Firstrand Limited · JSE:FSR
Firstrand — Aldermore Bank — Debt Investor Presentation (April 2023)
44 slides from Firstrand's debt investor presentation, April 2023
Slide 1: Aldermore Bank Investor Roadshow
Aldermore Bank Investor Roadshow April 2023 Information Classification: Confidential
Slide 2: Disclaimer
Disclaimer NOT FOR DISTRIBUTION IN OR INTO THE UNITED STATES OR TO ANY U.S. PERSON IMPORTANT: You must read the following before continuing. The following applies to the materials contained in this presentation. You must read this disclaimer carefully before reading, accessing or making any other us
Slide 3: Disclaimer
Disclaimer THIS PRESENTATION DOES NOT CONSTITUTE FINANCIAL, LEGAL, TAX, ACCOUNTING, INVESTMENT OR OTHER ADVICE. This document is for information purposes only, and does not take account of the specific circumstances of any recipient. This presentation does not constitute an offer to sell or the soli
Slide 4: Contents
Contents 1. Company Overview 5 2. Mortgage Overview 12 3. Origination and Underwriting 21 4. Servicing and Collections 28 5. Funding 33 6. Appendices 36 4 Information Classification: Confidential
Slide 5: Company Overview
Company Overview 5 Information Classification: Confidential
Slide 6: Our Blueprint and Purpose
Our Blueprint and Purpose Our Purpose • Aldermore’s purpose guides everything we do and extends beyond just the products and services we offer • Our aim is to seek out more undervalued and underserved people and do good by helping them take the action needed to move forward in life, ensuring we meet
Slide 7: Successful Story of Organic and Inorganic Growth
Successful Story of Organic and Inorganic Growth Jul 2009 Nov 2009 Jun 2012 Retail deposits Absolute Invoice SME business launched Finance acquired deposits launched May 2009 Founded by CEO Philip Monks with backing from AnaCap Financial Partners LTD May 2009 Oct 2009 Apr 2010 April 2014 Acquisition
Slide 8: Highly Diversified Portfolio and Established Position in the UK Market
Highly Diversified Portfolio and Established Position in the UK Market £14.7 bn Structured & Property Owner Occupied (16%) Specialist Finance • Profitably growing in existing segments and • Offer distinctive, specialist lending. new sub-segments e.g. sustainable Property property financing. • Build
Slide 9: ESG and Sustainability Approach
ESG and Sustainability Approach • The Group’s approach to ESG and Sustainability is • Sustainability was recognised as an strategic • For more information on our ESG & Sustainability aligned to our corporate strategy and supports our imperative in Autumn 2022 and in December, we activities and our p
Slide 10: Financial Highlights for Financial Year 2022
Financial Highlights for Financial Year 2022 Profit Before Tax Pre-provision Operating Profit Net Interest Margin £204.7m £262.1m 3.8% Cost-to-Income ratio1 Return On Equity CET 1 Ratio2 54% 12.5% 14.0% Cost of Risk Net Lending Customer Deposits 0.41% £14.7bn £14.1bn Source: Aldermore Group PLC Fina
Slide 11: Track Record Of Sustainable Profitable Growth and Financial Position
Track Record Of Sustainable Profitable Growth and Financial Position Net loans (£bn) Profit before tax (£m) Strategically pulled back from the market due to market 205 16 15 uncertainty regarding COVID 13 158 12 11 134 112 49 2019A 2020A 2021A 2022A 2023H 2019A 2020A 2021A 2022A 2023H (6 months to D
Slide 12: Mortgage Overview
Mortgage Overview Aldermere
Slide 13: Prime Retail Mortgage Business
Prime Retail Mortgage Business c. 43,000 mortgage Work with >17,000 Net Promoter Score 2/3 of customers stay with us registered brokers >50% for customers after product maturity, with most customers and £7.7bn taking a new loyalty product balance evidencing strong service We are… Our customers are…
Slide 14: Simple Mortgage Products that Meet the Needs of Borrowers
Simple Mortgage Products that Meet the Needs of Borrowers Residential Mortgage Balance Composition (Dec 22) Mortgage Products Owner Occupied Buy to Let Standard OO 19% 28% High LTV OO Help to Buy 9% Standard Mortgage Range Residential Buy to Let 3% Other OO (<=80% LTV) 0% Retail BTL Standard Prime O
Slide 15: Owner-Occupied Market Comparison
Market Comparison • Following uncertainty around the macro environment in 2020/21 Aldermore tightened lending standards. The conservative growth in new originations was more than off-set by very strong traction with our retention offering. • A revamped proposition was re-launched in the latter half
