1

20102010Debt investor presentation

London, 26 March 2010,

2

Overview of the key macro trends impacting FirstRand

Jaco van der Walt

3

Executive summary

• Global• Global recovery is underwayGlobal recovery is underway• Severe imbalances remain

• Macros for international strategyS b S h Af i t t f l b l th• Sub-Saharan Africa to outperform global growth

• Healthy fiscal positions of Sub-Saharan African countries• Sub-Saharan Africa benefits from increased trade with, and investment from, Asia

• South Africa• GDP recovering• Inflation to return to the target• Inflation to return to the target• Policy stimulus to be removed gradually• Nominal GDP to grow below average• Household sector recovering but risks remain• Corporate sector tentatively optimistic• Property prices have stabilised• Advances growth to lag economic activity

4

Global outlook

5

Global recovery – driven by EMs

Global GDP Growth Contribution to Global GDP Growthy/y%

5

6

60%

70%

G7 BRICs

3

4

40%

50%

1

2

20%

30%

-1

010%

20%

So rces IMF (historical data) FirstRand (forecast) S IMF

-2'00 '02 '04 '06 '08 '10 '12 '14

0%1990-2000 2000-08 2009-14e

Sources: IMF (historical data), FirstRand (forecast) Source: IMF

6

Imbalances remain

G7 public debt increasingHousehold debt still high

110180 United States

% disposable income

% GDP

100

150

United Kingdom

80

90

120

7090

6000 01 02 03 04 05 06 07 08 09 10 11 12 13

601995 2000 2005 2009

Source: OECD Source: EIU

7

Risk monitor shows concern for tail risk

4

8

Macros for international strategy

9

Targeting growth opportunities

Hi hChina 8.2I di 6 6High

growth*India 6.6Brazil 4.6Russia 4.5

Mediumgrowth

Nigeria 5.8Egypt 5.3Indonesia 5.2Turkey 5.1growth Turkey 5.1Poland 4.5South Africa 4.1

Australia 2 3

Lowgrowth

Australia 2.3US 2.2UK 2.1Germany 1.5Japan 1.1

Note: Figures represent GDP growth forecasts for 2010-2019Source: Goldman Sachs

10

Sub-Saharan Africa to outperform global growth

8 SSA GDP

global growth% y/y

6

8 SSA GDP

4

6

2 Global GDP

0

Global GDP

-280 84 88 92 96 00 04 08 1280 84 88 92 96 00 04 08 12

Source: IMF

11

Sub Saharan Africa in context

Growth ratesGDP

Angola

B

GDP (2009 PPP USD billions)

Angola

B t

Average 5 year forecast

Botswana

Kenya

Lesotho

Botswana

Kenya

Lesotho

MMozam-bique

Namibia

Nigeria

Mozam-bique

Namibia

Nigeria

SouthAfrica

Swaziland

Tanzania

SouthAfrica

Swaziland

Tanzania

0 100 200 300 400 500

Tanzania

Zambia

0 2 4 6 8

Tanzania

Zambia

Source: IMF Source: IMF

12

SSA cyclical growth driversExport volumesFiscal stimulus swing

Change in fiscal deficit/surplus(2008 11 2004 07 )

12% y/y

Angola

Botswana

(2008-11 ave - 2004-07 ave)

4

8

Botswana

Kenya

Mozam-bique

-8

-4

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Terms of trade

q

Namibia

Nigeria

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Source: IMF

% y/ySouthAfrica

Tanzania

Z bi 0

5

10

15% y/y

Terms of Trade

-12 -9 -6 -3 0 3

Zambia

Zimbabwe

% GDP-15

-10

-5

0

Sources: RMB FICC Research and EIU

-202003 2004 2005 2006 2007 2008 2009 2010

Source: IMF

13

SSA fiscal balances remain healthy

Public debtFiscal deficits

Angola

Botswana

2008-2011 Average

Angola

Botswana

2008-2011 Average

Botswana

Kenya

Lesotho

Mozam-

Botswana

Kenya

Lesotho

Mozam- Mozam-bique

Namibia

Nigeria

S h

Mozam-bique

Namibia

Nigeria

S th SouthAfrica

Swaziland

Tanzania

SouthAfrica

Swaziland

Tanzania

0 20 40 60 80

Zambia

Source: EIU

% GDP

276%

-10 -8 -6 -4 -2 0

Zambia

Source: RMB FiCC Research and EIU

% GDP

Source: EIUSource: RMB FiCC Research and EIU

14

Exploiting trade and investment linkages

Foreign direct investmentExport destinations% of total % of world FDI

60

1999 2003 2008

% of totalexports

3

4% of world FDI

Inward FDI flow into Sub Sahara Africa

40

501999 2003 2008

0

1

2

Excl. South Africa

30

40 0'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08

Source: UNCTAD

Ni i

Top 10 African FDI destinations

20

Nigeria

Angola

Egypt

South Africa

Libya■ 2007

10

y

Tunisia

Algeria

Congo

Sudan

■ 2008

0Asia North America Europe

Source: WTO

0 4 8 12 16 20

Morocco

Source: World Investment Report 2009$bn

15

South African economic outlook

16

Impact of the global financial crisis on SA

• No direct impact on the banking sector

• Impact on real economy via the usual channels

• Impact on the banking sector via the real economy

• No government support required for banking sector

• Orthodox policy stimulus to counter recession

• SA GDP to return towards trend growth

17

SA imbalances improving

Before theBefore thecrisis Latest

Series Metric (2004-07 Ave)

Credit extension %y/y 19% -1.0%

House price growth %y/y 21% 6.0%

Current account deficit % GDP 4 8% 2 8%Current account deficit % GDP -4.8% -2.8%

Government budget % GDP 0.4% -7.2%

18

SA returning to the growth highway

5

6SA GDP

% y/y

4

5

2

3

0

1

-2

-1

-3'03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Source: SARB, FirstRand

