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FIRSTRAND LIMITED
NOTICE OF THE FORMATION OF THE FIRSTRAND BANK HOLDINGS GROUP
INTRODUCTION
FOLLOWING THE MERGER ON 1 APRIL 1998 OF THE FINANCIAL SERVICES INTERESTS OF
ANGLO AMERICAN CORPORATION OF SOUTH AFRICA LIMITED AND RMB HOLDINGS LIMITED,
THE ACTIVITIES OF THE FIRSTRAND LTD GROUP HAVE BEEN DIVIDED INTO TWO DISTINCT
SUB GROUPS OF BANKING AND INSURANCE INTERESTS.
THE FIRSTRAND INSURANCE GROUP INCLUDES THE INSURANCE ACTIVITIES OF MOMENTUM
LIFE ASSURERS LIMITED, THE SOUTHERN LIFE ASSOCIATION LIMITED AND THEIR RELATED
ASSET MANAGEMENT ACTIVITIES, AS WELL AS THE OPERATIONS OF DISCOVERY HEALTH
LIMITED, THE GROUP'S HEALTH INSURANCE COMPANY.
THE FIRSTRAND BANK HOLDINGS GROUP COMPRISES BOTH FIRST NATIONAL BANK HOLDINGS
LIMITED AND RAND MERCHANT BANK LIMITED (RMB).
SINGLE LEGAL ENTITY FOR BANKING
THE MINISTER OF FINANCE HAS APPROVED THE RE-ORGANISATION OF FIRSTRAND'S BANKING
INTERESTS WITH EFFECT FROM 30 JUNE 1999 (THE "DESIGNATED DATE"). IMPLEMENTATION
IS TO BE EFFECTED IN TERMS OF SECTION 54 OF THE BANKS ACT, 1990.
IN TERMS OF THE RE-ORGANISATION, FIRSTRAND BANK HOLDINGS LIMITED (FORMERLY
FIRST NATIONAL BANK HOLDINGS LTD) WILL BE THE HOLDING COMPANY FOR THE COMBINED
BANKING OPERATIONS INCLUDING FIRSTRAND BANK LIMITED AND OTHER PRINCIPAL
OPERATING SUBSIDIARIES. FIRSTRAND BANK HOLDINGS WILL HOLD:
- FIRSTRAND BANK LIMITED;
- RMB INVESTMENT CAPITAL (PTY) LTD, THE GROUP'S PRIVATE EQUITY VEHICLE, WITH
ITS SUBSIDIARIES RMB CORVEST (79% OWNED), RMB VENTURES (100%), AND ETHOS
(49.9%) WHICH WAS FORMERLY KNOWN AS FIRSTCORP CAPITAL INVESTORS.
- FNB'S AFRICA BANKING INTERESTS, COMPRISING FIRST NATIONAL BANK OF NAMIBIA
(78% OWNED), FIRST NATIONAL BANK OF BOTSWANA (70%) AND FIRST NATIONAL BANK OF
SWAZILAND (100%);
- FIRSTRAND INTERNATIONAL LIMITED AND ITS SUBSIDIARIES, HENRY ANSBACHER AND RMB
INTERNATIONAL.
THE ORGANOGRAM AT HTTP://WWW.FNB.CO.ZA/FIRSNEWS/NEWS66.HTM OUTLINES THE
STRUCTURE WHICH COMES INTO PLACE ON 30 JUNE 1999 AND WHICH WILL BE PUBLISHED IN
THE PRESS ON 1 JULY.
FIRSTRAND BANK LIMITED WILL OPERATE UNDER THE CURRENT FIRST NATIONAL BANK OF
SOUTHERN AFRICA LTD (FNBSA) BANKING LICENSE AND WILL BE GIVEN EFFECT BY
TRANSFERRING THE PRIMARY ASSETS AND LIABILITIES OUT OF RMB TO FNBSA AND
CHANGING ITS NAME TO FIRSTRAND BANK LTD. THIS TRANSFER OF ASSETS WILL BE
EFFECTED ON THE DESIGNATED DATE AND THE RENAMING OF FNBSA WILL TAKE PLACE ON 1
JULY 1999.
BUSINESS DIVISIONS AND BRANDING
THE DIVISIONS OF RAND MERCHANT BANK AND FIRST NATIONAL BANK WILL CONTINUE TO
OPERATE AS AUTONOMOUS, STAND-ALONE DIVISIONS OF FIRSTRAND BANK LTD USING THEIR
RESPECTIVE BRAND NAMES.
