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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