Strong growth in earnings & returns

Transcription

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2 Strong growth in earnings & returns R mil June 07 June 06 % change Normalised earnings Normalised earnings per share - Basic Diluted Headline earnings per share - Basic Diluted Return on equity (%) Dividend per share (cents)

3 14% Bank remains largest 4% contributor Banking Group Momentum Group Discovery Group 82% * Based on normalised earnings, excluding the FirstRand centre and NCNR preference shares

4 22% Segment diversification % 1% 19% 33% 27% 24% 43% 53% 19% 33% 20% Retail Corporate & commercial Investment banking Insurance Centre * Based on normalised earnings

5 Good returns from a diversified portfolio of strong franchises 5% 2% Return on Equity % 8% 13% 35% FNB FNB Africa RMB WesBank Momentum Discovery 22 33% 4% OUTsurance 64 * Based on normalised earnings

6 Global ascendancy of investment banking * * Citigroup Barclays FirstRand 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 45% 33% 30% 33% 20% 16% Investment banking Other * Source: Morgan Stanley

7 Diverse sources of income Corporate client flows 2% 6% 1% Resources 15% Momentum Risk 24% Transactional income Lending 1% Outsurance & WesBank 4% Private equity 1% Investment Client flowsincome 4% Other income Structured lending 3% Net interest income 1% 11% Discovery Risk Capital 27% * Excludes FirstRand Limited and consolidation adjustments ** Reclassified fair value income to appropriate income sources

8 Diverse sources of income 26% Transactional income

9 Diverse sources of income Net interest income 30%

10 Diverse sources of income 15% Momentum Lending Client flows 26% 11% Discovery Risk

11 Diverse sources of income 7% Risk 4% Private equity Client flows Approximately 80% of earnings from client franchise

12 Performance against 65% 60% financial targets 10% real growth OUTsurance 55% 50% RMB ROE 45% 40% 35% 30% 25% 20% 15% FNB Africa WesBank FNB Momentum Discovery 10% plus FirstRand WACC 10% -20% 0% 20% 40% 60% 80% Normalised earnings growth * Momentum growth of 19% adjusted for special dividend

13 Premium returns over cost of equity R bil 50 28% 40 23% 25% 23% 25% 25% 25% % 16% 15% 14% 13% 12% 14% 10 0 Jun '01 Jun '02 Jun '03 Jun '04 Jun '05 Jun '06 Jun '07 NAV (excluding dividends) NAV (including dividends) Return on equity Average cost of equity * Based on normalised NAV

14 Capital efficiency and asset yields drive banking returns Gearing multiple % 6.40% 4.30% 3.70% 1.6% 1.6% 5.70% 5.80% 3.40% 3.50% 1.3% 1.5% 6.40% 6.80% 3.70% 3.80% 1.8% 1.8% 7.30% 4.3% 3.90% 2.0% 8% 7% 6% 5% 4% 3% 2% 1% Percentage to average assets 12 Jun '01 Jun '02 Jun '03 Jun '04 Jun '05 Jun '06 Jun '07 Operating expenses (%) Total revenue (%) Return on average assets Gearing 0%

15 Capital efficiency & product innovation drive Momentum returns 8% 7.3% CAR as a percentage of liabilities 7% 6% 5.7% 5.0% 5% 4% 3.3% 4.0% 3% 2% 2.6% 2.4% 2.1% 1.7% 1.6% 1% 0% Jun '98 Jun '00 Jun '02 Jun '04 Jun '06 Large companies Momentum

16 Bank well capitalised 14% 12% Target minimum capital adequacy 12% Actual % % 8% 6% Target minimum core equity 7.25% Basel II minimum core equity 5.25% 9.8 4% 2% Jun '04 Jun '05 Jun '06 Jun '07 Core equity Perpertual preference shares Upper Tier 2 Lower Tier 2

17 Capital backing banking 5% 5% risks 7% 5% 4% 11% Investment Credit - domestic Credit - international Market Operational Business & other Interest rate 63%

18 Capital backing insurance R mil 7,000 6,000 5, x CAR risks Reduction in economic capital 2.3 x CAR Target times Special dividend Normal dividend 4,000 3, x CAR 0.9 x CAR 2,000 1,000 1 x CAR 1 x CAR 0 Jun '06 Jun '07 Termination Mortality and morbidity Expense Investment Credit Other risks Available for distribution

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20 Bank delivers on key measures June 07 June 06 % change Normalised earnings (R mil) Return on equity (%) Return on assets (%) Credit loss ratio* (%) Cost to income ratio (%) * After insurance claim

21 Financial highlights R mil June 07 June 06 change Net interest income % Credit impairment charge (2 857) (1 411) 102% Net interest income after impairments % Non interest revenue % Non interest revenue % Associate earnings % Operating expenses (19 042) (15 037) 27% Taxation expense (3 844) (3 012) 28% * Non interest revenue in this presentation includes associate earnings going forward