THE INTENTION IS TO USE THE FIRST NATIONAL BANK BRANDS FOR RETAIL, COMMERCIAL
AND CORPORATE BANKING, AND THE RAND MERCHANT BANK BRAND FOR MERCHANT BANKING,
INVESTMENT BANKING AND TREASURY OPERATIONS.
FINANCIAL POSITION OF THE BANKING ENTITIES
THE TABLE BELOW SUMMARISES THE PRO FORMA BALANCE SHEET OF FIRSTRAND BANK
HOLDINGS LIMITED AND FIRSTRAND BANK LIMITED AS AT 30 JUNE 1998 AND 31 DECEMBER
1998 RESPECTIVELY. THESE PRO FORMA FIGURES HAVE BEEN COMPILED TO REFLECT THE
FINANCIAL POSITION OF THE COMPANIES AS IF THE RESTRUCTURE HAD BEEN IN PLACE ON
THESE DATES. THEY ARE IN NO WAY INTENDED TO REFLECT THE EXISTENCE OF THE
ENTITIES IN LAW PRIOR TO THE DESIGNATED DATE, ALTHOUGH THE BALANCE SHEET SIZES
ARE NOT EXPECTED TO CHANGE MATERIALLY BY THE DESIGNATED DATE. AUDITED 1998
YEAR-END FINANCIALS FOR FIRST NATIONAL BANK HOLDINGS (30 SEPTEMBER 1998) AND
RAND MERCHANT BANK LTD (30 JUNE 1998) ARE AVAILABLE UPON REQUEST.
PROFORMA BALANCE SHEET
SUMMARISED BALANCE SHEET
FIRSTRAND FIRSTRAND
BANK BANK
HOLDINGS LIMITED
31 DECEMBER 30 JUNE 31 DECEMBER 30 JUNE
1998 1998 1998 1998
R'M R'M R'M R'M
LIABILITIES AND SHAREHOLDERS FUNDS
LIABILITIES
DEPOSITS AND CURRENT ACCOUNTS 114 972.7 117 850.6 105 082.3 106 888.4
CREDITORS AND ACCRUALS 7 610.2 9 011.3 6 948.9 7 722.7
DEFERRED TAXATION 1 147.1 1 101.7 1 129.0 1 010.7
HOLDING AND FELLOW
SUBSIDIARY COMPANIES - - 147.8 561.7
DEBENTURES AND LONG
TERM LIABILITIES 380.6 579.8 380.6 1 022.9
LIABILITIES TO CLIENTS
UNDER ACCEPTANCES 1 707.4 1 067.4 1 592.4 833.7
SHAREHOLDERS' FUNDS
SHARE CAPITAL AND RESERVES 9 523.8 8 811.2 7 035.8 6 088.6
OUTSIDE SHAREHOLDERS' INTEREST 163.0 151.1 - -
135 504.8 138 573.1 122 316.8 124 128.7
ASSETS
LIQUID ASSETS
CASH AND SHORT TERM FUNDS 9 259.4 10 186.6 7 093.4 7 145.4
SHORT TERM NEGOTIABLE
SECURITIES 10 473.5 10 583.1 6 282.0 4 041.0
OTHER ASSETS
INVESTMENT AND TRADING
SECURITIES 7 514.6 7 978.6 9 953.7 9 460.9
ADVANCES 96 859.2 96 613.1 87 803.4 87 402.1
DEBTORS 5 795.7 8 210.1 5 391.1 7 356.5
FELLOW SUBSIDIARY COMPANIES - - 382.3 2 235.4
INTEREST IN SUBSIDIARY
COMPANIES - - - 26.0
ASSOCIATED COMPANIES 65.0 130.5 65.0 153.0
OTHER INVESTMENTS 326.7 372.3 408.6 2 437.9
FIXED ASSETS 3 503.3 3 431.5 3 344.9 3 036.8
CLIENTS' LIABILITY UNDER
ACCEPTANCES 1 707.4 1 067.4 1 592.4 833.7
135 504.8 138 573.1 122 316.8 124 128.7
CAPITAL ADEQUACY RATIO
TIER 1 8.3 7.7 5.8 5.9
TIER 2 2.5 2.5 2.5 2.5
10.8 10.2 8.3 8.4
RETURN ON AVERAGE EQUITY 21.4 19.3 24.8 20.7
NET INTEREST MARGIN 3.4 3.1 3.4 3.1
BAD DEBT CHARGE TO ADVANCES 1.15 1.29 1.18 1.30
NON-INTEREST REVENUE
TO TOTAL REVENUE 50.2 50.7 52.1 51.0
NON-INTEREST COST
TO TOTAL REVENUE 61.5 62.4 58.1 60.9
REVIEW OF THE MERGER PROGRESS
UP TO 30 JUNE 1999, FNBSA AND RMB ISSUED CROSS GUARANTEES TO ENABLE THE BANKS
TO OPERATE AS A SINGLE ENTITY.