19

SA domestic demand reviving 2011

70

% of GDP growth

70

2010

50 2011

30

10

-10Consumption Investment Government Current account

Source: SARB

20

Current account at better levels

150

ZAR billions

100

150

FDI inflowsOther investmentPortfolio flo

50

Portfolio flow

0

-100

-50Current account balance

-15000 01 02 03 04 05 06 07 08 09 10 11 1200 01 02 03 04 05 06 07 08 09 10 11 12

Sources: SARB, FirstRand

21

SA inflation returning to the target

14

% y/y

12

14

CPI Inflation

10

CPI Inflation

8

4

6

2

4

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12Sources: SARB, FirstRand

22

The MPC’s inflation dilemma

56

% GDP

12345

Potential GDPDemand pull inflation pressures

Excesssupply =

-3-2-10

pressures absentcapacity

03 04 05 06 07 08 09 10 11 12

• But cost-push pressures:• Eskom• Wage pressures• Food prices by year-end

23

SA rates to normalise gradually

%

14Repo

12

10

8

61Q00

1Q01

1Q02

1Q03

1Q04

1Q05

1Q06

1Q07

1Q08

1Q09

1Q10

1Q11

1Q12

Sources: SARB, FirstRand

24

SA nominal GDP growth below average

18

% y/y

14

Nominal GDP growth

14

10

6

294 96 98 00 02 04 06 08 10 12

Sources: SARB, FirstRand

Note: Nominal GDP growth ≈ GDP growth + CPI inflation

25

SA household income recovering slowly

Employment stabilising Disposable income recovering

250thousands Quarterly change in employment 25

% q/q ann

0

250

5

10

15

20Nominal disposable income growth

-500

-250

4Q08 1Q09 2Q09 3Q09 4Q09-10

-5

0

5

00 01 02 03 04 05 06 07 08 09

Real disposable income growth

Consumer confidence in positive territory

Source: Stats SA

Wage per worker at average% / Index

Sources: Bloomberg, FirstRand

12

15

18% y/y Payment per worker

0

10

20

30Index

3

6

9

-30

-20

-10

0

094 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Sources: INet Bridge, FirstRand

-4082 85 88 91 94 97 00 03 06 09

Sources: Bloomberg, FirstRand

26

Household debt to remain affordable

%

18

14

16

Debt service costDebt service cost

12

14

8

10 AverageAverage

6

2

4

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 1280 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12Sources: SARB, FirstRand

27

Opportunities to rebalance across bands

%%

140

160

180 SA debt to disposable income

80

90% Debt to disposable

income

80

100

12070

40

60

80

50

60

0

20

40

SA income bandsSources: BMR Unisa, FirstRand

3081 85 89 93 97 01 05 09

Source: SARB

28

House prices have stabilisedRecovery in house price growth… …but gains are below inflation

45% y/y

Nominal house35% y/y

Real house i th

15

25

35Nominal house price growth

5

15

25price growth

-15

-5

5

81 84 87 90 93 96 99 02 05 08 11-25

-15

-5

81 84 87 90 93 96 99 02 05 08 11

Nominal peak to trough falls Real peak to trough falls

Sources: INet Bridge, FirstRand Sources: INet Bridge, FirstRand

I d J 03 100 I d J 03 100

140

160

180

200

240

280Index, Jan03 = 100

SA USA (rhs) -4% 140

160

200

240Index, Jan03 = 100

SA (lhs)USA (rhs)

100

120

140

120

160

200

-32%100

120

120

160 -12%

-35%8080

03 04 06 08 09Source: Bloomberg, FirstRand

808003 04 06 08 09

Source: Bloomberg, FirstRand

-35%

29

Corporate SA tentatively optimisticInvestment Employment

60 PMI: EmploymentIndex

10.020% q/q saa

Private sector i t t

GDP th

45

50

55

p y

2 5

0.0

2.5

5.0

7.5

5

0

5

10

15 investment spending (Lhs)

growth (Rhs)

35

40

45

03 04 05 06 07 08 09 10-10.0

-7.5

-5.0

-2.5

-20

-15

-10

-5

00 01 02 03 04 05 06 07 08 09

Corporate credit growth Business confidence% y/y Credit extension to

03 04 05 06 07 08 09 10Source: SARB

Inde

Sources: SARB, FirstRand

2025303540

% y/y Credit extension to corporates

60

80

100Index

Business confidence

10-505

1015

0

20

40Business

cycle downswings

-1095 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

Sources: SARB, FirstRand

080 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

Sources: INet Bridge, SARB, FirstRand

30

Advances growth to lag economic activity

Private sector credit / GDPPrivate sector credit

85

Ratio30% y/y

Credit growth

75

85

20

25

6510

15

555

10

Nom GDP growth

4582 86 90 94 98 02 06 10

-5

0

82 85 88 91 94 97 00 03 06 09 12Source: SARB, FirstRand

82 85 88 91 94 97 00 03 06 09 12Sources: SARB, FirstRand

31

SA government debt servicing cost still manageablestill manageable

4520% %

36

45

17

20

Gov debt/GDP (rhs)

27

36

14

Gov debt/GDP (rhs)

1811 Gov debt servicing cost/expenditure

98

cost/expenditure(lhs)

052002/03 2004/05 2006/07 2008/09 2010/11 2012/132002/03 2004/05 2006/07 2008/09 2010/11 2012/13Sources: National Treasury, FirstRand

32

SA fiscal stimulus to counter recession

% of total expenditure

Fi l b l% GDP

-8

-7

68

9

10 Fiscal balance (rhs)

-6

-5

-46

7

8

Govt investment spending (lhs)4

-3

-24

5

6

-1

02

3

1

20

1

2002/03 2004/05 2006/07 2008/09 2010/11 2012/132002/03 2004/05 2006/07 2008/09 2010/11 2012/13

Sources: National Treasury, FirstRand

33

Appendixpp

34

South Africa fact sheet

Population (millions) 49.1Labour force (millions) 17 1Labour force (millions) 17.1Employed (millions) 13.8Unemployment rate 24.3%N i l GDP (ZAR billi ) 2 431Nominal GDP (ZAR billions) 2,431Nominal GDP (USD billions) 324GDP per capita (ZAR) 36 951GDP per capita (USD) 4 926Budget deficit 7.3%Government debt to GDP ratio 28.2%%External government debt to GDP ratio 3.8%External bank debt to GDP ratio 3.2%Foreign exchange reserves (USD billions) 32 3Foreign exchange reserves (USD billions) 32.3Current account deficit (% GDP) 3.2%Inflation 6.2%Sovereign debt rating BBB+ (S&P); BBB+ (Fitch); A3 (Moodys)

35

SA GDP fact sheet

GDP growth (y/y) -1.4%

GDP growth (q/q annualised) 3 2%GDP growth (q/q annualised) 3.2%

Nominal GDP growth (y/y) 6.9%

Nominal GDP growth (q/q annualised) 2.4%

Savings (% GDP) 17%

Investment (% GDP) 25%

Consumption (% GDP) 62%Consumption (% GDP) 62%

Government spending to GDP ratio 21%

Remuneration to employees (% GDP) 47%

Gross operating surplus (% GDP) 42%

Mining (% GDP) 9%

Manufacturing (% GDP) 14%Manufacturing (% GDP) 14%

Construction (% GDP) 3%

Wholesale and retail trade (% GDP) 13%

Finance and real estate (% GDP) 19%

36

Financial market summary

2yr – 10yr rates Rand & NEER

13200Index ZAR/$Index, Jan07 = 100

Nominal effective 16%

10-year government bond yield

7

9

11

80

120

160exchange rate (lhs) ZAR/$

(rhs)

12

14

bond yield

3

5

7

0

40

80

94 96 98 00 02 04 06 08 106

8

10

00 01 02 03 04 04 05 06 07 08 09

Sovereign spread Equity market

Source: Bloomberg,

S d (b ) I d

00 01 02 03 04 04 05 06 07 08 09Sources: Bloomberg, FirstRand

400

500

600

700Spread (bps)