22 Financial highlights June 07 June 06 Net interest income % Credit impairment charge (2 857) (1 411) 102% Non interest revenue % Operating expenses (19 042) (15 037) 27% Taxation expense (3 844) (3 012) 28%

23 Impairments dampen benefits of asset growth and endowment June 07 June 06 change Net interest income % Credit impairment charge (2 857) (1 411) 102% Net interest income after impairments % Bad debts offset 13 % of asset growth

24 Strong growth in advances continues R bil (3%) 320 bil 67 (21%) 39% 21% 388 bil 93 (24%) 20 (5%) 3 (1%) (5%) (14%) 7% 49 (13%) % (57%) 223 (57%) 50 0 Jun '06 Jun '07 Retail Corporate Commercial Investment banking Other

25 Asset backed dominates retail advances R bil bil bil 19% 67 (30%) (30%) % 128(57%) 87% asset backed 105 (57%) 50 30% 0 10 (6%) 13 (6%) 12 (7%) 15 (7%) Jun '06 Jun '07 Other Card HomeLoans Auto loans

26 Liability strategy & endowment enhances margin 5% 4% 3.95% 0.35% 0.16% -0.10% -0.10% -0.10% -0.15% 4.01% 3% 2% 1% 0% Jun '06 Liability margins Capital endowment Advances margins Funding / liquidity Hedges Other Jun '07

27 Asset margins under pressure Weighting % June 07 June 06 Asset backed mortgages Instalment sales Card debtors Overdraft and loans Personal loans Other banking advances Total Lending margin down 10 bps * Based on the daily average advances balance after deducting NPL s

28 Liability margins improve through endowment benefit Weighting % June 07 June 06 Current and savings Money market Call Notice deposits Fixed deposits Managed account creditors Total Funding margin up 35 bps * Based on the daily average balance

29 Financial highlights June 07 June 06 Net interest income % Credit impairment charge (2 857) (1 411) 102% Non interest revenue % Operating expenses (19 042) (15 037) 27% Taxation expense (3 844) (3 012) 28%

30 Credit themes Bad debts reflect impact of cycle caused by higher indebtedness and higher interest rates Actual versus expected charge off Manage credit markets impact on current portfolio and origination strategies

31 NPL s and bad debts continue upward trend NCA and 50bps interest increase amount to an extra 9 bps Turbulent: Long run expected loss: Calm: NPLs (%) Provisions (%) Impairment charge (%)

32 Retail main contributor to bad debts Percentage of average advances Non performing loans - Retail* - Corporate and commercial** - Investment banking*** Total For the period ended June 07 June % 1.5% 1.3% 1.5% 0.5% 0.8% 1.70% 1.30% Bad debts - Retail* - Corporate and commercial** - Investment banking*** Total 1.34% 0.31% 0.11% 0.81% 0.83% 0.27% 0.00% 0.50% * Includes securitised assets ** Includes CTB, WesBank and commercial *** Primarily fair value advances with fair value changes offset against the asset values and fair value income

33 Affordability drives higher impairments 1.60% 16.00% 1.40% 14.00% Impairments 1.20% 1.00% 0.80% 0.60% bps bps 12.00% 10.00% 8.00% 6.00% Repayment rate 0.40% 4.00% 0.20% 2.00% 0.00% % Historical impairments Historical impairments Historical repayment rate Market implied repayment rate A th 100 b (P i t 14 5) Historical repayment rate Market implied repayment rate Another 100bps (Prime at 14.5) * Repayment rate = ( household debt / disposable income x prime interest rate )

34 Credit themes Bad debts reflect impact of cycle caused by higher indebtedness and higher interest rates Actual versus expected charge off Manage credit markets impact on current portfolio and origination strategies

35 Bad debts at the higher end of 1.2% projected range 1.0% Upper end of income statement range Protection against negative gearing 0.8% Bad debts 0.6% 0.4% Aug Oct Dec June Aug Prime rate: 11% 11.5% 12% 12.5% 13% 13.5% 0.2% 0.0% 30 June '06 '+50 '+100 '+200 '+300 Interest rates Lower Expected Upper bps

36 Credit themes Bad debts reflect impact of cycle caused by higher indebtedness and higher interest rates Actual versus expected charge off Manage credit markets impact on current portfolio and origination strategies

37 Financial highlights June 07 June 06 Net interest income % Credit impairment charge (2 857) (1 411) 102% Non interest revenue % Operating expenses (19 042) (15 037) 27% Taxation expense (3 844) (3 012) 28%

38 Diversification in non interest revenue 31% Transactional income 1% WesBank and OUTsurance 6% 5% Private equity Other 1% Other investment Fair value 16% Interest income 1% Resources 39% * Associate income split into appropriate non interest revenue categories

39 Diversification in non interest revenue 31% Transactional income

40 Economic activity drives transactional income R mil 14,000 23% 12,000 10,000 8,000 6,000 4,000 2,000 0 FNB - transactional and customer volumes RMB - corporate activity WesBank - new business volumes 120% -10% 22% Transactional Fair value Investment Other

