Firstrand Limited · JSE:FSR
Firstrand — FirstRand Bank — Debt Investor Presentation (October 2023)
42 slides from Firstrand's debt investor presentation, October 2023
Slide 1: Financial and strategic update for the year ended 30 June 2023
financial and strategic update for the year ended 30 June 2023
Slide 2: Agenda
Agenda 2 Group overview and strategic update Mary Vilakazi Overview of the bank (debt issuer) and financial performance COO: FirstRand Financial resource management Funding and liquidity Andries du Toit Capital management FirstRand Group Treasurer South African financial sector and market infrastruc
Slide 3: Group overview and strategic update
group overview and strategic update for the year ended 30 June 2023
Slide 4: FirstRand's portfolio
FirstRand’s portfolio 4 Retail and commercial banking, insurance and investments Corporate and investment banking Vehicle asset finance and fleet management Listed holding company (FirstRand Limited, JSE: FSR) UK specialist lender and savings bank Asset management Group-wide functions
Slide 5: Portfolio mix at June 2023 – activity, geography and business
Portfolio mix at 30 June 2023 – activity, geography and business 5 Other Transact UK operations† Investing UK operations† FNB Insurance Broader 9% 9% WesBank Save/ Africa# invest** 5% 11% RMB Geographic Normalised Revenue split normalised earnings per by activity* earnings mix 25% operating business
Slide 6: Group strategic framework presents distinctive investment proposition
Group strategic framework presents distinctive investment proposition 6 FirstRand commits to building a future of SHARED PROSPERITY through enriching the lives of its customers, employees and the societies it serves. This is the foundation to a sustainable future and will preserve the group’s enduri
Slide 7: Bank overview and financial performance
bank overview and financial performance for the year ended 30 June 2023
Slide 8: FirstRand Bank is a wholly owned subsidiary of FirstRand Limited
FirstRand Bank is a wholly owned subsidiary of FirstRand Limited 8 Listed holding company (FirstRand Limited, JSE: FSR) Other wholly owned subsidiaries of FirstRand Limited 100% FirstRand EMA Holdings (Pty) Ltd (FREMA) DEBT ISSUER FirstRand Bank Limited (FRB) Broader Africa SA banking FirstRand Inte
Slide 9: FRB is a significant contributor to the group's financial position
FRB is a significant contributor to the group’s financial position 9 Other group legal entities* 28% Other group Group legal entities* 42% Group normalised assets net asset value 58% FRB 72% FRB 2% 3% 4% Other group South Africa legal entities* 32% FRB geographical Broader Africa Group normalised ad
Slide 10: SA banking business remains underpin to group's growth
SA banking business remains underpin to group’s growth 10 SOUTH AFRICA BROADER AFRICA UK Platform-enabled integrated financial Modernise, digitise and scale Build competitive advantage services providing ecosystems that to a more valuable UK business and scale to deliver economic create long-term va
Slide 11: The bank supports the group's broader Africa strategy
The bank supports the group’s broader Africa strategy 11 SOUTH AFRICA BROADER AFRICA UK Platform-enabled integrated financial Modernise, digitise and scale Build competitive advantage services providing ecosystems that to a more valuable UK business and scale to deliver economic create long-term val
Slide 12: UK (MotoNovo back book) – only c. £41 million net advances remain on FRB
UK (MotoNovo back book) – following integration into Aldermore, only c. £41 million net advances remain on FRB’s balance sheet 12 SOUTH AFRICA BROADER AFRICA UK Platform-enabled integrated financial Modernise, digitise and scale Build competitive advantage services providing ecosystems that to a mor
Slide 13: FRB's financial performance for the year ended June 2023
FRB’s financial performance for the year ended 30 June 2023 – resilient earnings and superior returns 13 Normalised earnings Deposit franchise Normalised net asset value R24.8bn R990bn R104.4bn (2022: R24.7bn) – (2022: R901bn) 10% (2022: R106.6bn) 2% Return on assets Return on equity Cost-to-inco
Slide 14: Strong topline growth offset by above-inflation cost growth and credit normalisation