25 000

30 000

35 000Index

JSE All Share

100

200

300

400

SA sovereign spread

10 000

15 000

20 000

003 04 05 06 07 08 09

Sources: Bloomberg, FirstRand

5 00000 01 02 03 04 04 05 06 07 08 09

Sources: Bloomberg, FirstRand

Overview of FirstRand:Structure, results & strategy

Johan Burgerg

38

Current structure

100%100%

Listed entity (FirstRand Limited, JSE: FSR)

100% 100%100%

FirstRand InvestmentHoldings Limited

MomentumGroup Limited

FirstRand BankHoldings Limited

100%

Banking Insurance & asset managementUnregulated

100%

FirstRand Bank LimitedFirstRand International Ltd FNB Africa

100% 100% 100%100% 100% 100%

Investment banking division Instalment finance divisionCommercial banking division

39

Proposed structureConsolidated supervision

Bank controlling company, listed entity (FirstRand Limited, JSE: FSR)

FirstRandBank

FirstRandAfrica

Momentum Group

FirstRandOtherBank Africa GroupOther

Non-banking activities:FR I t ti l

FNB BotswanaFNB Namibia

Insurance & t t- FR International

- OUTsurance- Other

FNB NamibiaFNB SwazilandFNB Lesotho

FNB MozambiqueFNB Zambia

asset management

FNB Zambia

40

Financial review

Johan Burgerg

41

Macro remains challenging

• Weak GDP growth

• Continuing job losses

• Lower interest rates

• High levels of consumer leverage, but some de-risking taking place

• Corporate sector cautious about recovery

• Recovery in equity markets

42

High-level impact on performance

– Negative balance sheet growth

– Lower growth in transaction volumes

– Negative endowment effect

+ Reduction in retail bad debts

+ Level of losses from legacy portfolios reducing

+ Increase in fees earned on investment business

43

Despite challenges, profitability improving

6 000

Normalised earnings*R millions

5 319

5 990 5 953

5 000

6 000

1%

ROE = 17%

4 445 4 576 4 6054 000

79%

2 575

3 000

2 5752 000

0

1 000

Dec '06 Jun '07 Dec '07 Jun '08 Dec '08 Jun '09 Dec '09* December 2006 to December 2007 normalised earnings exclude contributions from Discovery

44

Franchises show mixed performance year on year but trend positiveyear-on-year, but trend positive

Profit before taxR illi

6 months t D ’09

6 months t J ’09

Change (6 /6 )

6 months t D ’08

Change ( / )R millions to Dec ’09 to Jun ’09 (6m/6m) to Dec ’08 (y/y)

FNB 2 895 2 185 32% 2 875 1%

FNB Africa 643 564 14% 658 (2%)FNB Africa 643 564 14% 658 (2%)

RMB 1 403 151 >100% 1 904 (26%)

WesBank* 470 244 93% 168 >100%WesBank 470 244 93% 168 >100%

OUTsurance 216 213 1% 227 (5%)

Momentum** 850 909 (6%) 740 15%Momentum 850 909 (6%) 740 15%* Normalised profit before tax (i.e. excl. loss on sale of Motor One and goodwill impairments)** Figures shown for Momentum are normalised earnings (not PBT)

45

Earnings diversification

B f hi B t

17%17%

By franchise By segment

37%46%7%

23%

23%

23%

Retail

7%

FNB Retail

Corporate

Investment banking

FNB Africa

RMB

WesBankInsurance

WesBank

Momentum

46

Banking Group key financial ratios

Dec ’09 Dec ’08 Change

Normalised earnings (R millions) 4 038 4 149 (3%)

Return on equity (%) 17 18 Return on equity (%) 17 18

Return on assets (%) 1.26 1.23

Credit loss ratio (%) 1.51 1.64

Cost to income ratio normalised (%) 55 5 52 9 Cost to income ratio – normalised (%) 55.5 52.9

Tier 1 capital ratio* (%) 12.7 11.3

Interest margin – normalised (%) 5.02 5.17

Advances** (R billions) 458 442 4%Advances (R billions) 458 442 4%

* Ratio calculated for FRBH including unappropriated profits

47

Diversification ratios (interest vs non-interest)(interest vs non-interest)

Current Current adjusted for endowmentCurrent Current adjusted for endowment

Interest 40% 48%

Non-interest 60% 52%

NIR composition Current

Client activities 90%

Investment/risk (secondary markets) 10%

Composition of NIR from client activities Current

Transactional income (commercial and retail banking) 70%

Interest spread on corporate lending activities in RMB (fair value accounted) 12%

48

Net interest income

49

Bad debt unwind drives recovery in retail NII after impairmentsNII after impairments

Net interest income after bad debts Dec ’09 Dec ’08 ChangeR millions

Dec 09 Dec 08 Change

HomeLoans (138) (705) (80%)

Bad de

WesBank 779 109 >100%

Card 92 (18) (>100%)

ebt decrease

FNB Africa 745 736 1%

Other consumer banking 853 1 013 (16%)

Endowm

e

Mass 262 458 (43%)

Wealth* 313 302 4%

ent A

dvangrow

FNB other and support (80) 24 (>100%)

Retail net interest income after bad debts 2 826 1 919 47%

ces w

th

Retail net interest income after bad debts 2 826 1 919 47%* Wealth NII driven by advances growth after increase in bad debts

50

Corporate and commercial net interest income reflects endowmentincome reflects endowment

Net interest income after bad debtsR millions

Dec ’09 Dec ‘08 Change

End

FNB Commercial 1 191 1 761 (32%)

FNB Corporate 313 212 48% Bdedow

ment

RMB 5 (113) (>100%)

ad debtecrease

Bain

WesBank 42 332 (87%)

Corporate net interest income after bad debts* 1 551 2 192 (29%)

ad debt crease

p ( )

* Excluding Corporate Centre

51

Margin hit by endowment, but partly offset by asset pricingoffset by asset pricing

Percentage of average interest-earning banking assets %

D ’08 li d 5 17Dec ’08 normalised 5.17

Asset price movement 0.50

Capital and deposit endowment effect (0 91)Capital and deposit endowment effect (0.91)

Retail deposit pricing (0.04)

Wholesale liquidity pricing (0 05)Wholesale liquidity pricing (0.05)

BSM hedges 0.35

Dec ’09 normalised 5.02

52

Bad debts

53

Bad debts have peaked, but NPLs sticky

5 6 1 8

2.06.0

5.65.4

1.4

1.8

1.51.6

1.85.0

4.2

3.4

1.3

1.0 1.11.3 1.2

1.44.0

2.82.6

2.3

2.90.8

0.50.8 0.8

1.0

2 0

3.0 Long-run expected loss: 0.9

1.51.2 1.1

1.5

0.40.3

0.5

0.4

0.6

1.0

2.0

0.0

0.2

0.0Jun '99 Jun '00 Jun '01 Jun '02 Jun '03 Jun '04 Jun '05 Jun '06 Jun '07 Jun '08 Jun '09 Dec '09