41 Diversification in non interest revenue 5% Private equity

42 Good balance between annuity income and realisations R mil 14,000 12,000 10,000 8,000 Annuity income 51% Profit on realisations 49% Annuity income 42% Profit on realisations 58% 6,000 4,000 2,000 30% -10% 22% 0 Private equity Other Transactional Fair value

43 Diversification in non interest revenue Fair value 17%

44 Almost half of fair value income from client activity 51% R mil June 07 June 06 % change Lending Risk Client flows Risk Transactional Capital 9% Capital Total (10) 66 19% Lending 21% The rest of fair value represents only 9 % of total income

45 Financial highlights June 07 June 06 Net interest income % Credit impairment charge (2 857) (1 411) 102% Non interest revenue % Operating expenses (19 042) (15 037) 27% Taxation expense (3 844) (3 012) 28%

46 Top line growth drives operational leverage R mil 40,000 60% 60% +32.4% 35,000 30,000 25,000 20,000 58% 55% 56% 57% Jaws =5.8% 54% 15,000 52% 10, % 5,000 0 June '00 June '01 June '02 June '03 June '04 June '05 June '06 June '07 Total income Total costs Cost to income

47 R mil Spending for top line growth June 07 June 06 Cost Cost % change Base Cost International expansion >100 - Share based expenses Performance linked expenses New initiatives >100 FirstRand Banking Group

48 Improving efficiencies remains a focus June 07 Jun 06 Top line Cost Cost to Cost to growth growth income ratio income ratio R mil % % % % FNB Retail Corporate & commercial FNB Africa WesBank RMB FirstRand Banking Group

49 Financial highlights June 07 June 06 Net interest income % Credit impairment charge (2 857) (1 411) 102% Non interest revenue % Operating expenses (19 042) (15 037) 27% Taxation expense (3 844) (3 012) 28%

50 Effective tax rate 40% 30% 27.60% 26.50% 20% 10% 0%

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52 Good operating performance R mil June 07 June 06 % change Insurance operations Momentum insurance FNB insurance >100 Asset management operations Group operating profit Investment income on shareholder assets (20) Normalised earnings However operating performance not true reflection of value creation Return on equity (%) Return on embedded value (%)

53 EV growth shows true profit R mil 4,000 3,500 3,000 2,500 Capital appreciation Investment variations Other Investment Income Operating profit Adjusted EV profit Normalised earnings CAGR 51%pa EV 2,000 CAGR 16%pa 1,500 I/S 1, Jun '03 Jun '04 Jun '05 Jun '06 Jun '07 * Adjusted EV profit excludes revaluation of subsidiaries

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55 Strong operational performance Growth R mil June 07 June 06 % Discovery Health Discovery Life Discovery Vitality Destiny Health (102) (151) 32 PruHealth (218) (146) (49) PruProtect (36) - (>100) Operating profit After tax profit, before BEE * After tax profit, after BEE *After dilution & normalised earnings adjustments

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57 Good environment for banks SA Banking market in good shape Despite 250bps hike in interest rates retail demand for credit remains robust, but slowing Higher capital expenditure and corporate activity driving corporate sector growth Financial markets provide excellent opportunities for investment banking Increased regulation

58 Customer numbers & transaction volumes drive growth 000 s June 07 June 06 Retail Customer base % InContact accounts % ebucks customers % Internet bankers % Cellphone bankers % South African Retail clients only

59 Retail remains robust R mil 5,000 35% Customer numbers and transaction volumes have increased 7% Slower advances growth to normalised levels 2,985 3,203 Higher bad debts % NCA was well implemented and limited impact going forward 32% Competition Commission on-going (1)% but no impact as yet 0 Retail Corporate & Commercial Investment banking Other Total * Normalised earnings June '06 June '07

60 Shift to corporate & commercial R mil 3,000 35% Growth in advances driven mainly by mid-corporate and WesBank 1,500 1,706 2,311 Deposit franchise a key part of the growth strategy Strong growth in transactional volumes, particularly in the electronic banking channels 0 Corporate & Commercial Retail Investment banking Other Total * Normalised earnings June '06 June '07

61 Investment banking was exceptional R mil 5,000 82% 3,910 35% Equity trading business benefited from buoyant financial markets 4,247 BEE was good 3,731 for private equity and corporate finance opportunities 2,500 2,148 Increased client flows, volatility and direction for FiCC 82% Lazy corporate balance sheets starting to 1,267 be 32% leveraged 960 (1)% Investment banking Corporate & Commercial Retail Other Total * Normalised earnings June '06 June '07

62 Rotation to corporate & investment banking R mil 10,000 35% 10,041 7,463 82% 5,000 2,985 7% 3,203 1,706 35% 2,311 2,148 3,910 (1)% Retail Corporate & Commercial Investment banking Other Total * Normalised earnings June '06 June '07

