Winning Strategies in Winning Strategies in a Brave New World RMB - PowerPoint PPT Presentation

Winning Strategies in Winning Strategies in a Brave New World RMB Morgan Stanley conference 15 September 2010

Index  Core economic view  Conventional responses  Innovative growth  Conclusion 2

Our core economic view consistent with pressures on top-line banking growth 2010 2011 2012 2013 3.0 3.0 3.3 3.3 GDP growth 3.8 5.0 5.5 5.5 Inflation (year-end) (y ) 8.5 8.5 8.8 8.8 Nominal disposable income (year -end) 6.0 6.5 7.5 8.0 Repo rate (year-end) 7.5 8.0 8.3 8.5 Rand/ dollar (average value) 8.0 6.0 5.5 5.5 House prices (year-end) 5.0 7.5 8.8 8.8 Total private sector credit extension (year-end) We get it!! We get it!! 3

Repricing credit Repricing Realigning transactional banking transactional banking b business models i d l Conventional/ Generic strategies Changing balance Geographic diversification sheet composition Containing cost 4

Repricing credit Weighted average discount to Prime & change in risk distribution at registration Weighted average discount to Prime & change in risk distribution at registration 100% 90% als 80% 80% egistered dea 70% 60% 50% % of re 40% 30% 20% 10% 10% 0% Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 A B C D E F G H I WAD New Reg Business Average discount new business Low risk High risk 5

Repricing transactional banking Smart Transmission Silver Cheque 110 140 90 120 R 124 95 R 124.95 88.50 86.37 100 R 100.73 R 105.50 70 75.65 72.60 R 91.50 80 R 87.05 50 R 72.55 60 30 40 33.00 23.65 20 10 Smart Easy Silver Achiever Classic Smart Cheque q Plan Plan Platinum Cheque Gold Cheque 270 320 299.95 299.95 270 270 220 220 269.25 212.95 248.52 220 170 181.50 170 146.73 173.85 120 135.80 120 70 70 20 20 6

Changing balance sheet composition Smart Loans HomeLoans Advances Advances (R billi (R billions) ) R millions 114 9 500 113 9 000 8 500 112 8 000 111 7 500 110 7 000 109 6 500 108 6 000 107 5 500 5 500 106 5 000 Jul '08 Jan '09 Jul '09 Jan '10 Jul '08 Jan '09 Jul '09 Jan '10 7

Cost containment FNB headcount (18 month trend) Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 H Headcount has dropped 5.4% y/y d t h d d 5 4% / 8

FNB branch distribution in relation to GDP 2010 2009 GDP distribution distribution Free State 8% 11% 5% Northern Cape 4% 5% 2% Eastern Cape 12% 11% 8% Western Cape 15% 14% 15% North West 6% 6% 6% Limpopo 7% 6% 7% KZN KZN 17% 17% 16% 16% 16% 16% 8% Mpumalanga 8% 6% 23% % Gauteng Gauteng 24% 24% 35% 35% 100% Total 100% 100% 9

Africa – expected GDP 2011 Swaziland 2.4% Existing Lesotho 3.0% subsidiaries subsidiaries • Botswana Nigeria 3.0% • Namibia • Mozambique South Africa 3.0% • Lesotho Namibia 4.5% • Swaziland • Zambia Botswana Botswana 5 0% 5.0% Representative Angola 6.2% offices • Angola go a Z Zambia bi 6 5% 6.5% • Nigeria Tanzania 7.1% New countries • Tanzania Mozambique 7.3% • Ghana Uganda 8.0% • Uganda Ghana 14.0% 10

CIB Coverage within Group Corporate and Investment Banking Group (CIB) RMB Manbo FNB CBG EXCO FNB CBG EXCO Proprietary Board Relationship Mgmt Relationship Mgmt Business Development Unit Business Development Unit CIB Client Co erage CIB Client Coverage Wholesale Credit Corporate Private Equities Investment Transactional FICC Equity Trading Banking Banking Banking Risk & Compliance Finance & Compliance Finance Operations O ti Operations O ti IT IT Human Capital HR 11

