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ANALYSIS of FINANCIAL RESULTS for the Year Ended 30 June 2017 About This 01 OVERVIEW of BANK RESULTS Simplified Group and Shareholding Structure

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ANALYSIS of FINANCIAL RESULTS for the Year Ended 30 June 2017 About This 01 OVERVIEW of BANK RESULTS Simplified Group and Shareholding Structure ANALYSIS OF FINANCIAL RESULTS for the year ended 30 June 2017 about OVERVIEW OF BANK RESULTS this 01 Simplified group and shareholding structure ..... 01 report Track record ..... 03 Key financial results, ratios and statistics – normalised ..... 04 Summary financial statements – normalised ..... 05 This report covers the audited summary Flow of funds analysis – normalised ..... 08 financial results of FirstRand Bank Overview of results ..... 09 Limited based on International Financial Segment report ..... 18 Reporting Standards (IFRS) for the year Additional activity disclosure – RMB ..... 26 ended 30 June 2017. The primary Additional segmental disclosure – WesBank ..... 27 results and accompanying commentary are presented on a normalised basis as the bank 02 INCOME STATEMENT ANALYSIS believes this most accurately Net interest income (before impairment of advances) ..... 30 reflects its economic performance. Credit highlights ..... 35 The normalised results have been Non-interest revenue ..... 38 derived from the IFRS financial results. Operating expenses ..... 41 Normalised results include a summary income statement, statement of BALANCE SHEET ANALYSIS AND FINANCIAL comprehensive income and statement of financial position. 03 RESOURCE MANAGEMENT Economic view of the balance sheet ..... 44 A detailed description of the difference Advances ..... 45 between normalised and IFRS results is Credit ..... 47 provided on pages 78 and 79. Detailed Deposits ..... 62 reconciliations of normalised to IFRS Funding and liquidity ..... 63 results are provided on pages 88 to 89. Capital ..... 71 Commentary is based on normalised Credit ratings ..... 76 results, unless indicated otherwise. Jaco van Wyk, CA(SA), supervised the preparation of the summary financial 04 IFRS INFORMATION results. Presentation ..... 78 FirstRand Bank’s annual financial Independent auditors’ report on summary financial statements ..... 80 statements will be published on the Summary financial statements ..... 81 group’s website, www.firstrand.co.za, Statement of headline earnings ..... 86 on or about 3 October 2017. Reconciliation from headline to normalised earnings ..... 87 Reconciliation of normalised to IFRS summary income statement ..... 88 Restatement of prior year numbers ..... 90 Restated summary income statement – IFRS ..... 90 Restated summary statement of financial position – IFRS ..... 91 Fair value measurement ..... 93 Summary segment report ..... 103 05 SUPPLEMENTARY INFORMATION Contingencies and commitments ..... 106 Company information ..... 107 1929/001225/06 Certain entities within the Listed financial instruments of the bank ..... 108 FirstRand group are Definitions ..... 110 Authorised Financial Services and Credit Providers. This analysis is available on the group’s website: www.firstrand.co.za Email questions to investor. [email protected] C SIMPLIFIED GROUP AND SHAREHOLDING STRUCTURE Remgro Limited Directors Royal Bafokeng Holdings (Pty) Ltd 3.9% 28.2% 9.9% 15.0% RMB Holdings Limited 34.1% BEE partners 5.2% LISTED HOLDING COMPANY (FIRSTRAND LIMITED, JSE: FSR) 100% 100% 100% 100% 100% FirstRand Bank FirstRand EMA FirstRand Investment FirstRand Investment FirstRand Insurance Limited Holdings (Pty) Ltd Holdings (Pty) Ltd Management Holdings (Pty) Ltd Bond Code: FRII (FREMA) (FRIHL) Holdings Limited Africa and Investment Banking Other activities Insurance emerging markets management First National Bank1 58% FNB Namibia 96% RMB Private 100% Ashburton Fund 100% FirstRand Life Equity Holdings Managers Assurance Rand Merchant Bank1 69% FNB Botswana 93% RMB Private Equity 100% Ashburton Investor 100% FirstRand Insurance WesBank1 100% FNB Swaziland Services Services Company 100% RMB Securities FirstRand Bank India2 90% FNB Mozambique (FRISCOL)† 100% Ashburton 50% RMB Morgan FirstRand Bank London2,* 100% FNB Zambia Management Stanley Company (RF) FirstRand Bank 100% FNB Lesotho 100% FNB Securities Guernsey2,** Ashburton 100% FNB Tanzania 100% 100% RentWorks FirstRand Bank Kenya3 Investments 100% First National Bank International 100% Direct Axis FirstRand Bank Angola3 Ghana Holdings 81% MotoVantage FirstRand Bank Dubai3 100% RMB Nigeria 100% FNB CIS 100% FirstRand FirstRand Bank Shanghai3 100% FirstRand Management International International Company (RF) – Guernsey – Mauritius 100% Atlantic Asset 100% RMB Australia Management 1. Division Holdings 2. Branch 100% Various general 3. Representative office 100% FirstRand Securities partners# * MotoNovo Finance is a business segment of FirstRand Bank Limited 48% NewDisc (London Branch). ** Trading as FNB Channel Islands. # Ashburton Investments has a number of general partners for fund seeding purposes – all of these entities fall under FirstRand Investment Management Holdings Limited. † With effect from 1 July 2017. Structure shows effective consolidated shareholding For segmental analysis purposes, entities included in FRIHL and FREMA, FirstRand Investment Management Holdings Limited and FirstRand Insurance Holdings (Pty) Ltd are reported as part of the results of the managing franchise. The group’s securitisations and conduits are in FRIHL. 