Firstrand Limited · JSE:FSR
Firstrand — FY2012 Earnings Presentation
44 slides from Firstrand's earnings presentation, September 2012
Slide 1: Results presentation for the year ended 30 June 2012
results presentation for the year ended 30 June 2012
Slide 2: Earnings growth reflects strong operational performance
1 introduction SIZWE NXASANA Earnings growth reflects strong operational performance Group continuing operations – normalised earnings* R million 20.7% ROE 14 000 12 000 +26% 12 730 10 000 10 117 8 000 8 401 8 283 6 000 5 540 4 000 2 000 0 June '08 June '09 June '10 June '11 June '12 * Excludes cont
Slide 3: Consumer remained resilient despite lower economic activity
2 Consumer remained resilient despite lower economic activity Operating environment Business impact + Retail and corporate impairments continued to trend downwards FNB and Interest rates remained low WesBank + Robust advances growth − Negative endowment impact (FNB & capital) Low GDP growth in SA −
Slide 4: Group actual and normalised performance
3 financial review JOHAN BURGER Group actual and normalised performance R million June ’12 June ’11 Change Earnings – Group actual 12 730 10 805 18% Adjusted for: Earnings – OUTsurance* – (180) Earnings – Momentum† – (508) Earnings – Group continuing operations 12 730 10 117 26% * June ’11 OUTsu
Slide 5: Performance highlights – Group's continuing operations
4 Performance highlights – Group’s continuing operations ti Normalised (R million) June ’12 June ’11 Change Earnings 12 730 10 117 26% Dil t d EPS (cents) Diluted ( t ) 225 8 225.8 179 4 179.4 26% Return on equity q y (%) ( ) 20.7 18.7 Net asset value per share (cents) 1 142.4 1 044.0 9% Div
Slide 6: Consistent strategies are driving performance
5 Consistent strategies are driving performance • Improve diversification • Grow client franchise businesses • Improve margin • Reduced contribution from trading activities • Cost containment • Rebalance corporate versus retail lending activities • Shift retail asset mix • Increase deposit franchise
Slide 7: Franchises provide diversification
6 Franchises provide diversification June ’11 June ’12 16% 20% FNB SA 41% FNB Africa 45% RMB and GTS 34% WesBank 27% 9% 8% Based on PBT, excluding Corporate Centre and consolidation adjustments Shift in segment diversification reflects macro conditions June ’11 June ’12 7% 7% Retail 22% 25% 49% C Co
Slide 8: Product diversification limits volatility
7 Product diversification limits volatility FNB Africa VAF Other* Trading 2% Investing 1% 7% 11% Hedging and structuring 3% Personal 2% loans† Client execution 9% 4% Retail (52%) Mortgages 6% Commercial (19%) Financing 10% Corporate (22%) 5% Deposits FNB Africa (7%) 3% 3% Other Other 5% 2% Deposits
Slide 9: Client franchise contributes 94% of gross revenue
8 Client franchise contributes 94% of gross revenue NIR breakdown Gross revenue breakdown 49% 51% 65% Transactional income 11% Insurance Client activity 7% RMB client flows 88% 1% WesBank associates 4% Other client 5% Investing Investment & trading NII before impairments 12% 7% Trading g & other fai
Slide 10: Deposits and advances origination drives net interest income
9 Deposits and advances origination drives net interest income NII (R million) +21% %x 1 344 >100% June ’11 normalised margin 4.58 2 094 15% Accounting mismatches 0.09 433 2 263 10% 4 67 4.67 1 821 12% Capital and deposit endowment (0.06) 2 226 2 055 Advances 0.22 3 008 7% 1 979 Changes in bal
Slide 11: Core impairment trend as expected
10 Core impairment trend as expected % of advances Credit loss ratio (%) June ’12 June ’11 6 Retail – secured 0.58 0.88 5.7 Residential mortgages 0.56 0.79 5 5.0 VAF 0.62 1.11 Retail – unsecured 5.11 3.86 4 4.2 Credit card 0.35 1.39 3.5 Other retail 8 30 8.30 6 12 6.12 3 Corporate 0.47 0.66 FNB Afri
