UBS conference Integrated financial services
2 Integrated financial services Matching demand (assets) and supply (liabilities) Right to compete • Group model • Asset management • Insurance Conclusion
3 Existing models: banks vs insurers vs asset managers SEGREGATED PLATFORMS SUPPLY OF MONEY INSURANCE BANKING Short/long-term Deposits insurance INVESTMENT PRODUCTS LENDING PRODUCTS DEMAND FOR MONEY
4 Existing models: banks vs insurers vs asset managers SEGREGATED PLATFORMS BANCASSURANCE MODEL Partnership or one owns the other SUPPLY OF MONEY INSURANCE BANKING INSURANCE BANK COMPANY Short/long-term Deposits insurance Insurance company uses bank’s sales channel Insurance INVESTMENT PRODUCTS LENDING PRODUCTS Bank’s sales company’s sales channels channels DEMAND FOR MONEY
5 Integrated platforms required for customer-centric approach INTEGRATED PLATFORMS SUPPLY OF MONEY INSURANCE BANKING ASSET MANAGEMENT SHADOW BANKING LIABILITIES ASSETS VAF MORTGAGES CORPORATE/CIB UNSECURED AUM DEMAND FOR MONEY
6 Requires sophisticated asset and liability matching SUPPLY OF MONEY LIABILITIES SHADOW BANKING INSURANCE BANKING ASSET MANAGEMENT Optimise matching of assets CLEARING and liabilities through treasury, HOUSE ALM and structuring capabilities VAF MORTGAGES CORPORATE/CIB UNSECURED AUM ASSETS DEMAND FOR MONEY
7 Clearing house allows us to capture more of the value chain Reduce funding costs through better matching 1 of assets and liabilities CLEARING Create better value propositions 2 HOUSE to capture full customer value chain Originate on most efficient platform 3
8 Integrated financial services Matching demand (assets) and supply (liabilities) Right to compete • Group model • Asset management • Insurance Conclusion
9 FirstRand already a large player on both demand and supply sides SUPPLY OF MONEY LIABILITIES SHADOW BANKING INSURANCE BANKING ASSET MANAGEMENT Ashburton RMB GTSY FNB WesBank FNB RMB GTSY GTSY Investments Ashburton WesBank FNB RMB WesBank FNB Investments VAF MORTGAGES CORPORATE/CIB UNSECURED AUM ASSETS DEMAND FOR MONEY
10 Enabled by platform- and franchise-neutral business model Distribution channels Clearing house Customer bases Licences Banking Short-term insurance Life insurance Asset management Systems, data, operating platforms MADE AVAILABLE TO ALL
11 Supports a customer-centric approach • Single view of the customer • Identifying and meeting needs • Provide appropriate customer solutions and access Customer • Transparency and single point of accountability * Underwriting management agencies
12 Integrated financial services Matching demand (assets) and supply (liabilities) Right to compete • Group model • Asset management • Insurance Conclusion
13 Asset management strategy leverages innovative utilisation of existing building blocks • Origination and structuring franchises supply attractive assets previously not available in fund format • Customer base • Distribution • Balance sheet and liquidity • Optimisation of asset liability matching and risk management
14 What drives growth in AUM? TRUST/TIME Prerequisites INVESTMENT PERFORMANCE MARKET DYNAMICS TIED DISTRIBUTION
15 What drives growth in AUM? • Regulatory changes TRUST/TIME • Search for alternative sources of return • Liability-driven investing INVESTMENT • All of the above have driven demand for alternative PERFORMANCE asset classes • RMB origination capabilities (credit, private equity, infrastructure, renewables, real estate) MARKET DYNAMICS • Provides protection for RMB’s origination franchise and leverages RMB’s structuring capabilities TIED DISTRIBUTION
16 What drives growth in AUM? TRUST/TIME INVESTMENT • Ability to distribute is key PERFORMANCE • Tied distribution forces provide distinct advantage • FNB channels MARKET DYNAMICS • Digital • Face-to-face TIED DISTRIBUTION
17 WIM business has now been integrated into FNB • Distribution • Building own solutions for customers • Capture flows currently going to third parties • Protecting customer franchise • Cost-effective for FNB and client • Positions the group for new retail distribution review (RDR) regulations
18 Traction in AUM reflects success R billion • FNB distribution channels 250 • Alternatives – R52 billion AUM • Credit funds 200 • Structured notes (GMFS) • LDI 150 • Westport (African real estate) • 100 Private equity, renewables 103 • 50 Traditional – R51billion AUM 88 72 60 • Fixed income • 0 Equity 2014 2015 2016 2017 • Multi-asset AM traditional AUM AM alternative AUM WIM AUM WIM AUE WIM AUA * AUM excludes conduits.
19 Integrated financial services Matching demand (assets) and supply (liabilities) Right to compete • Group model • Asset management • Insurance Conclusion
20 Our right to compete in the insurance space Group customers are buying insurance products Through FNB Insurance Debit orders to brokers – third party product providers products Sell own products to our customers Use data analytics to offer product to customer when required Offer better products at better price Supported by rewards programme
21 Significant opportunity in our own customer base Jun 16 Jul 16 Aug 16 Sep 16 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Jul 17 Aug 17 Sep 17 FNB share of ST premium flow Debit orders to short-term insurers Short-term insurance: the real opportunity is in comprehensive (underwriting)
22 How do we capture the opportunity in this space? ORGANIC BUY PARTNER
23 Good traction in FNB insurance –increased penetration of customer base utilising all channels Penetration Sales channels Value creation Embedded value – life products In-force annualised premium on Channel % of sales standalone life products R million R million Branch 75 4 000 250 3 500 Call centres 13 3 459 200 +48% 3 000 Digital 8 2 500 150 2 343 Other 4 2 000 100 1 500 1 000 50 500 0 0 2016 2017 Premium Consumer
24 Integrated financial services Matching demand (assets) and supply (liabilities) Right to compete • Group model • Asset management • Insurance Conclusion
25 Conclusion • We have the building blocks: • Customer base • Distribution channels • Product manufacturing capabilities/skills • Data analytics • Platforms • Sizeable profit pools • Group’s current revenue contribution from these activities is small • Presents opportunity for growth and diversification • ROE enhancing • Asset management business – capital light • Attractive returns in insurance
www.firstrand.co.za
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