A NUMBER OF SIGNIFICANT DEVELOPMENTS HAVE ALREADY TAKEN PLACE SINCE THE MERGER
AS THE FIRSTRAND BUSINESS PHILOSOPHY IS INCULCATED THROUGHOUT THE GROUP. THE
FIRSTRAND PHILOSOPHY IS ONE OF "CHUNKING" INTO FOCUSED PROFIT CENTRES, WHICH IN
TURN ARE STRATEGICALLY CLUSTERED, WITH THE EMPHASIS ON IMPROVED CUSTOMER
SERVICE AND INCREASED PROFITABILITY. ELEVEN CLUSTERS HAVE BEEN ESTABLISHED.
MANAGEMENT AND STAFF ARE EMBRACING THE FIRSTRAND BUSINESS PHILOSOPHY OF AN
OWNER-MANAGER CULTURE.
THE GROUP INTENDS TO IMPROVE FURTHER ITS METHOD OF ALLOCATING CAPITAL, COSTS
AND REVENUE TO AN ESTIMATED 70 PROFIT CENTRES, THEREBY ENSURING THAT LOSS
MAKING ACTIVITIES ARE IDENTIFIED EARLY AND ENABLING DEVELOPMENT OF THOSE THAT
ARE PROFITABLE.
SOME OF THE MORE SIGNIFICANT EVENTS FOLLOWING THE MERGER ARE:
FNB'S "BUILD A BETTER BANK" TRANSFORMATION STRATEGY IS PROCEEDING APACE. THIS
INVOLVES THE ESTABLISHMENT OF BUSINESS UNITS FOCUSED ON KEY MARKET SEGMENTS,
EACH OF WHICH IS SEPARATELY MEASURABLE AND FULLY ACCOUNTABLE.
THE MERGER OF RAND MERCHANT BANK AND FIRST NATIONAL BANK'S MERCHANT AND
INVESTMENT BANKING OPERATIONS WILL BE COMPLETE ON THE DESIGNATED DATE,
RESULTING IN INCREASED CAPACITY. THIS HAS ALREADY RESULTED IN THE MERGER OF THE
RMB AND FNBSA STRUCTURED FINANCE, TREASURY, AND MERGERS AND ACQUISITIONS
DIVISIONS.
THE INVESTMENT BANKING OPERATIONS, RMB VENTURES, RMB CORVEST AND ETHOS
(FORMERLY FIRSTCORP CAPITAL INVESTORS) HAVE BEEN INCORPORATED INTO RMB
INVESTMENT CAPITAL (PTY) LTD. MANAGEMENT OF ETHOS NOW OWNS A MAJORITY SHARE OF
THE COMPANY, IN LINE WITH INTERNATIONAL PRACTICE FOR THIRD PARTY PRIVATE EQUITY
FUNDS.
MC(2) SOLUTIONS AND FNB CORPORATE ELECTRONIC BANKING RECENTLY MERGED THEIR
ACTIVITIES INTO ONE BUSINESS UNIT IN ORDER TO PROVIDE INNOVATIVE, INTEGRATED
ELECTRONIC BANKING SOLUTIONS TO THE CORPORATE MARKET. THE NEW BUSINESS WILL BE
LAUNCHED IN JULY.
THE HENRY ANSBACHER GROUP IS IN THE PROCESS OF BEING TRANSFORMED FROM A
UK-BASED CORPORATE BANK WITH OFFSHORE CAPABILITIES TO A PRIVATE, SPECIALIST
BANKING GROUP. HENRY ANSBACHER WILL PROVIDE INTERNATIONAL COMPETENCIES FOR FNB
PRIVATE BANK WHILE THE EXPERTISE OF MOMENTUM ADMINISTRATION SERVICES (MAS) WILL
SOON BE USED BY ANSBACHER IN THE UK AND ELSEWHERE.
