results presentation RESULTS PRESENTATION 31 DECEMBER 2016 Real - PDF document

for the six months ended 31 December 2016 results presentation

RESULTS PRESENTATION 31 DECEMBER 2016 Real EPS and DPS growth continued, return remained above target range Cents 22.9% ROE 250 . +7% 200 207.6 194.6 177.3 150 154.2 +10% 128.5 119.0 100 108.0 93.0 77.0 50 55.0 0 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Diluted normalised earnings per share Dividend per share p 01

FIRSTRAND GROUP Introduction continued Higher cost of equity impacted NIACC growth NIACC * (R million) ROE and COE 24.0% 6 000 25% 23.4% 23.4% 22.9% 22.3% 20% (8%) 4 129 4 475 4 383 4 000 3 645 15% 13.6% 14.8% 13.8% 13.6% 13.5% 2 822 10% 2 000 5% 0 0% Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 NIACC ROE Cost of equity (COE) * Net income after capital charge. Results themes – income statement NIR PRESSURES HIGH QUALITY NII • Strategic choices • Endowment benefit • Product rationalisation and pricing in Consumer • Good growth in deposit franchise • E-migration – lower fees • Asset growth • Regulatory impacts • Targeted growth across segments/franchises • Rate and fee caps – lower production • Appropriate cutbacks in risk appetite • Timing of private equity realisations Themes playing out in resilient earnings performance BAD DEBTS COSTS • Origination actions taken over past two years • Investment decisions underpin bad debt charge • Cost reduction lagging e-migration in FNB • Bad debt charge at 86 bps remains below long-term range of 100 – 110 bps p 02

RESULTS PRESENTATION 31 DECEMBER 2016 Results themes – balance sheet STRONG CAPITAL POSITION ROBUST FUNDING AND LIQUIDITY POSITION • CET 1 ratio = 14.1% (regulatory minimum 6.9%) • LCR = 95% (minimum requirement 70%) • Basel III leverage = 8.4% (regulatory minimum 4%) • Available HQLA = R173 billion • RWA = 60.6% of total assets • Deposit franchise represents 60% of funding Balance sheet prudence maintained APPROPRATE ORIGINATION STRATEGIES PRUDENT PROVISIONING AND COVERAGE • Cutbacks in high risk buckets in retail • Portfolio provisions > annual bad debt charge • Retail advances grew 3% • Total coverage at 79.5% appropriate • Commercial advances +11% • CIB (incl. HQLA) +8% Franchises produced solid operational performances FRANCHISE SPLIT OF NORMALISED EARNINGS ** NORMALISED EARNINGS (R million) Dec 16 Dec 15 * % change 17% 3  FNB 6 462 6 278 2  RMB 2 853 2 805 58% 25% 9  WesBank 1 944 1 786 FNB RMB WesBank ROE: 38.5% 21.3% 19.9% * Dec 15 numbers have been restated for the move of a business unit from WesBank to FNB. ** Excludes FCC (including Group Treasury), FirstRand company, consolidation adjustments and NCNR preference dividend. p 03

REVIEW OF OPERATIONS FNB Domestic franchise resilient, weak macros impacted rest of Africa NORMALISED PBT (R million) 38.5% ROE (total FNB) 10 000 . +6% 9 000 8 894 8 000 8 366 7 000 7 392 6 000 6 410 5 000 5 000 4 000 3 000 2 000 (29%) 1 000 838 853 769 771 547 - Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 FNB SA Rest of Africa Periods prior to 2015 have not been restated for refined rest of Africa segmentation. Periods prior to 2014 have not been restated for allocation of FCC costs and return on capital. p 04

RESULTS PRESENTATION 31 DECEMBER 2016 Segment view of FNB SA presents a mixed picture NORMALISED PBT (R million) 6 000 +1% 5 000 4 000 +16% 3 000 2 000 1 000 0 Commercial Retail Dec 15 Dec 16 Strong performance from FNB Commercial underpinned by growth in customers and cross-sell NORMALISED PBT (R million) 6 000 +1% 5 000 4 000 +16% 3 000 2 000 1 000 0 Commercial Retail Dec 15 Dec 16 p 05