63 Changing composition % 6% 32% 29% 40% 39% 23% 23% Retail Corporate Investment banking Other * Normalised earnings

64 Banking hits R10 billion FNB Normalised earnings R4.14 billion % Growth 27 RMB R3.91 billion 82 WesBank R0.92 billion (13) Africa R0.46 billion 21 Other R0.61 billion (1) Total R10.04 billion 35

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66 Strong profit growth R mil Profit before tax 6, ,000 4,000 81% 3,000 2,000 1, Return on Equity 43 %

67 Off an already high base R mil Profit before tax 6, ,000 4,000 3,000 81% 2,000 31% 37% 39% 1,

68 From a well balanced portfolio Equities Trading 27% Other 10% FiCC 14% Private Equity 25% Investment Banking 24% * Percentage net income per division

69 reflected in diversity Trading 34% of earnings Structuring and fees 17% Lending 24% * Percentage gross income Investment 25%

70 and quality of earnings 7% Fee income 43% Risk based 4% New Asset Income 46% Annuity 2007 * Percentage gross income

71 Growth across the board R mil 1, % 1,400 1,200 1,000 64% Profit before tax 54% % 94% Equities Private Equity Investment Banking FiCC Other

72 Driven by favourable business environment Strong Economy Buoyant markets across board Equities Commodities & Currencies Interest Rates & Credit Increased deal making activity Private equity BEE Infrastructure spend Increased capital markets activity

73 Private equity & BEE stimulus Hedging Acquisition & Leveraged Finance Private Equity & BEE Corporate Finance Investment

74 Infrastructure spend takes off R mil 100,000 80,000 60,000 Ports Rail Roads Investment Banking Origination & structuring Arranging & underwriting 40,000 Electricity 20,000 Housing Health FiCC FNB Water Diesel, currency, inflation & interest rate hedging Transactional Banking Source : MTEF 2007

75 Driven by favourable business environment Strong Economy Buoyant markets across board Equities Commodities & Currencies Interest Rates & Credit Increased deal making activity Private equity BEE Infrastructure spend Increased capital markets activity

76 Driven by favourable business environment Relationships Equity house Niche Player & Product Balance sheet Ability to attract and retain intellectual capital.and a sound strategic framework

77 Leading to a balanced business Brand value Risk Based Client relationships Local Distribution capability Debt Rainmakers Annuity Product Leader International Balance sheet heavyweight Equity Sound strategic framework

78 Future prospects Ever changing markets Sound strategic framework

79 Current market conditions End of under priced credit Ride the boom Dance near the door Hold vs Distribute Contagion Significant increase in volatility Fear replacing greed Market dislocations Patience Power Volatility increases risk - but also opportunity

80 Profitable despite changing markets Subprime dotcom crash Asian Crisis Russian Debt Crisis LTCM High Yield Market Crisis Rand collapse

81 and the divisional prospects Investment Banking Large annuity portfolio Healthy deal pipeline

82 Consistent leaders in Investment Banking Survey Year Mergers & Acquist ns BEE Deals Listings Structured Finance Private Equity st 1 st 3 rd 1 st Not rated M & A Dealmaker of the year st * 1 st 1 st 1 st 1 st M & A Dealmaker of the year 2005 M & A Dealmaker of the year st * n/a 7 th 1 st 1 st Magazine by transaction value nd n/a 1 st 1 st 1 st Survey on Banking in SA n/a = new category * Joint place Source: The PWC survey conducted every two years since 2003

83 and the divisional prospects Investment Banking Private Equity Large annuity portfolio Healthy deal pipeline Associate annuity income Pipeline of realisations FiCC More volatility More volume

84 Private Equity growth story R mil 3,500 3,000 2,500 2,000 1,500 1, Associate Earnings Profit before tax Unrealised profits Assets Unrealised profits R2.2bn * Associates are determined after deducting minorities and expenses

85 and the divisional prospects Investment Banking Private Equity Large annuity portfolio Healthy deal pipeline Associate annuity income Pipeline of realisations FiCC Equity Trading More volatility More volume More volatility More opportunity and risk

86 Good prospects, greater unpredictability IFRS Market volatility Disintermediation CAGR 40% CAGR 34%

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88 FNB s great performance continues June 07 June 06 change Net profit before taxation (R mil) % Advances (R bil) ( 17% to R180b post gross-up) % Deposits (R bil) ( 13% to R168b post gross-up) % Net interest revenue (R mil) % Non interest revenue (R mil) % ROE (%) 33.3% 31.8% 1.5% Cost to income (%) 59.9% 63.2% 3.3%

89 Growing profits & improving efficiency R bil % 66.3% +24% 63.20% +26% 59.60% 68% 66% 64% 62% 60% 58% 2 Jun-05 Jun-06 Jun-07 56% Pre-tax profit Cost to income * Prior years restated for businesses transferred out