Slide 12: Understanding the stickiness of NPLs
11 Understanding the stickiness of NPLs FNB HomeLoans NPLs (R million) 2 000 Debt counselling 1 800 Insolvencies 1 600 Deceased Defended matters 1 400 Payments being made 1 200 Litigation 1 000 800 600 400 200 - Last 13 - 24 25 - 36 37 - 48 48+ 12 months months months months months 35% 19% 18% 21% 7
Slide 13: Bad debts at bottom of the cycle
12 Bad debts at bottom of the cycle Credit loss ratio (%) 3.5 2.97 3.0 2.5 2.08 1.85 2.0 1.87 1.5 1.38 1.39 1.26 1.16 1.07 Retail 10 1.0 0 87 0.87 0 93 0.93 0.93 0.79 0 90 0.90 0.94* Total 0.72 0.66 0.54 0.75 Africa 0.5 0.37 0.66 0.50 0.43 0.62 0.58 0.49 0.47 Corporate p 0 36 0.36 0.30 0.18 0.29 0.2
Slide 14: Client franchise drives growth in non-interest revenue
13 Client franchise drives growth in non-interest non interest revenue Non-interest revenue (R million) June ’12 breakdown +8% 1 123 9% 4% 1 031 12% 3 173 12% 3 609 84% 21 796 11% 19 555 Client income* Other NIR Private equity activities June '11 June '12 * Includes fee and commission income and
Slide 15: Mixed picture from other non-interest income
14 Mixed picture from other non-interest income Other NIR (R million) 12% Normalised (R million) June ’12 12 June ’11 11 Change Investment income 152 1 448 (90%) Risk and other fair value 3 609 1 725 771 >100% income 3 173 Other income 1 296 1 390 (7%) Total other NIR 3 173 3 609 (12%) June
Slide 16: Income statement – Group's continuing operations
15 Income statement – Group’s continuing operations Normalised (R million) June ’12 June ’11 Change Net interest income before impairment of advances 24 869 20 501 21% Impairment of advances (5 471) (4 292) 27% Net interest income after impairment of advances 19 398 16 209 20% Non interest revenue*
Slide 17: Core costs remain well controlled
16 Core costs remain well controlled R million 28 000 +14% 27 000 27 212 (469) ((579)) 26 000 (564) (409) +10% 25 000 25 191 24 000 23 840 23 000 22 896 22 000 21 000 20 000 June '11 11 June '12 12 Share based Expansions Share-based Cooperation Accelerated June '12 12 June '11 11 normalised normalis
Slide 18: Total assets dominated by a balanced advances portfolio
17 Consistent strategies are driving performance • Improve diversification • Grow client franchise businesses • Improve margin • Reduced contribution from trading activities • Cost containment • Rebalance corporate versus retail lending activities • Shift retail asset mix • Increase deposit franchis
Slide 19: Retail secured lending +8%, quality and margins improved
18 …however, shift in retail mix June ’11 June ’12 6% 8% 4% 4% Residential mortgages 27% Vehicle and asset finance Credit card 30% Other unsecured lending 58% 63% Retail secured lending +8%, quality and margins improved Gross advances (R million) Change 106 864 FNB HomeLoans 1% dential morttgages 10
Slide 20: Retail unsecured lending +33% off a low base
19 Retail unsecured lending +33% off a low base and moderating Change Gross advances (R million) 10 758 FNB Card 11% Retail unsecured 11 946 3 906 8% FNB Smart & Easy loans 44% 5 622 18% Rettail unsecurred 37% 3 342 FNB Consumer loans 89% 6 330 20% 5 001 17% WesBank loans 18% 5 901 1 251 June ’12 FN
Slide 21: Commercial and investment banking underpin growth
20 Commercial and investment banking underpin growth Change Gross advances (R million) 8 569 18% Commercial property 10 071 mmercial 9 811 Term loans 5% FNB Com 10 278 12 898 19% Overdrafts 15 297 2 593 GTS – 2 605 31 109 WesBank Corporate 2% 31 621 102 556 Investment Banking 21% 124 092 RMB 30 257
Slide 22: Good growth in retail and commercial deposits