REVIEW OF OPERATIONS FNB continued Retail performance unpacked – product view NORMALISED PBT (R million) • Topline impacted by strategic actions 3 500 • Sticky branch costs lagging e-migration success (4%) 3 000 Appropriate origination actions resulted in 2 500 good performance across asset classes 2 000 1 500 +1% 1 000 +18% +8% 500 0 Residential mortgages Card Personal loans Retail other Dec 15 Dec 16 Premium’s strategy delivered strong growth in NIR, offset by strategic action to simplify Consumer offering PREMIUM TRANSACTIONAL ACCOUNT NIR (R million) • Deliberate strategy to migrate clients to Premium • Successful cross-sell and up-sell strategy into 3 000 (8%) sweet-spot customers 2 500 CONSUMER • Simplified product and pricing options 2 000 • Some customers moved into lower revenue-generating +18% 1 500 product lines resulting in R250 million negative impact Previously Current 1 000 10 products 4 products 500 0 13 pricing options 5 pricing options Consumer Premium Dec 15 Dec 16 p 06

RESULTS PRESENTATION 31 DECEMBER 2016 Success of FNB’s e-migration strategy results in revenue squeeze… DEPOSIT CHANNEL MIX ILLUSTRATES SCALE FASTER-THAN-EXPECTED E-MIGRATION OF MIGRATION OVER PAST FIVE YEARS RESULTS IN REVENUE SQUEEZE Year-on-year DEC 11 DEC 16 change in transaction Smartbox volumes % 5% Mobile 26 Smartbox Cash Branch 23% centre Internet 11 31% 21% Strong growth Cash centre Point-of-sale volumes 11 ATM/ADT Branch 12% (lower fees) 9% 65% ATM/ADT Banking app 80 34% ADT/ATM cash deposits 18 Branch Volumes contracting – Withdrawals (12) (higher fees) – Deposits (30) …will require recalibration of the branch network, but there is a lag SOME EARLY COST INVESTMENT TO TAKE LONG-TERM STICKY COSTS REDUCTION WINS OUT MORE COSTS • Staff costs (5%) • Electronic channels • Long-term leases +8% • Growth in ADT device +8% • Reduced fit-out • Rationalise: • Smartbox devices (business cost per branch cash processing) +3 5 % • (modular) (29%) Property portfolio • Operational process • Digital capabilities in branch – • Outcomes-based coverage increased from 30% remuneration paying off of branches to 50%, with plans to increase to 80% • Dedicated migration agents forecast to grow >40% * Percentages shown above relate to year-on-year changes. p 07

REVIEW OF OPERATIONS FNB continued Activity view of FNB performance NORMALISED PBT (R million) 7 000 +10% 6 000 5 000 4 000 3 000 2% 2 000 (29%) 4% 1 000 >100% +4% 0 (1 000) Transactional* Term lending Save and invest Insurance** Rest of Africa Other Dec 15 Dec 16 * Transactional includes transactional deposit products and deposit endowment, overdrafts and credit cards. ** Insurance includes elements of embedded credit protection. Transactional franchise resilient despite headwinds • Good customer growth: +5% in Consumer, +8% in Premium NORMALISED PBT (R million) and +15% in Commercial 7 000 • 12% growth in volumes and continued e-migration +10% • Cross-sell and up-sell – overdrafts and credit cards 6 000 • Endowment benefit 5 000 Partly offset by: 4 000 • Product rationalisation • Higher cost of rewards 3 000 • Weaker macros placing pressure on bad debts 2 000 1 000 0 (1 000) Transactional* Term lending Save and invest Insurance** Rest of Africa Other Dec 15 Dec 16 * Transactional includes transactional deposit products and deposit endowment, overdrafts and credit cards. ** Insurance includes elements of embedded credit protection. p 08

RESULTS PRESENTATION 31 DECEMBER 2016 Term lending performance reflects origination strategies NORMALISED PBT (R million) • Remained conservative in mortgage lending • Further cutbacks in high risk buckets 7 000 • Cross-sell of lending products to existing commercial customers 6 000 • Moderate growth in personal loans 5 000 • Increase in bad debts in line with expectations • Post write-off recoveries remained strong across all portfolios 4 000 • Return profile remains healthy 3 000 2% 2 000 1 000 0 (1 000) Transactional* Term lending Save and invest Insurance** Rest of Africa Other Dec 15 Dec 16 * Transactional includes transactional deposit products and deposit endowment, overdrafts and credit cards. ** Insurance includes elements of embedded credit protection. Strong growth in deposits, but at lower margins NORMALISED PBT (R million) 7 000 • Strong penetration of new savings products in Retail and Commercial 6 000 • Leveraging digital channels 5 000 • Market share gains in retail deposits (total deposit growth +12%) 4 000 • Pricing landscape impacting margins 3 000 2 000 4% 1 000 0 (1 000) Transactional* Term lending Save and invest Insurance** Rest of Africa Other Dec 15 Dec 16 * Transactional includes transactional deposit products and deposit endowment, overdrafts and credit cards. ** Insurance includes elements of embedded credit protection. p 09