Strong topline growth offset by above-inflation cost growth and credit normalisation 14 Normalised earnings R million 36 000 32 000 12% 43% 7% 12% (2 522) 2 505 28 000 5 972 (5 811) 1% (77) 24 000 24 742 24 809 Effective tax rate 2023: 23.3% (2022: 24.3%) 20 000 16 000 12 000 8 000 4 000 - 20
Slide 15: Deposit franchise outperformance continues
Deposit franchise outperformance continues 15 Funding liabilities 13% 2022 2023 14% 421 10% 367 368 332 28% 201 202 204 13% 159 132 117 29% 56 5% 43 28 26 Retail Commercial CIB Group Treasury Debt securities Other deposits AT1 and Tier 2 capital deposits Deposit franchise 10% Institutional
Slide 16: Growth in advances across all portfolios
Growth in advances across all portfolios 16 Core lending advances R billion Centre 1 200 7% 13% 1 000 1 024 FNB retail 7% 909 800 RMB 2023 core 19% lending 600 advances composition 400 200 FNB commercial WesBank 8% - 15% 2022 2023
Slide 17: Unpacking the objectives and outcomes of the ALM strategies
Unpacking the objectives and outcomes of the ALM strategies 17 • Overarching objectives of group ALM strategies: • Actively manage the profile to protect and enhance earnings through the cycle • Earn the structural term premium for shareholders by investing along the yield curve • Group balances its
Slide 18: Through-the-cycle ALM NII outperformance
Through-the-cycle ALM NII outperformance 18 Additional endowment NII from ALM strategies relative to overnight (repo) profile R billion 7.0 Outperformance = R12.3 billon 6.0 3.0 3.2 5.0 4.0 3.0 3.2 2.9 2.0 0.8 0.3 0.2 0.2 1.3 1.0 1.0 0.9 0.5 - 2018 2019 2020 2021 2022 2023 Capital endowment Deposit
Slide 19: Origination tilt and ALM outcomes add margin stability and superior risk-adjusted profile
Combination of origination tilt and ALM outcomes adds margin stability and superior risk-adjusted profile 19 Basis points 800 700 Average repo rate 600 Group margin excl. UK operations 500 400 Risk-adjusted group margin* (excl. UK operations) 300 200 100 - Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 D
Slide 20: Credit performance at a glance
Credit performance at a glance – fully expected, due to origination approach, coverage reflects macro outlook 20 Impairment charge (R million) and credit loss ratio (%) Total provisions (R million) and coverage (% of core lending advances) 40 000 Last of pandemic 35 000 45.8% 50.8% 51.1% releases +2
Slide 21: NIR performance reflects strength of customer franchises
NIR performance reflects strength of customer franchises 21 RMB 2% Bank FNB retail 9% NIR WesBank 6% (7% to R40.3 billion) FNB broader Africa 17% FNB commercial 9% * Excluding Centre (incl. Group Treasury).
Slide 22: Financial resource management
financial resource management
Slide 23: FRM philosophies and practices
FirstRand’s shareholder value creation thesis 23 #1 Liabilities #2 RWA optimisation FRM philosophies Capital-light/ and practices #3 non-bank revenues #4 Costs
Slide 24: FirstRand's philosophy on funding and capital
FirstRand’s philosophy on funding and capital 24 FUNDING CAPITAL RISK APPETITE MEASURES • Diversify across business, • Capital planning performed • Regulator – comfortably markets, currencies, maturities on forward-looking basis, exceed minimum prudential and instrument types not point-in-time requi
Slide 25: Funding and liquidity
FirstRand Bank lunging and liquidity
Slide 26: FRB exceeds LCR and NSFR requirements
FRB exceeds LCR and NSFR requirements 26 % 2023 2022 • FRB manages excess liquidity using a combination LCR of cash, central bank deposits, treasury bills and Regulatory minimum 100 100 government bonds (acquired outright and through Actual 129 124 reverse repos) Average available HQLA (R billion) 3
Slide 27: Continuing focus on optimising the funding base
Continuing focus on optimising the funding base 27 Sources of funding R1 065 bn R1 079 bn R1 095 bn R1 147 bn R1 155 bn 5 4 6 5 6 10 10 14 11 13 5 6 4 6 6 21 23 23 23 23 Funding instruments 20 22 23 26 24 4 2 11 2 2 11 2 11 9 10 24 21 19 17 16 Current and savings accounts Customer fixed- and notice
Slide 28: Deposit franchise outperformance has improved funding mix
Sustained outperformance from the deposit franchise has resulted in improved funding mix 28 Institutional Institutional funding funding 36% 24% 2018 funding 2023 funding Other composition composition 4% AT1/Tier 2 2% Deposit franchise 57% Other 4% AT1/Tier 2 3% Deposit franchise 70%