21 Good growth in retail and commercial deposits results in improved liability profile Liabilities and equity (R billion) Deposit D it ffranchise hi +17% F di Funding June ’12 +10% June ’11 265 242 +17% +15% 104 84 89 +11% 73 +40% +18% 61 67 28 28 33 36 40 38 37 20 FNB Consumer FNB FNB FNB GTS Insti
Slide 23: Funding profile reflects SA Inc structure
22 Funding profile reflects SA Inc structure, however, institutional reliance reducing & term lengthened 100% 2% 2% 4% 2% 50.0 5% 5% 5% 5% 90% 8% 8% 9% 11% 45.0 6% 5% 80% 5% 6% 40.0 70% 16% 16% 16% 17% 35.0 60% 23% 22% 50% 21% 30.0 22% 40% 42% 40% 40% 25.0 37% 30% 20.0 17.4 20.3 20.7 20% 12.4 15.0 1
Slide 24: The Group remains well capitalised
23 The Group remains well capitalised R billion % 700 15.0 16 13.5 13.2 13.2 600 12.3 13.9 11.1 12.6 12 12.3 12.1 500 11.4 26 10.3 21 400 8 300 450 471 385 4 374 330 342 200 100 0 June '08 June '09 June '10 June '11 June '12 June '12 June '12 pro pro forma forma Basel Basel III III Risk weighted ass
Slide 25: South African banking sector conservative in RWA and capital
24 South African banking sector conservative in RWA and level of capital Low capital p ratios & Well capitalised p & high risk weights US high risk weights South Africa China Greece Italy Spain otal assets UK RWA Total EMEA To France Germany/Austria Japan B Benelux l Nordic Low capital ratios Well c
Slide 26: Operating reviews
25 Consistent strategies are driving performance • Improve diversification • Grow client franchise businesses • Improve margin • Reduced contribution from trading activities • Cost containment • Rebalance corporate versus retail lending activities • Shift retail asset mix • Increase de
Slide 27: Another strong performance from the FNB SA franchise
26 Another strong performance from the FNB SA franchise Profit before tax* Characterised by: R million 38.7% ROE + Strong topline growth 9 000 +27% % + NII +19% 8 000 7 000 + NIR +14% 6 000 + Continued customer acquisition 5 000 + Appropriate credit origination and pricing 4 000 + Strengthening St t
Slide 28: Increase in active accounts drives NIR
27 Increase in active accounts drives NIR Active accounts (millions) • Superior retail customer value 18 proposition driving account growth 16 +9% • Historical strategy of pricing below 14 inflation translating into price 12 competitiveness 10 • Product offering returns value to customers through re
Slide 29: Innovation continues to attract and retain customers
28 Innovation continues to attract and retain customers FNB Banking App transactions FNB Smart device sales Volumes (thousands) Values (R million) Units sold to date 400 1 200 90 000 80 000 1 000 300 70 000 800 60 000 50 000 200 600 40 000 400 30 000 100 20 000 200 10 000 0 0 0 Jul '11 Oct '11 Jan '
Slide 30: "First loss is best loss" strategy validated in HomeLoans
29 “First loss is best loss” strategy validated in HomeLoans NPLs (R million) As a % of advances • HomeLoans NPLs have reduced by 10 000 7% over R1.7 o er R1 7 billion in the 2012 financial year 6% • Acted early in 2008 2008, taking 7 500 medicine upfront 5% • Offered customer solutions 4% 5 000 • Q
Slide 31: Cost containment is a strategic imperative
30 Cost containment is a strategic imperative Cost-to-income ratio R billion • Cost-to-income ratio reduction due to 60% 30 • Strong topline growth • NIR and NII up 16% 58.2% 25 58% • Good cost control 20 • Core costs up 9% 56% 55.8% • Branch costs flat reflecting move to 15 electronic channels 54%
Slide 32: Prospects
31 Prospects • Growth to be largely driven by transactional accounts and deposits • Retail: superior value proposition and innovation will continue to drive customer acquisition, deposit growth and NIR • Business: extension of existing retail offering into business and commercial segments a major dr
Slide 33: Performance driven by client franchise