90 Consumer dominates advances but every segment growing Composition Growth Mass +39% Consumer +22% Wealth +32% Commercial +21% Corporate +38% (-16% post gross-up) FNB Total %(+17% post gross-up)

91 Success in raising sticky deposits, despite low savings rate Composition Growth Mass +16% Consumer +16% Wealth +42% Commercial +19% Corporate +25% (+2% post gross-up) FNB Total % (+13% post gross-up)

92 FNB has a segment strategy and structure Income / Turnover R400m + N/A R0k 400m Public Sector Banking Commercial Banking Corporate & Transactional Banking Customer numbers 0,6k 12k 394k Profit before tax for year ended Corporate & Transactional Banking 9% June 07 FNB Smart & Support 7% R750k + R81 750k Wealth Segment Consumer Segment 45k 2,2m 3.1bn Commercial Banking 40% Consumer Segment 41% R0 R81k Smart Solutions 3,3m Wealth 3% Total 5,8m Corporate & Commercial = 49% Retail = 51%

93 All segments contributed Profit before tax +30% -35% R mil FNB Mass & Support June June Corporate Transactional Banking FNB Mass & Support Consumer Wealth Commercial Commercial Banking Consumer Segment +35% Corporate % Total FNB Wealth +59%

94 A success story in Mass Support includes significant NCA provision 7% - 35% FNB brand resonates in the mass market A R1 bil business FNB 3.3m customers (up 12%) Cherry-picking and secured lending behind 39% asset growth 22% increase in income generating transactions Insurance Policies up 30% to 2.6 million Expanding distribution Sales centres operating 7am-7pm, 7 days Cellphone banking customers up 74%

95 Customer and market share growth continues in Consumer Profits underpinned by continued growth in: Over 2 million customers as market share increases VSI reaches 2.94 Increasing transaction volumes support fee reductions Product innovations 41% +35% Consumer finance hub improved efficiency Investment in JV greenfields

96 Card disappoints Profits significantly down (59%) to R156m Dynamics: Margins squeezed by Usury Act ceiling until March 07 Start-up costs of JVs Massive growth ahead of new entrants had an anti-selection effect Unexpected interest rate increases Bad debts rose 85% to 5.4% of average advances Response: Significant tightening in credit management from November 2006 Outcome: Improved quality of new business Asset market share to 23.6% from 25.8%, but transactional market share maintained at 23.6%

97 Plastic still being swiped All banks market share credit, cheque and debit cards 32% Market share 27% 22% 17% 12% Jun '06 Jun '07 ABSA FNB NED STD Source: FNB Merchant Acquiring

98 HomeLoans: targeting ROE Dynamics: New business still dominated by intermediaries with 60% of new registrations Commoditised HomeLoans can produce inappropriate ROE s Response: Focus on ROE not market share, and on overall customer profitability Re-engineered back-office to improve service and reduce costs Maintained credit standards but refined provisioning Outcome: Stabilised margins but new business market share reduced from 20.7% to 15.8% Profits up 52% to R840 million

99 Strong performance in Wealth The SA wealth segment is growing at the 4 th fastest rate in the world after South Korea, India and Russia* Strong growth (45%) in assets-under-management to R26 billion Start-ups show promise 3% +59 % Offshore wealth management offered through Ashburton * (Merrill Lynch / Cap Gemini World Wealth Report 2006)

100 New products & customers drive Commercial growth Customer base grew 11% to 394,000 reflecting strong market share gains 21% advances growth driven by Commercial Property Finance and invoice discounting +34% 40% Sub-segment strategies in franchising, tourism and BEE Enrich relationships using ebucks, Biznetwork & Businessman s clubs Efficiency: account opening time down 30%; rating and scoring reduced from 2 days to ½ hour Scalable business model and quality client base

101 Transactional banking strategy pays off for Corporate Alternative strategy: Transactional banking +30% 9% Money Market and Direct Foreign Dealing transferred from FNB IB to RMB Growth in electronic channels Electronic banking transactional volumes +26% SpeedPoint volumes +31% eforex volumes +46% Cash throughput volume increase +35%

102 Africa shines Pre-tax profit up 25% to R927 mil; CIR 43.8% FNB Botswana Pre-tax profit +23% to R428m 34% CIR ratio despite significant expansion Deposits and Advances +12% (Pula) FNB Mozambique FNB Mozambique was launched on 24 July 07 with an 80% stake that will increase to 90% FNB Namibia Pre-tax profit +21% to R435m Deposits +7%, Advances +10% CIR reduces 2.4% to 49% FNB Lesotho Pre-tax profit moves positive to R2m ahead of business plan FNB Swaziland Pre-tax profit +59% to R62m (successful 2-year turnaround) Deposits +14%, Advances +10% CIR improved to 50%