01 OVERVIEW OF BANK RESULTS FirstRand Bank (FRB or the bank) is a wholly-owned subsidiary of FirstRand Limited (FirstRand or the group), which is listed on the Johannesburg Stock Exchange (JSE) and the Namibian Stock Exchange (NSX). The bank provides a comprehensive range of retail, commercial, corporate and investment banking services in South Africa and offers niche products in certain international markets. The bank has three major divisions which are separately branded, First National Bank (FNB), Rand Merchant Bank (RMB), and WesBank. The FCC franchise represents group-wide functions. FRB has branches in London, India and Guernsey, and representative offices in Kenya, Angola, Dubai and Shanghai. The bank’s portfolio produced a resilient performance Normalised earnings ROE ROA 4% 22.2% 1.71% 2016: 14% 2016: 23.0% 2016: 1.75% Credit loss NPLs as % ratio of advances CET1 0.88% 2.27% 14.1% 2016: 0.84% 2016: 2.43% 2016: 13.9% Normalised Normalised Normalised earnings earnings earnings 7% 12% 10% 2016: 13% 2016: (2%) 2016: 30% 02 TRACK RECORD Normalised earnings (R million) and ROE (%) CAGR 14% 22.9 23.0 22.4 21.9 22.2 18 089 17 351 15 246 12 321 10 842 13 14 15 16 17 Normalised net asset value (R million) CAGR 13% 84 373 78 919 71 997 61 604 51 407 13 14 15 16 17 03 OVERVIEW OF BANK RESULTS KEY FINANCIAL RESULTS, RATIOS AND STATISTICS – NORMALISED This section is based on normalised results. A detailed reconciliation between IFRS and normalised results is set out on pages 88 to 89. R million 2017 2016 % change Earnings performance Attributable earnings – IFRS (refer page 81) 18 300 16 931 8 Headline earnings 18 269 16 959 8 Normalised earnings 18 089 17 351 4 Normalised net asset value 84 373 78 919 7 Tangible normalised net asset value 84 140 78 813 7 Average normalised net asset value 81 646 75 458 8 Capital adequacy* – IFRS Capital adequacy ratio (%) 17.3 17.1 Tier 1 ratio (%) 14.3 14.2 Common Equity Tier 1 ratio (%) 14.1 13.9 Balance sheet Normalised total assets 1 082 151 1 031 579 5 Advances (net of credit impairments) 799 419 764 088 5 Ratios and key statistics ROE (%) 22.2 23.0 ROA (%) 1.71 1.75 Average loan-to-deposit ratio (%) 93.5 93.2 Diversity ratio (%) 42.5 41.6 Credit impairment charge 6 984 6 255 12 NPLs as % of advances 2.27 2.43 Credit loss ratio (%) 0.88 0.84 Specific coverage ratio (%) 38.6 38.6 Total impairment coverage ratio (%) 80.3 78.2 Performing book coverage ratio (%) 0.97 0.99 Cost-to-income ratio (%) 54.4 54.0 Effective tax rate (%) 22.9 24.2 Number of employees 35 979 36 310 (1) * Includes foreign branches. Ratios include unappropriated profits. 04 SUMMARY INCOME STATEMENT – NORMALISED for the year ended 30 June R million 2017 2016 % change Net interest income before impairment of advances 39 849 38 333 4 Impairment charge (6 984) (6 255) 12 Net interest income after impairment of advances 32 865 32 078 2 Non-interest revenue 29 506 27 261 8 – Fee and commission income 22 199 21 119 5 – Markets, client and other fair value income 3 692 2 807 32 – Investment income 137 91 51 – Other non-interest revenue 3 478 3 244 7 Income from operations 62 371 59 339 5 Operating expenses (37 721) (35 392) 7 Income before tax 24 650 23 947 3 Indirect tax (876) (763) 15 Profit before tax 23 774 23 184 3 Income tax expense (5 448) (5 614) (3) Profit for the year 18 326 17 570 4 NCNR preference shareholders (237) (219) 8 Normalised earnings attributable to ordinary equityholders of the bank 18 089 17 351 4 05 OVERVIEW OF BANK RESULTS SUMMARY STATEMENT OF OTHER COMPREHENSIVE INCOME – NORMALISED for the year ended 30 June R million 2017 2016 % change Profit for the year 18 326 17 570 4 Items that may subsequently be reclassified to profit or loss Cash flow hedges (150) 118 (>100) Fair value (losses)/gains arising during the year (141) 144 (>100) Reclassification adjustments for amounts included in profit or loss (67) 20 (>100) Deferred income tax 58 (46) (>100) Available-for-sale financial assets (393) (495) (21) Losses arising during the year (483) (679) (29) Reclassification adjustments for amounts included in profit or loss (67) 7 (>100) Deferred income tax 157 177 (11) Exchange differences on translating foreign operations (512) 482 (>100) (Losses)/gains arising during the year (512) 482 (>100) Items that may not subsequently be reclassified to profit or loss Remeasurements on defined benefit post-employment plans 288 (31) (>100) Gains/(losses)
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