32 Performance driven by client franchise P fit before Profit b f tax* t * (R million) illi ) 2011 3 000 2012 2 500 2 000 1 500 1 000 500 - Advisory Financing Capital raising Hedging and Client execution Trading Investing and underwriting structuring Client Trading Investing * Based on risk-centric
Slide 34: Continued strong growth in lending activities
33 Continued strong growth in lending activities P fit before Profit b f tax* t * (R million) illi ) 2011 3 000 2012 2 500 2 000 1 500 1 000 500 - Advisory Financing Capital raising Hedging and Client execution Trading Investing and underwriting structuring Client Trading Investing + Good g growth i
Slide 35: FICC drives hedging and structuring performance
34 FICC drives hedging and structuring performance P fit before Profit b f tax* t * (R million) illi ) 2011 3 000 2012 2 500 2 000 1 500 1 000 500 - Advisory Financing Capital raising Hedging and Client execution Trading Investing and underwriting structuring Client Trading Investing + Increased hed
Slide 36: Trading results higher, but mixed picture
35 Trading results higher, but mixed picture P fit before Profit b f tax* t * (R million) illi ) 2011 3 000 2012 2 500 2 000 1 500 1 000 500 - Advisory Financing Capital raising Hedging and Client execution Trading Investing and underwriting structuring Client Trading Investing + Strong performance
Slide 37: Progress on strategy – rebalancing portfolio
36 Progress on strategy – rebalancing portfolio and improving quality of earnings Pre-2008 2012 15% 25% 35% Client activities 9% Investment activities Trading activities 76% 40% * Based on gross revenue. Excluding Legacy. Management action on three fronts to protect ROE Impact of actions to improve
Slide 38: Prospects
37 Prospects • Continue to g grow client franchise and maintain market-leading g position p • C ti d balance Continued b l h t growth sheet th • Grow franchises in the rest of Africa and corridors • Contain domestic cost growth • Leverage early response to regulatory change WesBank: leaders in insta
Slide 39: Where the profits came from
38 Where the profits came from Profit before tax (R million) +52% 2 250 2009 2010 2011 2012 2 000 1 750 1 500 1 250 +26% 1 000 750 500 +47% 250 - ( 250) Retail secured lending g activities Unsecured lending g activities Corporate/commercial p lending g activities • Good growth in profitability acros
Slide 40: Unsecured lending delivers good growth
39 Unsecured lending delivers good growth Profit before tax (R million) • Track record in the unsecured 1 200 lending middle market 1 000 +26% • Proven behavioural scorecards 800 • Advances growth good, but below market sector growth 600 • New business volumes up 17% 400 year-on-year 200 • Expected
Slide 41: Progress on growth strategies outside SA
40 Prospects • Advances and profit growth at lower levels • Gradual increase in impairments in retail portfolios • Momentum in corporate and commercial markets • Additional front and back office efficiencies • Continued credit profile discipline • MotoNovo expected to continue to deliver progress on
Slide 42: Building out the current African footprint
41 Building out the current African footprint • Expanding branch network in new territories resulting in customer and transactional volume growth • FNB introducing innovation – cellphone banking and eWallet • RMB deploying global markets and investment banking skills into established and d new terri
Slide 43: India – focus shifts to in-country opportunity
42 India – focus shifts from corridor strategy to in country opportunity in-country • India • RMB has established a track record in corporate and investment banking • Appropriate platform to launch more comprehensive range of banking products and services • FNB has opened first retail branch in Mumb
Slide 44: www.firstrand.co.za
FIRSTRAND www.firstrand.co.za