Slide 16: Prime Customer Base
Prime Customer Base Owner Buy to Let Occupied Average age 38 54 Average loan size (£’000s) 195 249 Weighted average Original LTV 74.6% 71.1% First-time buyer (OO) / First-time landlord (BTL) 41% 1% (by balance) Self-employed (by balance) 35% 64% Adverse credit1 in last 16% 1% 3 years (by balance) Po
Slide 17: Risk-Based Pricing
Risk-Based Pricing • We segment and cascade our range of owner-occupied mortgages to effectively price the risk associated with each level – Level 1 is highest credit quality. • Applicants are cascaded to the highest priced tier if they trip any one of the criteria • Level 1 is the overwhelming majo
Slide 18: Strong Distribution Network of more than 10,000 FCA Registered Brokers
Strong Distribution Network of more than 10,000 FCA Registered Brokers Broker administration and monitoring Mortgage distribution1 • Online registration process via secured Aldermore Mortgages web portal – Broker FCA number essential to access. • We use our “Grow, Acquire, Maintain” model – using da
Slide 19: Leading Retention Proposition
Leading Retention Proposition We have a leading retention proposition spanning products, sales, and tech-enabled service and outperform most other specialists on retention, driving financial and credit risk benefits. • Online switching – Self-service portals for customers and brokers to quickly Borr
Slide 20: Our Approach to Cost-Of-Living Pressures
Our Approach to Cost-Of-Living Pressures We are taking a prudent and proactive approach to cost-of-living pressures, striving to achieve a balance of credit and conduct risk mitigation Originations Back-Book Management Risk Appetite • We have a sophisticated and controlled Several actions to support
Slide 21: Origination and Underwriting
Origination and Underwriting 21 Information Classification: Confidential
Slide 22: Lending Criteria - Loan
Lending Criteria - Loan LOAN Loan criteria ▪ Changes to Lending Policy approved by Chief Credit Officer (CCO) as OWNER OCCUPIED BUY TO LET Accountable Executive Purchase or re-mortgage of residential Purchase or re-mortgage of residential ▪ Changes to Lending Standards approved by Head of Credit Ris
Slide 23: Lending Criteria – Applicants and Affordability
Lending Criteria – Applicants and Affordability APPLICANT AFFORDABILITY OWNER OCCUPIED BUY TO LET OWNER OCCUPIED Residential BTL Portal – 2 Applicants • Aldermore uses an affordability calculation to assess the maximum available loan Specialist BTL Portal – Up to 6 Applicants using the income and ex
Slide 24: Tightening of Underwriting Criteria
Tightening of Underwriting Criteria Timeline of Risk Changes – Residential Mortgages • There were a number of changes made since June 2021 to tighten underwriting criteria, the majority of which were a result of the enhanced <570 App Score Cut HTB Cascade Tightened approach to risk appetite and port
Slide 25: Robust Underwriting Framework
Robust Underwriting Framework 1 Clear products, credit policies and procedures • Clearly defined credit criteria and product terms • Underwriting processes designed to ensure Robust underwriting approach 2 consistency of approach and decision • Traditional approach to assessing creditworthiness • St
Slide 26: Experienced Underwriting Team
Experienced Underwriting Team 3 Underwriters Levels 46 FTE underwriters Senior Manager “Whole Case” Review £1m Multi-Skilled Mandated underwriter Average Experience Team Managers 6yrs £600k from application to offer £300k • All underwriting undertaken in Aldermore offices - no devolved authority gra
Slide 27: Closely Managed and Monitored Underwriting Process
Closely Managed and Monitored Underwriting Process ▪ Underwriters are closely trained, managed and monitored through a robust T&C Framework, and Summary of monitoring process Quality Control Framework. Area Description of monitoring undertaken Quantity Frequency ▪ Independent assurance over decision
Slide 28: Servicing and Collections
Servicing and Collections 28 Information Classification: Confidential
Slide 29: Mortgage Servicing Team
Mortgage Servicing Team ▪ The Customer Service team is the front line support to all Ben Taylor our customers who have an existing account. Supporting Chief Customer Experience Officer customers throughout the life cycle of their mortgage from completion up until account closures. ▪ The teams are st
Slide 30: Collections Capacity and Competency