NPLs (%) Impairment charge (%) Long-run expected loss

54

Retail NPL flows decline

R millions Retail NPL quarterly flows

4 000

3 000

2 000

1 000

0

-1 000Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

55

All retail lending books improving and corporate more robust than expected corporate more robust than expected

Bad debtsPercentage of average advances

6 months to Dec ’09

6 monthsto Jun ’09

6 months to Dec ’08

Retail 2.08 2.97 2.63

- Residential mortgages 1.17 1.77 1.48g g

- Credit card 8.14 12.51 9.77

- Vehicle and asset finance (SA) 2.12 2.54 2.96

Wholesale* 0.71 0.90 0.67

Total bad debt ratio 1.51 1.99 1.64

* Includes WesBank Business and Corporate

56

HomeLoans’ new credit origination strategies improving quality of business writtenimproving quality of business written

H L i t l i15%

HomeLoans vintage analysis

10%

5%5%

0%

2006

06

2006

09

2006

12

2007

03

2007

06

2007

09

2007

12

2008

03

2008

06

2008

09

2008

12

2009

03

2009

06

2009

09

3 6 12 monthsTime since registration:

57

Non interest revenue

58

NIR driven by organic growth and turnaround and turnaround

R millions Dec ’09 Dec ’08 ChangeR millions Dec ’09 Dec ’08 Change

Client activities/primary markets 11 493 10 964 5%

T ti l i 8 555 7 964 7%- Transactional income 8 555 7 964 7%

- Annuity fair value income 1 469 1 343 9%

- Operational associates income 422 434 (3%)- Operational associates income 422 434 (3%)

- Other primary income 1 047 1 223 (14%)

Investment/risk activities/secondary markets 1 044 (44) (>100%)y ( ) ( )

- Fair value risk income 439 (767) (>100%)

- Private equity (4) 1 313 (>100%)

- Other investment income* 609 (590) (>100%)

Total normalised non interest revenue ** 12 537 10 920 15%

* Revenue earned on assets held against employee liabilities, the RMB Resources portfolio, and other

59

Reasonable growth in transactional volumes despite tough conditionsvolumes despite tough conditionsTransactional revenueR millions

7%2009 breakdown by franchise*

7 500

5 000

2 500FNB FNB Af i RMB W B kFNB FNB Africa RMB WesBank

0Dec '08 Dec '09 * Excluding Corporate Centre

60

Sustained performance from lending business dampened by lower market activitybusiness dampened by lower market activity

Fair value annuity revenue

1 500

R millions

9%R millions Dec ’09 Dec ’08 Change

Annuity 1 469 1 343 9%

- Lending 1 092 868 26%1 000 - Client flows 377 475 (21%)

Client flo s 377 475 (21%)

500

Client flows 377 475 (21%)

- Forex 209 286 (27%)

- Debt 128 148 (14%)( )

- Equity 40 41 (2%)

0Dec '08 Dec '09

61

Turnaround in risk income

Fair value risk

1 000

R millions

R millions Dec ’09 Dec ’08 Change

500 (>100%)

g

Risk 439 (767) (>100%)

- Equities 127 (1 101) (>100%)

0

q ( ) ( )

- Commodities 22 91 (76%)

- Interest rates 226 384 (41%)

- 500

- Credit 35 (336) (>100%)

- Forex 29 195 (85%)500

-1 000Dec '08 Dec '09

62

Private equity reflecting current cycle

R millions Dec ’09 Dec ’08 Change

Annuity income 229 431 (47%)

Realisations and impairments (233) 882 (>100%)p ( ) ( )

Total private equity income (4) 1 313 (>100%)

Unrealised profits at R1.5 billion (Dec ’08: R1 billion)

63

Costs

64

Normalised cost growth below inflation

14 000

R millions

11

12 000

14 000

(2%) (2%) (8%)1% 751 10 543

10 438

8 000

10 000

6 000

2 000

4 000

0As per

normalised i

Fund liabilities New subsidiaries

d i

Revenue related

Comparable cost base D '09

Normalised cost Dec '08

income statement

and expansion expenses Dec '09

65

Results in a nutshell

66

Operational performance reflects underlying franchise strengthunderlying franchise strengthProfit before taxR millions

6 000

7 000

10%

5 421

5 955

5 000

6 000

(19%)9%

(19%)

18%

8%

3 000

4 000 12%(19%)

1 000

2 000Market FirstRand specific

0

1 000

Dec 08 Endowment Decrease in Private equity Legacy Other Organic Dec 09bad debts

q y g yportfolios investment

income

ggrowth

67

Capital

68

Banking Group’s capital position remains robustremains robust

FRBH Tier 1% Total %FRBH capital adequacy (%)

Capital adequacy ratio 12.19 14.34

2 15

14.34

12.97Regulatory minimum 7.00 9.50*

Target 10.00 12.00 – 13.50

0.90.86

2.151.89

FRB Tier 1% Total %11.29 10 22

Capital adequacy ratio 10.55 12.83

Regulatory minimum 7 00 9 50*

10.22

Regulatory minimum 7.00 9.50

Target 9.50 11.50 – 13.00Dec '09 Dec '08

Core Tier 1 Tier 1 pref shares Tier 2* Excludes bank-specific (Pillar 2b) add-on** Ratios exclude unappropriated profits of R1.6bn and R1.7bn for

FRB and FRBH respectively

Core Tier 1 Tier 1 pref shares Tier 2

69

Banking ROEs continue to recover

30%

20%

10%Jun '04 Jun '05 Jun '06 Jun '07 Jun '08 Jun '09 Dec '09

Return on equity (actual) Return on equity (adjusted for the cycle)Average cost of equity Average ROE through the cycle

70

Strategy

Johan Burgerg

71

Strategy & growth opportunities

• SADC strategies

• Rest of Africa strategies

72

FirstRand’s refocused strategy (S th Af i )(South Africa)

• Group’s portfolio already has• Diverse revenue streams

• Strong operating franchises

• Asset origination and distribution capabilities

• Building blocks for access to profit pools in SA financial services• Increase organic growth opportunities that currently exist between franchises

E d i h fi l i fi i l i• Expand into other profit pools in financial services

73

Opportunities in retail space

• Leverage off FNB’s continued investment in footprint and innovation• Utilising telecommunications and cellphone platforms• Growing electronic customer channelsGrowing electronic customer channels

• Mass segment a key area of growth for FNB• Easy Plan

• Continued focus on deposit franchise

• WesBank’s further alliance opportunities• WesBank s further alliance opportunities