103 African footprint has exciting growth prospects Botswana 2007: 4.7% 2008: 4.4% Mozambique 2007: 7.5% 2008: 7.2% Namibia 2007: 4.5% 2008: 5.0% South Africa 2007: 4.8% 2008: 4.5% Lesotho 2007: 3.0% 2008: 5.3% Swaziland 2007: 1.6% 2008: 1.4%

104 Why FNB remains upbeat SA and SADC economic growth will remain high Our diversified portfolio provides for sector rotation and interest rate volatility 2010 Sponsorship will give FNB an edge especially in black middle market NCA and Competition Commission will have only a marginal impact on profitability next year Lots of runway for expansion of representation, cross-selling and improving efficiency

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106 A challenging year for WesBank R mil June 07 June 06 Local lending % International operations (149) 14 (>100%) Consolidated (6%)

107 Performance - Curate s egg As expected in the current environment Slow down in retail new business (motor and loans) Higher bad debts Good performance in corporate and fleet Improved cost ratios in local operations Losses on the international front

108 Retail new business growth flattens after period of high R mil 30,000 growth 25,000 20,000 15,000 10,000 5,000 0 Dec '02 Jun '03 Dec '03 Jun '04 Dec '04 Jun '05 Dec '05 Jun '06 Dec '06 Jun '07 Half yearly new business

109 Steady decline in advances growth 25% 20% 15% 10% 5% 0% Dec '02 Jun '03 Dec '03 Jun '04 Dec '04 Jun '05 Dec '05 Jun '06 Dec '06 Jun '07 Six monthly advances growth

110 Corporate returns R mil Advances R mil Net income 100,000 1,600 90,000 80,000 70,000 60,000 20, % 26,500 1,400 1,200 1, % ,000 40,000 30,000 20,000 58, % 65, % 1,187 1,141 10, Jun '06 Jun '07 0 Jun '06 Jun '07 Retail Corporate Retail Corporate

111 40% Dominant in vehicle asset finance 30% Market share 20% 10% 0% Jun '02 Jun '03 Jun '04 Jun '05 Jun '06 Jun '07 WesBank Absa Standard Bank Nedcor Imperial Other Source: Reserve Bank DI 900 including securitisation Bond exchange

112 Bad debts rise as expected in this cycle Predictable bad debt levels in higher indebtedness environment Household debt levels impacting affordability Price of second hand vehicles Quality of newer book (<18 months) cleaner Low levels of corporate delinquency R mil Bad debts Bad debt rate 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0 Jun '01 Jun '02 Jun '03 Jun '04 Jun '05 Jun '06 Jun ' %

113 Sharp rise in household debt impacts affordability 80% 75% 70% 65% Sharp rise in household debt levels 60% 55% 50% 45% 40% 35% 30% Jun '80 Jun '83 Jun '86 Jun '89 Jun '92 Jun '95 Jun '98 Jun '01 Jun '04 Household debt to disposable income

114 International expansion still in investment phase Carlyle Finance United Kingdom MotorOne Finance - Australia Bought existing business Greenfield's Investment in people and systems Longer investment period Advances exceed R3.5 billion Advances exceed R2 billion Losses as expected Losses more than forecast Ready to deliver Expecting an improved performance Progress on strategies reviewed regularly

115 Improving outlook for 2008 Challenges faced Continued pressure on retail new business Affordability levels Higher interest rate environment But Strong pipeline in corporate Improvement in the used vehicle sector Improving book quality Arrears and provisions flattening Systems and operational efficiency Greater contribution from non-lending activities Building off a low base

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117 Financial highlights June 07 June 06 % change Group operating profit (R mil) Return on equity (%) Return on embedded value (%) New business embedded value (R mil)

118 Operational performance R mil June 07 June 06 % change Insurance operations Momentum insurance FNB insurance >100 Asset management RMB Asset Management Ashburton (4) Group operating profit

119 Solid performance from insurance operations R mil June 07 June 06 % change Insurance operations Momentum insurance FNB insurance >100 Asset management RMB Asset Management Ashburton (4) Group operating profit

120 Strong new business growth across the board APE R mil 1,600 1, % +31% +17% 1,200 1, % Retail Wealth Group FNB collaboration

121 Good sales drive growth in recurring premiums R mil New business +17% 1,200 1, % +19% +13% Positive growth in in-force premiums Recurring premium income R5.7bn (+16%) Significant contributor to insurance profits (32%) Risk RAs Endowments

122 Market share gains in lump sum premiums R mil New business +31% 14,000 12,000 10,000 8,000 6,000 4, % +15% +10% Strong distribution model Buoyant equity markets Significant increase in off-shore linked product sales LISP market share growth in AUM (13.3% to 14.3%) 2, % Individual life Linked products - local Annuities Linked products - offshore

123 Improved margins in second half 3.0% 2.5% 2.7% 2.6% 2.7% 2.2% Driven by strong volumes and favourable business mix 2.0% 1.8% 1.9% - Retail single investments 1.5% - Employee Benefits 1.0% - FNB insurance 0.5% 0.0% Dec '04 Jun '05 Dec '05 Jun '06 Dec '06 Jun '07 Margin: Value of new business as % of PV of future premiums