THE FOCUS OF FNB CORPORATE BANK, WHICH IS NOW MANAGED AS A DIVISION OF RMB, IS
ON PROVIDING TRANSACTIONAL BANKING SERVICES TO LARGE SOUTH AFRICAN CORPORATE,
GOVERNMENT AND INSTITUTIONAL CLIENTS. CONSISTENT WITH THE RMB VALUE SYSTEM, THE
EMPHASIS IS ON THE VARIOUS DIVISIONS RUNNING AS SEPARATE, ENTREPRENEURIAL
BUSINESS UNITS, WITH CAPABLE MANAGEMENT AND MINIMAL BUREAUCRACY.
THE RECENT LAUNCH OF FNB UNIT TRUSTS IS ALSO A SIGNIFICANT SYNERGISTIC EVENT.
THE UNIT TRUSTS ARE MANAGED BY RMB ASSET MANAGEMENT, ADMINISTERED BY RMB FUND
MANAGERS AND SOLD THROUGH FNB OUTLETS.
FNB'S INSURANCE BROKER, FIRST BOWRING, IS DEVELOPING PRODUCTS WHICH ARE TO BE
ADMINISTERED BY SOUTHERN LIFE AND SOLD BY FINANCIAL ADVISERS IN FNB BRANCHES.
PROSPECTS
THE FORMATION OF THE SINGLE BANKING ENTITY AND THE RESTRUCTURING OF DIVISIONS
WITHIN FIRSTRAND BANK HOLDINGS CREATE EXCITING OPPORTUNITIES BOTH FOR THE
SHORT- AND LONG-TERM FUTURE.
THE OUTLOOK FOR THE YEAR IS ONE OF CALCULATED OPTIMISM AND MANAGEMENT IS
CONFIDENT THAT THE INTRODUCTION OF THE FIRSTRAND BUSINESS PHILOSOPHY INTO THE
ENLARGED GROUP WILL CREATE A COMPETITIVE ADVANTAGE TO THE LONG-TERM BENEFIT OF
ALL STAKEHOLDERS. WE ARE CONFIDENT, GIVEN THE GROUND-WORK DONE AND OUR
ACHIEVEMENTS TO DATE, THAT SIGNIFICANT VALUE WILL BE UNLOCKED.
PAUL HARRIS
CHIEF EXECUTIVE OFFICER
RAND MERCHANT BANK
VIV BARTLETT
CHIEF EXECUTIVE OFFICER
FIRST NATIONAL BANK OF SOUTHERN AFRICA LIMITED
ENDS
FIRSTRAND ANNOUNCES BANKING GROUP STRUCTURE
24 JUNE 1999
FIRSTRAND TODAY ANNOUNCED THAT THE FORMAL MERGER OF ITS BANKING INTERESTS INTO
A SINGLE LEGAL ENTITY, TO BE KNOWN AS FIRSTRAND BANK. WILL BE EFFECTED ON 30
JUNE, 1999. ALL CROSS-SHAREHOLDINGS BETWEEN THE INSURANCE AND BANKING INTERESTS
WILL BE ELIMINATED.
FIRSTRAND BANK WILL OPERATE UNDER THE EXISTING BANKING LICENCE OF FIRST
NATIONAL BANK OF SA.
FIRSTRAND LTD CEO, LAURIE DIPPENAAR SAYS: "FIRSTRAND BANK IS PURELY A LEGAL
STRUCTURE AND ALL EXISTING BUSINESS UNITS SUCH AS FNB, RMB, WESBANK AND ORIGIN
WILL OPERATE AS DIVISIONS OF FIRSTRAND BANK UNDER THEIR OWN STRONGLY
ESTABLISHED BRANDS."
"THE MERGER OF ALL THE VARIOUS ELEMENTS OF FNB AND RMB WITHIN A SINGLE LEGAL
ENTITY SIGNALS OUR FIRM COMMITMENT TO THE FUTURE OF FIRSTRAND LTD AS ONE OF THE
LEADING FINANCIAL SERVICES CORPORATIONS IN SOUTH AFRICA.
