An Authorised Financial Services Provider
First National First National BankBank
UBS Conference October 2005
In the business world, the rear view mirror is always clearer than the windshield.
Warren Buffett
Page 2 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
OutlineOutline
Historical turning points
Regulatory
Competitive
Macro-environment
Creating the future
Page 3 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
FNBFNB’’s historic turning pointss historic turning points
1998 2002 2004
Cultural revolutionCultural revolution
• Management replaced by investment bankers
• Businesses chunked
• CEO’s empowered
Outward focusOutward focus
Good to greatGood to great
•Unified FNB•Segment structure
Page 4 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
The ability to respondThe ability to respond
Wealth
Public SectorCommercial Corporate
PersonalSmart Solutions
Page 5 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
RegulatoryRegulatory
Page 6 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Customers feel they overpay Customers feel they overpay
Page 7 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
……but there is another side but there is another side to the story to the story
SA perceived to be most expensive
Structural reasons
Pressure from consumerism with possible regulatory response
Fees margins
Page 8 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
2.00%
3.00%
4.00%
Advances
A cigarette box illustrationA cigarette box illustration
Up 17bps
Required adjustment for
10% decrease in NIR
Page 9 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Deliberate positioning as low cost provider
Innovative pricing options
Customer education campaign
Already taking actionAlready taking action
Page 10 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Charter spells opportunitiesCharter spells opportunities
Voluntary signing – 17 October 2003
Integral part of transformation
Requires innovative response
Page 11 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Mass Mass –– playing to our strengthplaying to our strength
0
100
200
300
Payo
ut
(P
ayo
ut
( RR’’ mm
))
+182%
MicroloansMicroloans Smart HousingSmart HousingPlanPlan
+75%
2004 20042005 2005
1 313 mini-ATMs
22 Community banks
Page 12 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Commercial Commercial –– playing to our playing to our strengthstrength
0
50
100
2004 2005
FES P
ayout
(FE
S P
ayout
( RR’’ mm
))And growing…
FNB Enterprise Solutions (FES)
Enterprises experiencing difficulty with raising capital due to:
o Early stage of development
o Lack of equity or adequate security
o Complexity of financing requirements
Page 13 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
National Credit BillNational Credit Bill
PositivesPositives
Opens microloan market for ethical players
Disclosure will favour the trusted brand
No R10 000 exemption
NegativeNegative
More cross-subsidisation across risk profiles
Regulations will determine financial impact
Page 14 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
CompetitiveCompetitive
Page 15 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Retailers getting more aggressiveRetailers getting more aggressive
• Large credit books
• Extensive infrastructure
• Dominate point of sale
• Better operating hours
• Partnering with large banks
•Deals need proper structuring
•Branch operating hours
•Preference for intra-FirstRand deals
Retailer advantagesRetailer advantages
Page 16 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
0
100
200
March April May June July August
So are the cellphone operatorsSo are the cellphone operators
SMS and USSD (not WIG and WAP)
Any network, any cellphone
2.1m SMS customers
Botswana and Namibia next
Transactions processed Transactions processed per month since launchper month since launch
Tra
nsa
ctio
ns
per
month
(‘
000)
Page 17 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Even Branson canEven Branson can’’t resist!t resist!
Homeloan direct
Page 18 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Putting pressure on mortgage Putting pressure on mortgage originatorsoriginators
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
Mortgageoriginators
Switching Mobile sales Cashback
Page 19 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Barriers to entry are highBarriers to entry are high
Page 20 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Large corporate lending is Large corporate lending is toughtough
0.00%
1.00%
2.00%
Overnight lending - money market
2003 2004 2005
-10
0
10
20
30
40
50
Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04
% c
hang
e Y
-o-Y
Page 21 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
MacroMacro--environmentenvironment
Page 22 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Higher economic growth
World Cup catalyst for growth
Emerging market
Balancing act: Top line growth vs. cost containment
A structural shiftA structural shift
Page 23 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Emerging marketEmerging market
10
20
30
40
50
60
70
80
90
100
10 20 30 40 50 60 70 80 90 100
TOP 10%
NEXT 10%
BO
TTO
M5
0%
%
%
MID
DLE
White
Black
Coloured&
Indian
1980
Source: FinMark Trust 2002Source: FinMark Trust 2002
Page 24 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
White
Black
10
20
30
40
50
60
70
80
90
100
10 20 30 40 50 60 70 80 90 100
TOP 10%
NEXT 10%
Coloured&
Indian
%
%
BO
TTO
M5
0%
MID
DLE
30%
1991
Source: FinMark Trust 2002Source: FinMark Trust 2002
Emerging marketEmerging market
Page 25 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
10
20
30
40
50
60
70
80
90
100
10 20 30 40 50 60 70 80 90 100
TOP 10%
NEXT 10%
%
%
White
Black
Coloured&
Indian
BO
TTO
M5
0%
MID
DLE
30
%
2001
Source: FinMark Trust 2002Source: FinMark Trust 2002
Emerging marketEmerging market
Page 26 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Other banks = STD, ABSA,and NedcorSource: Consumer and Business Tracker Research November 2004 and AMPS 2004
MassR0-60K
84%76%
37%46%
39%
22%
16%24%
52%62% 63%
54%61%
78%
38%48%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FNB OtherBanks
FNB OtherBanks
FNB OtherBanks
FNB OtherBanks
White
Black
WealthR750K+
ConsumerR60 – R750K
BusinessR60k – R400m
WellWell--positioned in growing black positioned in growing black marketmarket
Page 27 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Branch repositioning
Mobile sales force
FNB Private Clients
FNB Housing Finance
Cellphone Banking
Commercial Property Finance
Capitalising on growthCapitalising on growth
Page 28 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Creating the futureCreating the future
Page 29 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Single product to integrated Single product to integrated solutionsolution
Page 30 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Encouraging savings despite low Encouraging savings despite low interest ratesinterest rates
Page 31 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
Entrepreneurs need single entryEntrepreneurs need single entry
Page 32 | 21 October 2005 | First National Bank | A Division of FirstRand Bank Limited | An Authorised Financial Service Provider
First National Bank
FirstRand building blocksFirstRand building blocks