124 Growing channel diversification New business APE 100% 80% 60% 18% 15% 13% 8% 6% 12% 12% 9% 9% 14% 15% 16% 30% 40% 20% 68% 64% 60% 61% 0% Independent brokers Agency force FNB Other bank brokers

125 Growing product diversification New business APE per product R mil 3,000 2,500 2,000 1,500 1, Retail Wealth Group Health STI

126 Positioned for growth in History health Lives: Momentum Health Scheme Lives: MMSA (Administrator) Pulz Momentum Health Sovereign ALH MMSA Create economies of scale through integration Growth through market segment approach: - open schemes (high and low income) - local government schemes - restricted schemes

127 Significant contribution from FNB collaboration In-force API +62% pa R mil mil mil Growth driven by strong sales - funeral policies embedded credit life products Positive contribution to new business EV and margin Jun '05 Jun '06 Jun '07 In-force API Number of policies

128 Mixed results from asset management R mil June 07 June 06 % change Insurance operations Momentum insurance FNB insurance >100 Asset management RMB Asset Management Ashburton (4) Group operating profit

129 RMB Asset Management s strategic imperatives 1 Excellent investment performance 2 Leverage retail distribution and marketing 3 Eliminate duplication and improve efficiencies 4 New assets and markets 5 Globalise!

130 Improving trend in investment performance Alexander Forbes Global Large Manager Watch Performance period June 07 December 06 June 06 1 year 5/11 7/11 11/11

131 Award-winner in international hedge fund of funds 140% 120% RMBAM Global Diversified 100% 80% 60% 40% EDHEC Fund of Funds Index 20% -20% -40% MSCI World Equity Index Jan 99 Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07

132 New global alternative fund of funds business Alternative fund of funds Fund of Hedge Funds - ZAR - International Private Equity - ZAR - International Property - ZAR - International

133 Consistently good ROEV 35% 30% 27.9% 31.2% 28.1% 25% 20% 16.6% 15% 10% 5% 0% Investment return on net worth Value of new business Investment experience on VIF Operating experience

134 Strong growth in embedded value R mil 22,000 20,000 18,000 16,000 14, % 28% +9.5% % ,000 10,000 8,000 6,000 4,000 2,000 0 June '06 Growth in shareholders net worth Value of inforce Sub-total Dividends paid June '07

135 Improved capital efficiency 8% 7.3% CAR as a percentage of liabilities 7% 6% 5.7% 5.0% 5% 4.0% 4% 3.3% 3% 2% 2.6% 2.4% 2.1% 1.7% 1.6% 1% 0% Large companies Momentum

136 Driven by liability mix 100% 12% 17% 80% 32% 13% 60% 40% 20% 56% 70% 0% Linked and Market Related Smoothed Bonus Other

137 R mil More efficient use of economic capital 2.8 x CAR 2.3 x CAR x CAR 0.9 x CAR x CAR 1 x CAR 0 Jun '06 Jun '07 Termination Mortality and morbidity Expense Investment Credit Other risks Available for distribution

138 Looking forward: diversification ready to Profit deliver 2007 Revenue Health 2% Group 8% Other 6% Group 15% Other 5% Investments 52% Health 11% Investments 37% Retail 32% * Excludes FNB insurance Retail 32%

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140 Financial Markets Many strong franchises Excellent results Growth Strategies Diversified portfolios

141 Financial Markets Many strong franchises Excellent results Growth Strategies Diversified portfolios

142 Great franchises 5% 2% 1% 5% 13% 13% 35% 35% 8% 4% 8% 33% 4% 33% FNB FNB Africa RMB WesBank Momentum Discovery OUTsurance * Based on normalised earnings

143 Swaziland 7% With well diversified portfolios Corporate 9% Other 7% Namibia 47% Botswana 46% Africa 8% Commercial 40% Consumer 41% Equity trading 27% Other 10% FiCC 14% Wealth 3% Non Lending Entities Loans- 14% Retail 9% Corporate 25% Motor - Retail 52% Private Equity 25% Investment Banking 24% Health 2% Other Group 6% 8% Retail 32% Investment 52% * WesBank excludes international losses ** Based on profit before tax except for Momentum (normalised earnings)

144 Its not just about the numbers Corporate culture is very strong with effective and established management teams Basel II SARB approval to use Advanced Internal Ratings Based Approach for credit and market risk Deloitte / MoneyWeb Good Corporate Governance Awards 2 nd year in succession Strong focus on Transformation with buy in at divisional level Our BUSINESS PHILOSOPHY drives our success!