"IT ALSO SIGNIFICANTLY STRENGTHENS OUR BALANCE SHEET, CREDIT RATING AND DEAL
MAKING ABILITIES. OPERATIONALLY, THE RATIONALISED STRUCTURE MAKES SOUND
BUSINESS SENSE AND WILL ENABLE US TO CONTINUE PAVING THE WAY FORWARD AND EXTEND
THE FIRSTRAND BUSINESS PHILOSOPHY THROUGHOUT THE GROUP."
THE FIRSTRAND BUSINESS PHILOSOPHY NECESSITATES THE "CHUNKING" OF THE BUSINESSES
INTO FOCUSED PROFIT CENTRES AND EMPOWERING AUTONOMOUS BUSINESS UNITS WITH AN
OWNER-MANAGER CULTURE.
THE GROUP INTENDS TO IMPROVE FURTHER ITS METHODS OF ALLOCATING CAPITAL, COSTS
AND REVENUE TO AN ESTIMATED 70 PROFIT CENTRES. THIS WILL ENSURE THAT
LOSS-MAKING ACTIVITIES ARE IDENTIFIED EARLY AND ENABLING THE DEVELOPMENT OF
THOSE THAT ARE PROFITABLE.
UNDER THE NEW STRUCTURE, FIRSTRAND BANK HOLDINGS (FORMERLY FIRST NATIONAL BANK
HOLDINGS) WILL BE THE HOLDING COMPANY FOR THE COMBINED BANKING OPERATION
INCLUDING FIRSTRAND BANK LIMITED, FNB'S AFRICAN BANKING INTERESTS, RMB
INVESTMENT CAPITAL, FIRSTRAND INTERNATIONAL AND OTHER BANKING INTERESTS.
RMB INVESTMENT CAPITAL IS THE PRIVATE EQUITY FUND ARM OF THE GROUP COMPRISING
THIRD PARTY FUND, ETHOS, AND THE EQUITY FUNDS, RMB CORVEST AND RMB VENTURES.
FIRSTRAND INTERNATIONAL IN TURN HOLDS THE UK-BASED CORPORATE BANK, HENRY
ANSBACHER, AND RMB INTERNATIONAL WITH ITS BUSINESS OPERATIONS IN AUSTRALIA,
DUBLIN AND LONDON.
AS A RESULT, THE FIRSTRAND BANKING GROUP NOW LEADS THE BANKING SECTOR IN ITS
NON-INTEREST INCOME TO REVENUE RATIO OF 50,2%. THE RATION OF NON-INTEREST COST
TO REVENUE IS 61,5%
"WE HAVE BEGUN TO REALISE SOME VERY REAL SYNERGIES BETWEEN THE TWO BANKING
GROUPS. FNB IS WELL DOWN THE ROAD WITH ITS TRANSFORMATION PROGRAMME TO
ESTABLISH SEPARATELY MEASURABLE AND ACCOUNTABLE BUSINESS UNITS FOCUSING ON KEY
MARKET SEGMENTS.
"THE MERGER OF RMB'S AND FNB'S MERCHANT AND INVESTMENT BANKING OPERATIONS IS
NOW COMPLETE, RESULTING IN INCREASED CAPACITY. RECENTLY, THE THIRD PARTY
PRIVATE EQUITY FUND FIRSTCORP CAPITAL INVESTORS WAS RESTRUCTURED AND RENAMED AS
ETHOS. MANAGEMENT OF ETHOS NOW OWNS A MAJORITY 50.1% SHARE OF THE COMPANY,
WHICH IS IN LINE WITH INTERNATIONAL PRACTICE FOR SUCH FUNDS.
"GIVEN ALL THE GROUNDWORK WE HAVE DONE AND OUR ACHIEVEMENTS TO DATE, WE ARE
CONFIDENT THAT SIGNIFICANT VALUE STILL REMAINS TO BE UNLOCKED WITHIN THE
FIRSTRAND GROUP," CONCLUDES DIPPENAAR.
ENDS
ISSUED BY: WILLIAM RAMWELL
FNB PUBLIC RELATIONS
TEL: 27-11-352-4233 FAX: 27-11-371-2314
FOR MORE INFORMATION: LAURIE DIPPENAAR
CEO FIRSTRAND LTD
TEL: 27-11-282-8068 FAX: 27-11-282-8065
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