EasyPlan eWallet Owner-manager mindset Innovative culture Innovative BJM Quicksell growth growth Transaction volumes Cellphone Banking A Account opening t i optimisation 12

Innovative culture 2005 2006 2007 2008 2009 2010 Ideas originated 3 120 3 606 6 346 6 845 6 227 8528 Ideas implemented 222 359 530 733 641 779  26 347 staff  15 465 registered users 13

QuickSell Number of properties 400 350 350 300 250 250 200 150 150 100 50 50 0 May 09 Aug 09 Nov 09 Feb 10 May 10 Aug 10 14

Account opening  Key objectives: • • Significantly reduce the time and simplify the process to set up a customer Significantly reduce the time and simplify the process to set up a customer and open accounts • Pre-populate and print rationalised, simplified customer agreements • Cross-sell appropriate services and value adds as part of the process • One standard process for account opening • Key drivers being: Speed, Simplicity, Accuracy & Cost Reduction  Benefits: Reduction in Consumer Commercial • Screens 40% 44% • Time (estimated) 25% 45% • Customer agreement (# pages) 15% 79% 15

Customer initiated financial transactions Customer initiated financial transactions (millions) 1 100 1,100 16% 1,000 13% 900 800 700 600 500 June 2008 June 2009 June 2010 16

Customer numbers still growing and cross-sell still increasing Cross sell Customers ratio (millions) 2.1 7 6 2 5 1 9 1.9 4 3 1.8 2 1.7 1 0 1.6 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 17

BJM Strategic Rationale Portfolio  M Management t Wealth   FNB Wealth building blocks FNB Wealth building blocks Management   Stockbroking Stockbroking • Stockbroking adds additional building block to FNB Wealth offering Stockbroking adds additional building block to FNB Wealth offering • Acquiring stockbroking businesses means by which competitors grew their wealth businesses • Cost of growing the business organically estimated at R400m – R500m Cost of growing the business organically estimated at R400m R500m • BJM Private Client segmentation will enhance FNB Wealth coverage and offering 18

Owner-manager philosophy Traditional Associate branches branch Measures: 5%   Direct cost growth 8% 10%  NIR growth 9% 63%  Cost to income 72% 19

EasyPlan branch rollout Number of branches (actual vs budget) 100 80 60 40 20 0 Aug 09 Nov 09 Feb 10 May 10 Aug 10 Nov 10 Feb 11 May 11 Actual Actual Target Target 20

Cellphone banking Cellphone banking Users 2 500 000 2 000 000 2 000 000 1 500 000 1 000 000 500 000 0 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 21

eWallet Monthly original send values R millions Onsend volumes 35 100,000 R 35,000,000.00 90,000 30 R 30,000,000.00 80,000 80 000 25 R 25,000,000.00 70,000 60,000 20 R 20,000,000.00 50,000 15 R 15,000,000.00 40,000 30,000 30 000 10 10 R 10,000,000.00 R 10 000 000 00 20,000 5 R 5,000,000.00 10,000 0 R ‐ OCT NOV DEC JAN 2010 FEB MAR APR MAY JUN JUL 2010 AUG 2009 2009 2009 2010 2010 2010 2010 2010 2010 ORIGINAL SEND VALUES ORIGINAL SEND VALUES ORIGINAL SEND VOLUMES ORIGINAL SEND VOLUMES 22

More innovations…  best reward programme in financial services  FNB Connect provides customers with free data  Slow lounge very popular  PayPal  Instant Accounting now free  Watch the reward space 23

Conclusion  The economy is not going to make it easy to grow banking revenues The economy is not going to make it easy to grow banking revenues  We have successfully implemented a range of conventional initiatives We have successfully implemented a range of conventional initiatives  Tough times create great growth opportunities if you have an Tough times create great growth opportunities if you have an innovative mindset 24