Collections Capacity and Competency Post COVID % of Forbearance arrangements adhered to post 3 months % of fair customer outcome scores ▪ Collections is based across 2 sites (Manchester Measuring effective arrangements strategy Measuring Fair Customer Outcomes1 & Peterborough) with a significant upl
Slide 31: Dedicated In-house Collections and Recoveries Team
Dedicated In-house Collections and Recoveries Team Collections Strategy Day 1 Day 2-40 Day 41-46 Day 50+ Day 70-81 Minimum Optimal Maximum • Start of • Pre-Visit • Field Agent • Letter 2 8 12 Letter collections Visit • Pre-Litigation process • Telephone Notice 1 1 1 (x1) • Collection • Telephone con
Slide 32: Oak Historical Performance
Oak Historical Performance Monthly CPR - Annualised 100% 90% 80% 70% 60% 50% • No repossessions or losses on all Oak deals 40% since closing 30% 20% 10% 0% Oak 3 Arrears Quarterly Excess Spread - Annualised 6.0% 4.0% 3.5% 5.0% 3.0% 4.0% 2.5% 3.0% 2.0% 2.0% 1.5% 1.0% 1.0% 0.5% 0.0% 0.0% Oak 3 Oak 3 -
Slide 33: Funding
Funding 33 Information Classification: Confidential
Slide 34: Diversified Funding Base
Diversified Funding Base Securitisations £16.8 bn Deposit funding Oak No. 1 April 2014 ▪ Predominantly customer deposit led funding model, £372m complemented by wholesale funding. Redeemed: May 2019 ▪ Award winning franchise across the Savings business. ▪ Growing Corporate Deposit book. Oak No. 2 Se
Slide 35: Comparing Key Characteristics from RMBS Transactions
Comparing Key Characteristics from RMBS Transactions Elvet RMBS Oak RMBS Oak 3 Oak 2 EMI 2023-1 Brass 11 Brass 10 2021-1 CMF 2020-1 Darrowby No.5 Originator Aldermore Aldermore Coventry BS Yorkshire BS Yorkshire BS Atom Bank CCFS Skipton BS Structure Standalone Standalone Master Issuer Standalone St
Slide 36: Appendices
Appendices 36 Information Classification: Confidential
Slide 37: Experienced Leadership Team
Experienced Leadership Team 30+ years of banking experience Former CFO at TSB for 5 years and Finance Director at Executive Directors predominantly at Barclays with the Bank of England from experience in retail and business banking, payments, digital, data 2013 to 2016. Has over 17 and technology ye
Slide 38: Operational Teams Spread Across The Country
Operational Teams Spread Across The Country Leeds (c.17 FTE) Banbury (c.44 FTE) Invoice Finance Specialist Finance Manchester (c.396 FTE) Peterborough (c.73 FTE) Mortgage Operations Savings Invoice Finance Mortgage Operations London (c.193 FTE) Wilmslow (c.220 FTE) Executive Team Mortgage Operations
Slide 39: Transparent Ownership Structure And Governance
Transparent Ownership Structure And Governance OTHER WHOLLY-OWNED SUBSIDIARIES OF FIRSTRAND LTD LISTED HOLDING COMPANY (FIRSTRAND LIMITED, JSE: FSR) ~80% assets 100% FirstRand Bank Limited FirstRand International Limited (Guernsey) SA banking UK banking and hard currency platform FirstRand EMA (Pty)
Slide 40: ESG And Sustainability Progress So Far
ESG And Sustainability Progress So Far Products People Planet Partners To supply products that enable people to operate Create an inclusive culture where everybody can Reduce our environmental impact for a more Collaborate with partners to deliver a wider-reaching effectively within their market thr
Slide 41: Risk Appetite Framework
Risk Appetite Framework Risk appetite can be primarily articulated as the desired performance of Aldermore Group under stress conditions. Board sets overall Risk Appetite Statement: • Aldermore Group’s performance can be captured i. Risk Appetite Constraints – acceptable level of as a set of financi
Slide 42: Risk Appetite Framework Processes
Risk Appetite Framework Processes The Aldermore Group Risk Appetite encompasses numerous processes that operate within the financial year and contribute to, or relate to, the understanding and monitoring of risk appetite. 42
Slide 43: Credit Risk Framework – Pillars
Credit Risk Framework – Pillars Credit Risk Framework – Pillars Risk reward Layered risk Single name concentration Affordability / Debt Recession readiness Lending at the marginal level Restricts lending to clients Max exposure for single serviceability framework of credit risk breaks even that have
Slide 44: Contacts
Contacts Charles Wood Group Treasurer Charles.Wood@aldermore.co.uk Melissa Yuen Saad Rahman James De Pellegrin Head of Debt Capital Markets Debt Capital Markets Manager Senior DCM & Debt IR Analyst Melissa.Yuen@aldermore.co.uk Saad.Rahman@aldermore.co.uk James.DePellegrin@aldermore.co.uk Debt Capita
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