNovo currently undiversified from a product and market perspective • Meaningful market share in financing second hand vehicles • Organically building more diversified product set (personal loans and insurance) • Acquisition of Aldermore would a
Slide 4: More appropriate hard-currency funding for FirstRand
4 More appropriate hard-currency funding for FirstRand Capacity limited to 10% Will become available to of domestic balance SA and rest of Africa sheet – substantial CCIB client franchises portion used and transactions to fund MNF SA sovereign rating is Resultant funding costs sub-investment grade u
Slide 5: Exercised discipline
5 Exercised discipline • Must not impact ability to maintain communicated dividend strategy • Capital position post transaction remains robust • CET 1 ratio > 11% • Maintain counterparty status • Manageable goodwill impact • No material impact on ROE • Stress analysis outcome must be acceptable
Slide 6: What does Aldermore bring to FirstRand?
6 What does Aldermore bring to FirstRand? A positive next step in strategy to build a more diversified, sustainable UK franchise Specialist lender with diversified lending Well-regarded client book to retail and SME customers deposit franchise 2% 5% 19% Residential mortgages 21% Buy-to-let 25% Retai
Slide 7: Why is it attractive to FirstRand?
7 Why is it attractive to FirstRand? • Highly regarded management team • Owner-manager CEO running the business • Brings UK banking licence • Operationally well structured • Deposit franchise that is easily scalable • Profitable business with good returns • Scope for FirstRand to add value
Slide 8: How will FirstRand add value?
8 How will FirstRand add value? SHORT TERM: • Significant value can be unlocked through MANAGEMENT OF FINANCIAL RESOURCES FRM strategies • Align to performance management framework, introduce NIACC • Funds transfer pricing Return • Align to risk/reward framework to optimise balance sheet and asset m
Slide 9: What the group’s portfolio will look like
9 What the group’s portfolio will look like LISTED HOLDING COMPANY (FIRSTRAND LIMITED, JSE: FSR) Retail and commercial Corporate and Instalment finance Asset management UK banking business Group-wide functions banking, insurance investment banking
Slide 10: Aldermore will operate within all group frameworks and governance structures
10 Aldermore will operate within all group frameworks and governance structures STRATEGIC FRAMEWORK Execution through operating franchises PERFORMANCE MANAGEMENT FRAMEWORK FIRSTRAND STRATCO RISK MANAGEMENT FRAMEWORK FINANCIAL RESOURCE MANAGEMENT FRAMEWORK CULTURE AND VALUES
Slide 11: Pro forma impact on FirstRand
11 Pro forma impact on FirstRand • Assumptions • Acquisition completed on 1 July 2016 for purposes of calculating normalised earnings and normalised earnings per share • Acquisition completed on 30 June 2017 for the purposes of calculation net asset value, net asset value per share, tangible net ass
Slide 12: Funding of investment
12 FUNDING OF INVESTMENT
Slide 13: Funding principles and philosophy
13 Funding principles and philosophy The group has enough internal cash resources to make the acquisition • Excess liquidity in terms of regulations • Excess CET1 of R19 billion FirstRand principles provided a conservative overlay: • Goodwill backed by CET1 • NAV backed with excess liquidity • Ensur
Slide 14: CEO quote on the Aldermore offer
14 “In making this offer, FirstRand carefully considered how current and potential macroeconomic future scenarios in the UK could impact the broader business. We are very comfortable that the financial impact of this transaction is supportive of FirstRand's previous guidance to shareholders on growt