74

Opportunities in the corporate and i b ki investment banking space

• Integrate CIB approach to grow in corporate space

Ali d FNB C t ith RMB d i t t d li t t• Aligned FNB Corporate with RMB and integrated client coverage team

• Enhanced service offering

• Improve our share of revenues across corporate and investment banking activities

75

Strategy & growth opportunities

• SADC strategies

• Rest of Africa strategies

76

Update on international strategy

• Operate in markets that strengthen the Group’s position as a leading African financial services group – key growth markets are:

• Nigeria• Staffing Nigeria rep office• Investigating acquisition opportunitiesg g q pp

• Zambia• Tanzania

• Awaiting regulatory approvalAwaiting regulatory approval• Angola

• Received regulatory approval for rep office

• Focus on Africa and key African-Asian corridors• CCB co-operation resulted in deal flow• India platform gains traction

• Increased focus on leveraging existing African platforms

77

FirstRand rebalancing its portfolio

• Retail vs corporate (CIB alignment)

• Retail portfolio (mass vs consumer segments)

• SADC vs rest of Africa

• Client franchises vs secondary market businesses

• Asset pools vs savings pools

• Bottom-up strategies vs top-down strategies

Maintain sound financial position

78

FirstRand growth prospects

• Short term recovery story• Short term recovery story• Unwind of the cycle will positively impact earnings to 2011• Reducing negative impact of legacy portfolios

• Medium term• Subdued GDP recovery expected to put pressure on top line growth• Subdued GDP recovery expected to put pressure on top line growth• Continued focus on unlocking synergies and managing costs

• Long term • Delivery on domestic and international strategy• Regulatory changes coming but impact uncertain• Regulatory changes coming, but impact uncertain

79

Capital management

Samantha Balsdon

80

Providing resources to back the Group’s strategy

FirstRand Group

Setting the Portfolio strategy

Today’s portfolio

Id tif i t d t iti dGrowth, Ensure

Business and action plans Identifying trends, opportunities and threats

,demographic, technological, regulatory, etc.

resources are available to

provide for the strategy

Target performance characteristicsTarget portfolio mixAlign with

growth, return and volatility

targets

Optimise portfolio to

provide these characteristics

Target portfolio

81

Contextualising capital strategyg p gy

Earnings Residual risks to earnings

Solvency / Tail risk -Capitalearnings p

Expected scenario

Good scenario

Cost baseSevere scenario

Cost base

Catastrophic scenario

Very severe scenarioOutstanding

year

Earnings Residual Risks Capital

Operating businesses seek to maximise returns within acceptable earnings Capital as buffer against

Expected earnings Zero profit Zero revenue Loss at 99.9% LossRevenue

Operating businesses seek to maximise returns within acceptable earnings volatility constraints

Capital as buffer against catastrophic outcomes

Earnings act as the first buffer against losses and financial underperformance

Group functions manage and mitigate these where economically feasible

“Tail risk to earningsunderperformance Tail risk to earnings resilience/sustainability”

82

Strengthening capital position over time

% 13 8% 14 6% 14 3%

FirstRand Bank Holdings Ltd(R million)

10 222 9 816 7 410 7 446

12.8% 13.6% 13.8% 14.6% 14.3%

5.0%

10.0%

15.0%

40,000

45,000

50,000

55,000

41 566 40 612 42 173

10 373 -5.0%

0.0%

25,000

30,000

35,000

24 129

36 754 41 566 40 612 42 173

-15.0%

-10.0%

5,000

10,000

15,000

20,000

-20.0%-

Jun 06 Jun 07 Jun 08 Jun 09 Dec 09

Tier 1 capital Tier 2 capital Capital adequacy %Tier 1 capital Tier 2 capital Capital adequacy %

83

A similar picture for the bank

FirstRand Bank Ltd(R million)

8 202 6 706 6 751

12.0% 11.4% 12.3% 13.1% 12.8%

5.0%

10.0%

15.0%

30,000

35,000

40,000

27 356 29 721 31 117

9 026

8 577

-5.0%

0.0%

15,000

20,000

25,000

16 507 22 666

27 356 29 721

-15.0%

-10.0%

5,000

10,000

-20.0%-

Jun 06 Jun 07 Jun 08 Jun 09 Dec 09

Tier 1 capital Tier 2 capital Capital adequacy %p p p q y

84

Capital levels exceed targets and quality i d

Capital adequacy December 2009Minimum capital adequacy

is goodM

ax 5

0%

f Prim

ary

2.15%

12.0%-13.5%

14.34%Capital adequacy December 2009Minimum capital adequacy

Lower Tier 2 11.5%-13.0% 12.83%

Max

100

%

of P

rimar

y M of Secondaryand

Tertiary2.5%

0.90%

%

3.5%

9 5%*Upper Tier 23.5%

2.28%

1.02%

Hybrid debtinstrumentsax

15%

P

rimar

y

x 25

%rim

ary

Pillar 1 andPillar 2

@ 9.5%*

11 29%

1.75

%

2.5%

9.5%*pp

1.75%

instruments

Non-redeemablenon-cumulative

preference shares

Ma

of

Max

of P

Primaryi 7%

5.25%8.25%

11.29%1.75% 9.53%

7.75%

Ordinary shares and defined reserve funds

(core equity)

min 7%

Min

75%

of

Prim

ary

SARB minimum

FRBH target

FRBH actual

* Excludes Pillar 2b add-on

FRB target

FRB actual

85

The Group backs economic capital with Tier 1with Tier 1

36 754

41 566 40 008 40 612 42 173

35 491 39 115

35 947 35 716

36 754

25 154

Jun 07 Jun 08 Dec 08 Jun 09 Dec 09

Economic capital (R million) Tier 1

86

Economic profit returns to positive territory

15.07,000

5 639

14.6

14.1

14.3 14.5

15.0

6,000

7,000

3 971 13.1

13.5

14.0

4,000

5,000

3 164 2 719

13.2

12.5

13.0

2,000

3,000

- 474 632

12.4

11.5

12.0

-

1,000

11.0 -1,000

Jun 05 Jun 06 Jun 07 Jun 08 June 09 Dec 09

Net income after cost of capital (R million) Average cost of equity (%)

87

Key conclusions on capital

• Capital levels are strong and the outlook for capital generation is robustp g p g

• Continue to focus on quality loss absorbing capital

• Capital is available to back the current strategy and expansion initiatives

• “Basel III” proposals are attainable if implemented in current form• Basel III proposals are attainable if implemented in current form

• Regulatory changes will lead to continued pressure on ROEs

88

Funding and liquidity management

Andries du Toit

89

Agenda

F di d li idit t hil h• Funding and liquidity management philosophy

• Funding & liquidity risk management• FirstRand’s strategy• Macro factors impacting funding• FirstRand’s risk profileFirstRand s risk profile• Regulatory impact

Fi tR d’ t th h ll f f di d li idit• FirstRand’s response to the challenges of funding and liquidity