145 Financial Markets Many strong franchises Excellent results Growth Strategies Diversified portfolios

146 Macro environment changing Globally - Credit risk was under priced for a long time creating a bubble - Excessive leverage in the system exacerbated the problem when the bubble burst - Liquidity is the issue forced liquidations and knock-on effect - Strength of holder more important than quality of assets South Africa - Overheating, inflation, balance of payments deficit - Interest rates increase - Slow down in consumer spending/growth

147 With resultant uncertainties & risks Globally - Can domestic growth in Chindia make up for slowdown of US consumer? - Can problems / slowdown be contained in US or will it spill over into emerging markets? - Refinancing of debt will be the test South Africa - Balancing act of slowing down without throttling the economy - Can SA continue to finance trade deficit in face of risk of liquidity crunch / flight to quality? SA s growth story remains intact, but there is risk of more external shocks

148 Sustainability of RMB earnings Skills and 25yrs experience in trading bonds, derivatives and now equities Real-time risk management systems that have stood the test of time Balanced Private Equity portfolio (plant, maintain, harvest) Relatively small capital allocation to trading and principal investing More volatility but skills, experience, risk management and capital allocation will provide sustainable profits in future

149 Financial Markets Many strong franchises Excellent results Growth Strategies Diversified portfolios

150 How do we grow: Organic Most divisions have lots of growth opportunities in SA (e.g. RMB Commercial Property finance <10% market share vs WesBank s 36%) Divisions look offshore if they have a competitive advantage and/or can leverage local infrastructure

151 How do we grow: Greenfields Group was built on starting businesses (RMB, RMBAM, Discovery, OUTsurance, Private Equity, ebucks, etc) All businesses continue to look to start new ventures (locally and offshore)

152 How do we grow: Accelerated Greenfields Appropriate in offshore ventures Regulatory approvals already in place Key people in place Small but ready to grow

153 How do we grow: Acquisition Acquisition successes (e.g. FNB and Momentum) ROE vs Return on Investment Risks: Skeletons in cupboard, internal focus, incompatible cultures etc. Always weigh up greenfields and acquisitions but we favour greenfields

154 Conclusion Good results a tribute to our management and staff Excellent franchises to ensure growth in future Mindful of more risks in this environment therefore will rely on our skills, experience and risk management SA growth themes still intact Confident but realistic

155 Annexure

156 Banking Group normalised earnings R mil June 07 June 06 % change FNB FNB Africa RMB WesBank (6) FirstRand Short Term Insurance Brand performance Banking group support (11) Banking group profit before tax Tax (3 844) (3 012) (28) Minorities (823) (639) (29) Share based payments and other Banking Group normalised earnings

157 All businesses deliver R mil June 07 June 06 % change Banking Group Momentum Group Discovery Group FirstRand Limited (100) (169) 41 Sub-total Less: NCNR preference dividends (348) (274) (27) Normalised earnings for the group

158 Normalised vs headline R mil June 07 June 06 % change Normalised earnings for the group % Adjusted for: (1 388) (843) (65%) - Private equity realisations (397) (219) - National Treasury settlement - (30) -Discovery BEE (19) (102) - IFRS 2: Share based payments (401) (168) - Treasury shares (543) (352) - Listed property adjusted to NAV (28) 28 Headline earnings for the group %

159 Restated normalised vs headline R mil June 07 June 06 % change Normalised earnings for the group % Adjusted for: (1 401) (1 861) - Fair value investment property (410) (1 237) - National Treasury settlement - (30) -Discovery BEE (19) (102) - IFRS 2: Share based payments (401) (168) - Treasury shares (543) (352) - Listed property adjusted to NAV (28) 28 Headline earnings for the group %

160 Annexure

161 Performance to financial targets 35% 10% real growth 82% 30% Banking Group (ROE 31%) 25% 14% Momentum Group (ROE 25%) ROE 4% Discovery Group (ROE 22%) 20% 10% plus FirstRand WACC 15% 10% 0% 10% 20% 30% 40% Normalised earnings growth * Based on normalised earnings, excluding the FirstRand centre and NCNR preference shares

162 Normalised vs Headline R mil June 07 June 06 % change Banking group headline earnings Adjusted for: Private equity realisations IFRS 2: Share based payments Transfer of RMBP to the FirstRand book - 48 (>100) Banking group normalised headline earnings

163 Transactional income dominates NIR R mil June 07 June 06 % change Fees and commissions Transactional Knowledge >100 Management Insurance (28) Other fees Fair value Fair value FirstRand International, associates and jv s >100 Private equity Annuity income Realisations Sub - total

164 Transactional income dominates NIR R mil June 07 June 06 % change Sub - total Investment income (6) Associate income WesBank Outsurance Other income Associates >100 Other Total non interest revenue

165 Decomposing fair value R mil June 07 June 06 % change Lending Client flows Risk Risk Resources Capital (10) Total

166 Annexure

167 Headline earnings analysis R mil June 07 June 06 % Momentum group headline earnings Adjusted for: 106 (20) - IFRS2: Share based payments Listed property adjustments 28 (28) - National Treasury settlement Transfer of RMBP to the FirstRand book - (48) Momentum normalised earnings