Slide 29: Recent increase in institutional funding, overall composition still low
Recent increase in institutional funding, however, overall relative composition still low 29 Institutional funding as % of total funding Diversified institutional funding mix and term profile 42% Institutional funding composition Months 100% 45 40% 90% 40 41 38% 39 80% 37 35 36 36% 70% 30 34% 60% 29
Slide 30: Capital management
capital management FirstRand Bank
Slide 31: CET1 position remains above internal target
CET1 position remains above internal target – focus on optimisation of overall capital stack 31 CET1 ratio* % 18 CET1 accretion: –20 bps 17 • Focus remains on CET1 16 329 bps • Rebalance of the capital (360 bps) stack; issuance of AT1 and 15 Tier 2 to fill targets 14.2 11 bps 14 • Recent issuances i
Slide 32: Financial sector and market infrastructure
financial sector and market infrastructure
Slide 33: Resolution framework and financial conglomerate update
Resolution framework and financial conglomerate update 33 • Financial Sector Laws Amendment Act 23 of 2022 (FSLAA) was signed into law in January 2022 • Designation of the South African Reserve Bank (SARB) as the Resolution Authority, effective 1 June 2023 • Necessary powers to operationalise an eff
Slide 34: Proposed implementation dates – final Basel III reforms
Proposed implementation dates – final Basel III reforms 34 • Guidance Note 3/2023, Proposed implementation dates in respect of specified regulatory reforms, released in July 2023; proposed reforms delayed to July 2025 onwards • Bank of England and PA implementation dates aligned 1 January 2024 • Int
Slide 35: Liquidity risk regulatory update
Liquidity risk regulatory update 35 • PA published Directive 11/2022 on 14 December 2022 addressing items of national discretion relating to the LCR • Inclusion of foreign currency denominated level 1 HQLA (subject to an 8% haircut) for purposes of domestic currency LCR, limited to the top 10 most l
Slide 36: FRB credit ratings
FRB credit ratings 36 SOUTH AFRICA FIRSTRAND BANK LIMITED SOVEREIGN RATINGS CREDIT RATINGS FOREIGN CURRENCY LOCAL AND FOREIGN CURRENCY Long term/ Long term/ Long-term Standalone outlook outlook national scale credit rating* S&P Global BB-/Stable BB-/Stable zaAA bbb- Moody’s Ba2/Stable Ba2/Stable Aa1
Slide 37: Annexures
ADNNEXUTES
Slide 38: Bank has strengthened its balance sheet
Bank has strengthened its balance sheet 38 ACTUAL TREND Assets in marketable format R444 billion Marketable liquid assets grew marginally Liquid assets as % of total assets 26.8* Marginally lower following balance sheet growth LCR: 129% The bank’s liquidity position remains healthy, with LCR and NSF
Slide 39: Resolution blueprint – proposed hierarchy in insolvency
Resolution blueprint – proposed hierarchy in insolvency 39 CURRENT AMENDED Secured Secured • Allows for setoff up to the value of security held (up to the (up to the • Residual claims rank pari passu with all other unsecured creditors value of value of security) security) • Assets under repo GMRA, I
Slide 40: Continued improvements to balance sheet liquidity
Continued improvements to balance sheet liquidity 40 Balance sheet growth Liquid asset growth and mix R billion R billion 1 800 400 364 1 621 1 600 350 CAGR 63 ▲7.2% 1 400 300 CAGR ▲15.1% 1 200 1 147 250 113 1 000 200 180 800 30 150 7 600 100 162 400 107 200 50 36 26 0 0 2018 2023 2018 2023 Cash and
Slide 41: Important notice
Important notice 41 The information, statements and opinions contained in this presentation do not constitute a public offer under any applicable legislation or law or an offer or solicitation of an offer to buy or sell securities or financial instruments or any advice or recommendation to buy such
Slide 42: Important notice (continued)
Important notice (continued) 42 The information in this presentation is given in confidence and the recipients of this presentation should not engage in any behaviour which would or might amount to market abuse for the purpose of Regulation (EU) 596/2014 (the Market Abuse Regulation). This presentat
FirstRand Bank — Debt Investor Presentation (October 2023) on 6ix