90

Funding and liquidity t hil hmanagement philosophy

91

Funding & liquidity risk management philosophyphilosophy

• Liquidity risk is the risk that the bank will not be able to meet all payment obligations as liabilities fall due (normally a consequential risk)

• Funding liquidity riskFunding liquidity risk• Market liquidity risk

• Context• FirstRand Limited’s board principles and limits• South African banking and exchange control systemSouth African banking and exchange control system• Moral Hazard risk• Subsidiaries within FirstRand Group

Hi h t t d S th Af i b ki• Highest rated South African banking group

• This is managed as part of Group Treasuryg p p y

92

Liquidity risk management philosophy

• Continuous funding and liquidity cycleForward Looking• Forward Looking

• Integrated across • Macro economic environment

Funds transfer pricing

Target risk

profile

• All business units• All financial risk disciplines

Financial markets outlook• Financial markets outlook

• Ensure compliance with• Internal risk appetite

Risk framework

Funding profile

• Regulatory requirements• Rating agencies requirements

• OutputStress testing

Liquidity buffer • Output

• Efficient, diversified, flexible funding• Built upon strong relationship

testingbuffer

93

Funding & liquidity managementFirstRand’s strategyFirstRand s strategy

94

Funding platforms to support international strategy

United Kingdom

international strategy

-

ChinaIranIraq

Cyprus

Greece

Middle EastLondon

TaiwanIndia

Dschibuti

Qatar

-United Arab Emirates

-Tanzania

Kenya

Nigeria

Ghana Indo-Africa trade

MozambiqueMalawi

Zimbabwe

Botswana

Namibia

Zambia

Angola Africa-China trade

Overlap of Banking Group and Momentum footprintAustralia

South Africa

Lesotho

Swaziland Momentum footprintRepresentative officeBranch

95

Funding & liquidity managementMacro factors impacting fundingMacro factors impacting funding

96

South Africa’s ratings by World Economic Forum Forum

Category RankingsFinancial market sophistication 5th

Regulations of securities exchange 2nd

Strength of auditing and reporting standards 1st

Private monitoring of the banking industry 1st

Efficiency of corporate boards 2nd

Quality of math and science education 55thy

Brain drain and ease of hiring foreign labour 53rd

External debt to GDP (developing economies) 9th

Non-performing bank loans to total loans 27thNon performing bank loans to total loans 27

Securitisation to GDP 24th

Change in real effective exchange rate 53rd

Banking system stability financial strengths indicator 19thBanking system stability financial strengths indicator 19th

Risk of sovereign debt crises (Foreign currency) 33rd

Source: World Economic Forum, The Financial Development Report 2009, 55 Countries

97

Growing balance sheets in excess of incomeincome

Private Credit to GDP

200% United States

150%

Switzerland

Spain

100%

South Africa

Germany

50%

South Africa

United Kingdom

De-leveraging has begunCredit growth in

excess of GDP

0%

ec-6

0

ec-6

5

ec-7

0

ec-7

5

ec-8

0

ec-8

5

ec-9

0

ec-9

5

ec-0

0

ec-0

5

ec-1

0

growth

De

De

De

De

De

De

De

De

De

De

De

Source: World Bank Data

98

Funding pressures – shift from households to public sectorhouseholds to public sector

Private credit/GDP ratio Government debt/GDP ratio

90%

95%

50

55% 

75%

80%

85%

45

50

65%

70%

75%

35

40

55%

60%

25

30

50%

Jan-

98

Jan-

00

Jan-

02

Jan-

04

Jan-

06

Jan-

08

Jan-

10

20M

ar-9

8

Mar

-00

Mar

-02

Mar

-04

Mar

-06

Mar

-08

Mar

-10

Mar

-12

Source: iNet Data Service

Private Sector Credit/ GDPGovernment debt/GDP National Treasury forecast

99

SA Banks monetised foreign liquidity

Current account deficit & PCE Foreign investment & PCE250600-10

200

250

500

600

50 -

150

200

400

100 -20

-10

100 200

300

150

-40

-30

50

100200

-50

-40

--100

0M

ar-9

0

Mar

-92

Mar

-94

Mar

-96

Mar

-98

Mar

-00

Mar

-02

Mar

-04

Mar

-06

Mar

-08

Mar

-10

250 -60

Mar

-90

Mar

-92

Mar

-94

Mar

-96

Mar

-98

Mar

-00

Mar

-02

Mar

-04

Mar

-06

Mar

-08

Mar

-10

Source: iNet Data Service

Cumulative FDI & Portfolio Investment

Total Private Credit Extension (RHS)

Current Account Total Private Credit Extension (RHS)

100

Comparing SA to international 1-year funding spreadsfunding spreads

1-year US v SA bank spreads

• Comparing the 1-year bank funding spreads to mid-swaps in SA vs the US

200

250

y swaps in SA vs the US

• Spreads in the US initially widened more severely than

150

200

s

in SA, however the US spreads have also contracted more aggressively

100

prea

d to

Sw

aps aggressively

• This highlights a divergence in funding pressure between

50

Sp ZAR and USD liquidity

• Internationally central banks have been providing

-50

0Sep-02 Jan-04 May-05 Oct-06 Feb-08 Jul-09 Nov-10

have been providing excessive liquidity in the short end, while in SA the central bank and national

fUS Banks AA 1-Yr Spread MA SA 1-Yr Spread MA

Source: Bloomberg & iNet Data Serivece

treasury have in fact drained liquidity

101

Increased reliance on institutionalfundingfunding

50%

40%

30%

10%

20%

0%Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10

The SA banking system has increasingly been funded in the institutional market

FRB SBK ABSA NED

The SA banking system has increasingly been funded in the institutional market

Source: SARB BA returns, Dec 2009

102

Funding more expensive across the term structurestructure

Liquidity premium curve spread to mid swapsq y p p p

140

160

100

120

Average term 9 months +55bps over 2 years

70 bps

60

80

+55bps over 2 years

+27bps

20

40+28bps

03 6 9 12 18 24 36 48 60

31-Dec-09 31-Dec-08 31-Dec-07

Source: FirstRand Financial Market Research

103

Funding & liquidity managementFirstRand’s risk profileFirstRand’s risk profile

104

FirstRand Bank Limited’s external ratings

Standard & Poor’s Moody’s Fitch Ratings

FOREIGN CURRENCY

Long term/Outlook BBB+/Negative A3/Stable BBB+/Negative

Short term A-2 P-2 F2

LOCAL CURRENCY

Long term/Outlook BBB+/Negative A2/Stable BBB+/Negative

Short term A-2 P-1 -

NATIONAL

Long term/Outlook - Aa2.za/Stable AA(zaf)/Negative

Short term - P-1.za F1+(zaf)

