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UBS conferenceIntegrated financial services

Matching demand (assets) and supply (liabilities)

Right to compete

• Group model

• Asset management

• Insurance

Conclusion

Integrated financial services2

Existing models: banks vs insurers vs asset managers

DEMAND FOR MONEY

INSURANCE BANKING

SUPPLY OF MONEY

INVESTMENT PRODUCTS LENDING PRODUCTS

DepositsShort/long-term

insurance

SEGREGATED PLATFORMS

3

Existing models: banks vs insurers vs asset managers

DEMAND FOR MONEY

INSURANCE BANKING

SUPPLY OF MONEY

INVESTMENT PRODUCTS LENDING PRODUCTS

DepositsShort/long-term

insurance

SEGREGATED PLATFORMS

4

Insurance company uses bank’s sales channel

Bank’s sales channels

Insurance company’s sales

channels

Partnership or one owns the other

BANK INSURANCE COMPANY

BANCASSURANCE MODEL

Integrated platforms required for customer-centric approach

DEMAND FOR MONEY

SUPPLY OF MONEY

ASSETS

LIABILITIES

VAF AUMMORTGAGES CORPORATE/CIB

INSURANCE BANKING ASSET MANAGEMENT SHADOW BANKING

UNSECURED

INTEGRATED PLATFORMS

5

ASSETSDEMAND FOR MONEY

VAF MORTGAGES CORPORATE/CIB UNSECURED AUM

LIABILITIESSHADOW BANKING INSURANCE BANKING ASSET MANAGEMENT

SUPPLY OF MONEY

Requires sophisticated asset and liability matching6

CLEARING HOUSE

Optimise matching of assets and liabilities through treasury, ALM and structuring capabilities

Clearing house allows us to capture more of the value chain

Reduce funding costs through better matching of assets and liabilities

Create better value propositions to capture full customer value chain

Originate on most efficient platform

CLEARING HOUSE

1

2

3

7

Matching demand (assets) and supply (liabilities)

Right to compete

• Group model

• Asset management

• Insurance

Conclusion

Integrated financial services8

FNB RMBFNB WesBank GTSYRMB

RMBFNBWesBank FNBWesBankAshburton

Investments

GTSYAshburton

InvestmentsGTSY

ASSETSDEMAND FOR MONEY

VAF MORTGAGES CORPORATE/CIB UNSECURED AUM

LIABILITIESSHADOW BANKING INSURANCE BANKING ASSET MANAGEMENT

SUPPLY OF MONEY

FirstRand already a large player on both demand and supply sides9

Enabled by platform- and franchise-neutral business model

Distribution channels

Customer bases

Systems, data, operating platforms

Clea

ring

hous

e

MADE AVAILABLE TO ALL

10

LicencesAsset managementLife insuranceShort-term insuranceBanking

Customer

Supports a customer-centric approach

* Underwriting management agencies

11

• Single view of the customer

• Identifying and meeting needs

• Provide appropriate customer

solutions and access

• Transparency and single point

of accountability

Matching demand (assets) and supply (liabilities)

Right to compete

• Group model

• Asset management

• Insurance

Conclusion

Integrated financial services12

• 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

Asset management strategy leverages innovative utilisation of existing building blocks

13

What drives growth in AUM?

TRUST/TIME

INVESTMENT PERFORMANCE

MARKET DYNAMICS

TIED DISTRIBUTION

14

Prerequisites

What drives growth in AUM?

TRUST/TIME

INVESTMENT PERFORMANCE

15

MARKET DYNAMICS

TIED DISTRIBUTION

• Regulatory changes

• Search for alternative sources of return

• Liability-driven investing

• All of the above have driven demand for alternative

asset classes

• RMB origination capabilities (credit, private equity,

infrastructure, renewables, real estate)

• Provides protection for RMB’s origination franchise

and leverages RMB’s structuring capabilities

What drives growth in AUM?

TRUST/TIME

INVESTMENT PERFORMANCE

16

MARKET DYNAMICS

TIED DISTRIBUTION

• Ability to distribute is key

• Tied distribution forces provide distinct advantage

• FNB channels

• Digital

• Face-to-face

• 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

WIM business has now been integrated into FNB17

0

50

100

150

200

250

2014 2015 2016 2017

AM traditional AUM AM alternative AUM WIM AUM

WIM AUE WIM AUA

Traction in AUM reflects success

• FNB distribution channels

• Alternatives – R52 billion AUM

• Credit funds

• Structured notes (GMFS)

• LDI

• Westport (African real estate)

• Private equity, renewables

• Traditional – R51billion AUM

• Fixed income

• Equity

• Multi-asset

* AUM excludes conduits.

R billion

60 7288

103

18

Matching demand (assets) and supply (liabilities)

Right to compete

• Group model

• Asset management

• Insurance

Conclusion

Integrated financial services19

Our right to compete in the insurance space

Group customers are buying insurance products

Through FNB Insurancebrokers – third party

products

Debit orders to product providers

Sell own products to our customers

Offer better products at better price

Supported by rewards programme

Use data analytics to offer product to customer when required

20

Significant opportunity in our own customer base21

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)

How do we capture the opportunity in this space?

ORGANIC

BUY

PARTNER

22

Good traction in FNB insurance –increased penetration of customer base utilising all channels

Channel % of sales

Branch 75

Call centres 13

Digital 8

Other 4

Sales channels

2 343

3 459

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

2016 2017

Value creation

Embedded value – life products

R million

+48%

Penetration

0

50

100

150

200

250

Premium Consumer

In-force annualised premium on standalone life products

R million

23

Matching demand (assets) and supply (liabilities)

Right to compete

• Group model

• Asset management

• Insurance

Conclusion

Integrated financial services24

• 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

Conclusion25

www.firstrand.co.za