Jacques Celliers, CEO of First National Bank.
Key performance markers
• Business and Premium Segments pre-tax profits up 15% and 22% respectively
• Deposits across all domestic segments up 13%
• Good cost containment
• Overall bad debt ratio at 1.20%, up modestly year-on-year
• Financial transaction volumes grew 10% compared to last year
• Adverse macro-economic factors created headwinds for some Africa operations
The bank’s performance is pleasing when considering the muted levels of credit demand, low levels of business and consumer confidence and subdued economic growth in the reporting period.
FNB lifted its earnings by 8% domestically with profit before tax increasing by 22% in the Premium segment and by 15% in the Business segment. The bank’s Consumer segment reported a 6% decline and including the FNB Africa performance, overall FNB earnings increased 5%. FNB remains deeply committed to expansion in Africa and as a result is incurring ongoing investment costs.
The product simplification and re-pricing in the Consumer segment has already had a positive impact and positions the business well for the year ahead. Customer numbers increased 4% from 7.48m in June 2016 to 7.8m in June 2017.
Deposits increased by 13% (SA) driven by strong customer support for the bank’s investment and deposit accounts. The bank’s lending to home buyers seeking lower-value mortgages from FNB’s Housing Finance business increased strongly by 11%.
These conditions placed greater emphasis on cost control with cost-to-income improved to 51.5% (SA). Costs increased 6% in the South African business and 7% when combining FNB SA with the African operations.
Greater efficiencies through reconfiguration of branches were achieved across the branch network with transaction minutes falling by some 20%, whilst, sales and advice minutes are becoming a larger component of branch activity. Efficiencies are further motivated by the bank’s strong leadership in digital and electronic banking. The bank’s e-race toward efficiencies is continuing to drive forward based on internal digitisation projects and customer-facing projects particularly in our App space.
FNB’s relatively new Insurance business already has over 3.2 million active policies. With its significantly lower-cost of acquisition, FNB Life has enormous potential to contribute materially to the bank’s performance in coming years.
FNB Connect is exceeding original expectations. Currently, Connect has acquired almost 10% of our customer base who meet product qualification criteria. This is a significant achievement as all qualifying customers have existing agreements with other service providers.
The number of customers using the FNB Banking App has increased from 1.4 million in June last year to just over 1.8 million in June 2017. However, the volume of financial transactions has significantly increased (up 68%) from 59 million in June last year to just under 100 million in June this year.
While income from our International operations accounts for less than 5% of FNB’s overall profit, strong negative macro-economic factors resulted in a 32% decline in profit before tax. There was a modest increase in advances of 3% with NPL’s and impairments higher in line with expectations given the prevailing credit cycle.
Looking forward, a recovery from the Consumer segment is anticipated as product sales increase. The Business and Premium segments remain well placed for growth.
FNB’s key innovative launches during 2016-2017
• Instant life cover via digital platforms
• NAV for home loans and vehicle management
• Augmented reality on App
• FNBy (FNB Youth) and FNB Fusion Premier Accounts
• Conexis Mobile Phone
• App 5.0
• Modular Branch
• FNB Pay
• 48 hour cash accelerator
New offerings on the FNB banking App continue to enable FNB to build comprehensive data sets and continuously refine customer experiences. At the same time, the real value creation from offerings such as NAV CAR and NAV HOME is that it empowers customers with sophisticated and helpful tools and data to better manage their financial affairs. NAV HOME is able to research property information and enable home loans applications in conjunction with the GPS system on the customer’s smartphone. NAV CAR was launched in April 2017 with the number of customers loading their vehicles onto NAV CAR rising to over 50 000 soon after launch. This enables automated payment of car licences, offers values of vehicles, and enables payment of traffic fines amongst other functionalities.
FNB Awards during the year under review
• Ranked Africa’s most powerful banking brand by Brand Finance Banking 500 Report 2017
• Awarded SA’s most valuable brand 2017 by Brand Finance
• Bank with the Strongest Reputation – 2015 - 2017 RepTrak™ Pulse Survey
• Awarded the 2016 Best in Customer Experience Award at the international Bank Customer Experience (BCX) Summit in Chicago, USA
• Most Innovative Bank in Africa – 2016 African Fintech Awards
• SA’s Coolest Bank – Sunday Times Generation Next Survey 2012 - 2017
• Best Internet Banking, Best Banking App, Best Cellphone Banking - SAcsi 2017
• Voted the best digital bank, internet banking site and mobile banking experience in South Africa by SAcsi Survey 2016 and Columinate Internet Banking SITEisfaction Survey 2016
• Best Internet Banking, Best Banking App (as a subset of the Mobile Banking category) - Columinate SITEisfaction 2017
• Best Online Financial Services Platform 2016 in the PriceCheck Tech & e-Commerce Awards
• Excellence in mobile banking - Lafferty Global Awards 2016.
• Sunday Times Top Brands Survey #1 Business Bank 2013 – 2016
• Awarded most innovative MVNO in the 2015 and 2016 Telecoms.com Awards
• Globally recognized as SA’s best foreign exchange provider by Global Finance World’s best FX Providers 2017
• FNB Islamic Banking awarded Best Islamic Banking Window 2017 at the Global Islamic Finance Awards 2017
• Awarded Best Islamic Banking Offering by Banker Africa at the Annual Southern African Banking Awards 2016
• BASA (Business and Arts SA) Chairman’s Premier Award 2016 for the FNB JoburgArtFair.
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