Sources: Standard & Poor’s, Moody’s Investors Service, Fitch Ratings

105

FirstRand Bank Limited’s external ratings history ratings historyBBB+ Pos i tive

BBB+ Stable

BBB+ Negative

BBB Pos i tive

BBB Stable

BBB Negative

BBB‐ Pos i tive

BBB‐ Stable

BBB‐ Negative

BB+ Pos i tive

BB+ Stable

BB+ Negative

BB Pos i tive

BB Stable

Oct-99 Oct-00 Oct-01 Oct-02 Oct-03 Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09BB Negative

Source: S&P: International rating scale

106

FirstRand’s diversified asset profile

40 38 33 64 69100%

- 9%

134 174 214 214 209

40 69

80%

90%

- 26%

71 78 93 10211

12 13 16 18 60%

70%

- 13%

- 2%

104 13351

68 73 80 75

60 71 102

40%

50%- 9%Corporate

48 74 104 133 116

20%

30%- 14%

119 165 206 227 222

0%

10%- 27%

Source: FirstRand shareholder circulars

FY05 FY06 FY07 FY08 FY09

107

FirstRand’s advances rating distribution

25%Rating distribution - FirstRand total book, Dec 2009

20%21%

18%20%

15%15%

12%

9%10%

3%5%

2%

0%A / BBB / BB+ / BB- / B+ / B B- / CCC /International

L l AAA (zaf) A (zaf) BBB- (zaf) BB (zaf) BB- (zaf) B+ (zaf) B (zaf) CCC+ (zaf)

Source: FirstRand annual report & FRBH Pillar III disclosures

Local

108

FirstRand’s advances show an improving rating distributionrating distribution

30% Rating distribution – FirstRand Bank’s lending book

25%

15%

20%

2007-2009

10%

15%00 009

Average rating for the book maps to an equivalent BB- (international scale)

5%

0%A /

AAA (zaf)BBB /A (zaf)

BB+ / BBB- (zaf)

BB- /BB (zaf)

B+ /BB- (zaf)

BB+ (zaf)

B- /B (zaf)

CCC /CCC+ (zaf)

Int'l / Local Rating

InternationalLocal

Int l / Local Rating

2007 2008 2009

Source: FirstRand annual report & FRBH Pillar III disclosures

109

Stable debt margin after credit impairmentsimpairments

350 550 bpbn

250

300 500

psR

200

250

400

450

100

150

350

400

50 300

-250 FY06 FY07 FY08 FY09 HY10

Investment Securities Cash & Short Term Funds Advances Interest Margin After Impairements† (RHS)

Source: FirstRand shareholder circulars

Net interest income + debt annuity income + income from investment securities – impairment chargeAdvances + investment securities + cash and short term funds

†

110

Strong credit enhancement for senior debt investorsdebt investors

2 0%0.6%

90%

100%Provisions

0.7%1.4%0.3%2.0%

70%

80%

90%

Profit after tax

429 85150%

60%

%Upper Tier II

Sub Debt

11.00%30%

40% Preference Shares

Equity

0%

10%

20%Equity

Depositors

Equates to a 16% “first loss protection”

0%

Funding Liabilities Loss absorption capacity

Equates to a 16% first loss protection(For a BBB+ rating in a CDO, rating agencies require 8.5% first loss protection)

111

Funding & liquidity managementg q y gRegulatory impact

112

SA banking liquidity gapBusiness as usual gap Contractual maturity gap

5%

10%2,000Contractual Maturity of Assets

5%

10%2,000

BAU Maturity6%

-5%

0%

5%

1,000

1,500 Contractual Maturity of Liabilities

Contractual Cumulative Gap0% 1% 0%

-1% -2%4%

7%

-5%

0%

5%

1,000

1,500BAU Maturity of Assets

-15%

-10%

0

500-4%

-7%

-15%

-10%

0

500

-19% -19%

-25%

-29% -30%

-25%

-20%

-1,000

-500

-30%

-25%

-20%

-1,000

-500

-29%-30%

-33%-35%

-40%

-35%

-2,000

-1,500

-40%

-35%

-2,000

-1,500

• Liquidity risk is largely managed on a business as usual (BAU) basis

• The contractual maturity profile is also managed within the context of the structure of the SA econom

Source: SARB BA Returns, Dec 2009

• However under stressed conditions the BAU conditions no longer apply.

economy

113

External influences on funding strategy

• Basel II focused largely on credit risk • Misdirected the attention of banks and regulators to focus mostly on credit risk• Misdirected the attention of banks and regulators to focus mostly on credit risk• Bank failures have proved to be as a result of liquidity risk• No sensible amount of capital can protect a bank from a liquidity event

• Bank for International Settlement (BIS)• Bank for International Settlement (BIS)• Principles for Sound Liquidity Risk Management and Supervision, August 2008• International framework for liquidity risk measurement, standards and monitoring,

December 2009December 2009

• Financial Services Authority (FSA)• PS 09/16: Strengthening Liquidity Standards, October 2009

• IMF • Report on SA Banking System, September 2009

• South African Reserve Bank• Exchange control prudential limit approach

114

Basel III – new liquidity rules

• Liquidity Coverage Ratios (LCR)• Addresses short term liquidity risk and cash management• Addresses short-term liquidity risk and cash management• Banks must hold high-quality liquid assets sufficient to cover

• all net cash outflows • over a 30-day period • under an acute liquidity stress scenario (combined idiosyncratic and systemic shock)

• Enhancement of statutory liquid asset and cash reserve requirement as risk specific (where statutory liquid assets and cash reserve are based on balance sheet size)

• Net Stable Funding Ratio (NSFR)• Long-term focus addressing the structural liquidity risk of the balance sheetLong term focus addressing the structural liquidity risk of the balance sheet• Ratio requires that assets maturing after 1 year be funded with “stable” funding• “Stable” funding takes into account the stability of funding over a year during an

t d d fi ifi t i (d li i fit bilit l t ti lextended firm-specific stress scenario (decline in profitability or solvency, potential downgrade, event affecting reputation/credit quality)

115

Basel III – Impact of new liquidity rules

• Latest research by the BIS suggests enhancements to theory of the role banks in the transmission mechanism of monetary policyin the transmission mechanism of monetary policy

• Original theory suggests deposits constitute the stock of loanable funds, acting as the driving force of bank lending†

• Broadening to incorporate non deposit funding• Broadening to incorporate non-deposit funding

• In its current form the BIS proposal will have a material impact on the South African banking industry:African banking industry:

• Structural reform required:• Contractual savings structure• The low savings rate• The low savings rate• South Africa economic development

• The financial impact is too early assess as the process is still inQ i i i d• Quantitative impact study

• Discussion forum• Information gathering

† BIS, Working paper 297, Feb 2010

116

Macro-prudential limit approach to exchange controlexchange control

M d ti l li it f 25% f b k’ t t l li biliti• Macro-prudential limit of 25% of bank’s total liabilities • (Excluding shareholders equity)• Applies to SA Authorised Dealers (banks),

N t SA t th t• Not SA corporates or other sectors

• Banks may acquire foreign assets directly from their SA balance sheet, or indirectly through foreign subsidiaries / branches

• Excludes foreign direct investment and intra-group bank exposures

• Effective 1 March 2010

117

FirstRand’s responseFirstRand s response

118

Create efficient, flexible and diversified funding platformsfunding platforms

Regulated platforms(licenced)

FirstRand Bank, (branches: London, India), African banking platform, Momentum OUTsurance RMB Morgan Stanley(licenced) Momentum, OUTsurance, RMB Morgan StanleyExchanges (LSE, JSE, BESA)

Unregulated entities* (un-licenced)

FirstRand Investment HoldingsPrivate equity(un licenced) Private equity

Off-balance sheet Securitisations, conduits / risk transformation platformBi l t l (C l l )Bi-lateral (Carlyle)

O f d P i t it (Eth )Own funds Private equity (Ethos)FirstRand structured investments, e.g. RMB / Westport

3rd party platforms Traditional3rd party platforms Traditional• RMBAM• FNB WealthAlternative

FSI• FSI

119

Funding assets under management

100%R465 bn R838 bn (CAGR 16%)

25% 27% 25% 22% 22%

80%

90%(CARG 13%)

33% 32%22%

19% 14%

60%

70%(CARG ‐7%)

32%

40%

50%

42% 41%52%

60% 64%

20%

30% (CARG 29%)

0%

10%

2005 2006 2007 2008 20092005 2006 2007 2008 2009

120

Diversified funding sources

100% R570 bnR453 bn

47% 48%80%

90%

Franchise deposit (CAGR 12%)

53%47% 48%

60%

70%

27% 28%40%

50%

Wholesale (CAGR 14%)

2% 1%4%4% 4%

27%27% 28%

20%

30%

Africa (CAGR 21%)Capital markets (CAGR 24%)

3% 6% 5%12%

14% 14%1%

1%4%

0%

10%

20% Capital markets (CAGR 24%)

Financial markets (CAGR 19%)

Off Balance sheet Assets (CAGR 48%)3%0%FY07 FY08 FY09

( )

121

Retail and corporate funding strategy key

R570 bn100%

R453 bn

12% 10% 11%

14% 13% 14%

80%

90%Retail (CAGR 12%)

Commercial (CAGR 4%)

26%24% 23%

60%

70%Corporate (CAGR 5%)

27% 28%40%

50%

Wholesale (CAGR 14%)

2%4% 4%

27%27% 28%

20%

30%

40%

Africa (CAGR 21%)Capital markets (CAGR 24%)

3% 6% 5%12%

14% 14%1%

2% 1%4%

0%

10%

20% Capital markets (CAGR 24%)

Financial markets (CAGR 19%)

Off balance sheet vehicles (CAGR 48%)3% % 5%0%FY07 FY08 FY09

Off balance sheet vehicles (CAGR 48%)

122

Funding strategy

• Deposit franchiseA i li t i iti d t ti t t i• Aggressive client acquisition and retention strategies

• New product and channel development

• Wholesale market• Wholesale market• Extending the term

• Diversify new sources

• Africa• Aggressive expansion into new markets

• Enhancing existing deposit franchises

• Capital marketsL l d i t ti l k t i t di if• Local and international market issuance programs to diversify

• Off-balance sheet vehicles• Continue existing funding platforms• Continue existing funding platforms

123

Diversified portfolio of funding instrumentsinstruments

NCD's7 7% R '

Securitisation5.3% Other Trading

Derivative7.9%

7.7% Repo's6.0%

gLiabilities

3%

Senior Debt2.0%

Other Deposits9.2%

Sub Debt1.5%

Conduits0.7%

Call Deposits

Savings Deposits0.4%

Fixed & Notice Deposits

25.3%

13.1%

Current Account18.2%

Sources: SARB BA 100 return & FirstRand Limited annual report

124

Creating appropriate liquidity buffers

15%

13%

9%

11%

7%

5%

Jan-

08

Feb-

08

Mar

-08

Apr

-08

May

-08

Jun-

08

Jul-0

8

Aug-

08

Sep-

08

Oct

-08

Nov

-08

Dec

-08

Jan-

09

Feb-

09

Mar

-09

Apr

-09

May

-09

Jun-

09

Jul-0

9

Aug-

09

Sep-

09

Oct

-09

Nov

-09

Dec

-09

Increased liquidity buffers by R7bn

M A S M A S

Buffer Liquidity Satutory Liquidity

Source: SARB BA returns, Dec 2009Note: SARB liquid assets definition is very narrow, above consists of government securities of SA & G7

Increased liquidity buffers by R7bn

125

In summary

• Integrated funding & liquidity framework• Aim to be in excess of minimum requirements of SARB, FSA & Basel II Minimum Liquidity

d d (2009)standards (2009)• Strong management in building deposit franchises in retail, commercial and corporate

segment

• Strong African deposit raising franchises• Strong African deposit raising franchises • South Africa, Namibia, Botswana, Swaziland, Lesotho, Mozambique

• Enter new African markets• Zambia Angola Tanzania NigeriaZambia, Angola, Tanzania, Nigeria

• International platforms to secure long term multicurrency funding• London branch• Europe Medium Term Note program (LSE)p p g ( )• Middle East and Asia platforms

• Currently the group has excess foreign currency funding to be deployed towards markets and businesses within the FirstRand overall group strategyg p gy

• Basel III • Support initiative to strengthen the international liquidity risk standards• Cost of compliance may reduce economic growth • SA would require structural reform with respect to the supply side of funds• A pragmatic approach should be adopted by all parties

126

AppendixAppendix

127

FirstRand Bank Limited’s external ratings

Moody’s Investor StandardFitch

Firstrand Bank Limited ServiceForeign currency counterparty credit rating

Long term A3Sh t t P 2

Firstrand Bank LimitedStandard & Poor’s

Foreign currency counterparty credit ratingLong term BBB+Sh t t A 2

Firstrand Bank LimitedFitch Ratings

Foreign CurrencyLong term issuer default rating BBB+Short term issuer default rating F2Outlook Negative

Short term P-2Outlook Stable

Local currency counterparty credit ratingLong term A2

Short term A-2Outlook Negative

Local currency counterparty credit rating

Local currencyLong term issuer default rating BBB+Outlook Negative

N ti lLong term A2Short term P-1Outlook Stable

National scale bank deposit ratings

credit ratingLong term BBB+Short term A-2

Outlook Negative

NationalLong term rating AA(zaf)Short term rating F1+(zaf)Outlook Negative

Individual rating CLong term issuer default rating Aa2.zaShort term issuer default rating P-1.zaOutlook Stable

Bank Financial Strength R ti C

Individual rating CSupport rating 2Support rating floor BBB-

Rating C-Outlook Stable

Source: Moody’s Investors Service, Fitch Ratings, Standard & Poor’s

128