Firstrand Ltd

and welcome to the first RENT annual results presentation for the year and that's June 2024, 25. Let's start with the operating environment. The macroeconomic environment over the last financial year was characterized by ongoing global fracturing and reorientation of the global economic policy. The ongoing conflict in Ukraine, Middle East, and the uncertainty around US tariffs serve as a few examples of this environment. Economic policy uncertainty has lifted well above levels seen in the midst of the COVID pandemic. Sticky inflation and ever-increasing sovereign indebtedness have raised the funding costs of several systemically important economies, This increase is seen in the graph on the right-hand side of the slide, which shows 10-year bond yields in some of these economies. On a comparative basis, South Africa is biking the global trend with a reduction in bond yields supported by the country's structural reform prospects alongside lower inflation expectations. The uncertainty in the global environment spilled into the South African economy, weighing on business and consumer confidence. Consequently, private sector investment was particularly weak. The figure on the left-hand side of the slide shows a progression of GDP growth focus as reflected in the Bloomberg consensus survey. At the start of this financial year, consensus expectations put GDP growth for this year at about 1.6%. At the last survey, the expectations put growth for 2025 at only 1%. There were, however, signals of support to the economic activity in South Africa. Interest rate cuts and lower inflation provided some support to households and businesses, while the reform implementation through Operation Volingela continues. We however expect this high interest rate environment to persist over the next two years, with the repo rate falling to 6.5% by June 2027, driven by an average inflation of 3.8%. The operational environments in the broader Africa portfolio were somewhat a mixed bag. Encouragingly, countries that suffered the consequences of sovereign debt restructuring and the lack of reforms over the last few years are starting to turn the corner. In Ghana and Zambia, inflation and interest rates are reducing and economic activity is gradually lifting. And these signs that the long awaited economic reforms in Nigeria are paying off. While economic activity in Namibia continued to perform in line with expectations, Botswana's economy has suffered significantly from the fall in demand for natural diamonds, creating a challenging operating environment. The Mozambican economy is another one that continues to present headwinds in the face of economic imbalances. A challenging fiscal backdrop and tariff uncertainty has kept a lid on economic activity in the UK. While interest rate cuts provided some relief, it was not enough to offset the negative impact of business tax increases and cost of living pressures. In this environment, the Bank of England was limited from providing faster interest rate relief. Moving on to unpack the group's operating performance against this macro background, This slide highlights the key performance metrics, including the impact of the large provision for the UK Motor Commission Meta. These metrics clearly demonstrate the strength of the operational performance delivered by the business, which we are very pleased about. For completeness, I would like to contextualize the results relative to our guidance in the trading update we issued in June. At that time, we were expecting growth of 16% in normalized earnings of last year's base, which included the first motor commission provision, and we guided as such. However, subsequent to the guidance, we did raise a further provision, which in our view is prudent given the regulatory uncertainty in the UK. This strong earnings capacity generated by the group allowed us to absorb this provision and still deliver but in our view, a solid earnings growth of 10%. To absorb a further provision of $2.7 billion, I still deliver normalized earnings growth ahead of our long-term stated range, and a superior return on equity is testament to the quality of the group's portfolio. The high ROE and ongoing generation of capital also allowed us to deliver growth in dividends ahead of normalized earnings growth, which I will cover in more detail later. All in all, despite the challenges we continue to navigate in the UK, our businesses continue to consistently outperform in terms of growth. Growth in net asset value and economic profits two key shareholder value matrix, they remained pleasingly strong. The group's superior ROE benefited from an improved return on assets, increasing by six basis points. This was again a result of the quality of our operational performance, in particular, strong growth in investment income, improved operational leverage, and a stable credit outcome. Gearing decreased this year, and the cost of equity remained unchanged at 14.65%. Worthwhile noting that at prior year gearing levels, ROE would have been 20.9%. This is a snapshot of operational performances delivered by our client-facing franchises. All the large domestic franchises performed well. Some of them are ahead of our expectations six months ago. In a highly competitive environment, F&B retail and commercial delivered good earnings and growth on the back of customer growth and healthy volumes. A callout here for West Bank, which delivered excellent growth and an impressive ROE given how fiercely competitive the market is. Another callout is the improvement in RMB's ROE. This came despite another challenging year for the global markets business, but private equity provided mitigation for that. And also, the originate and distribution strategy executed in the business in the second half of the year supported the returns outcome. I will now unpack the performance across three themes, similar to when I presented the results in March. These scenes represent key differentiators and are foundational to first strength, structurally higher and sustainable ROE relative to other traditional sector players. So let me start with the strength of the group's origination franchise. Our story here has been consistent. Our origination philosophy and mix of advances is deliberately anchored to growing the balance sheet, meeting the needs of our clients, and at the same time, achieving appropriate risk-adjusted returns. This means we have continued to grow our market share in good quality credit, supported by the appropriate allocation of financial resource through our FRM process. In retail, we have remained focused on how on lending to low- to medium-risk customers with capacity to borrow, and in commercial and corporate, we have targeted growth in sectors aligned to macro growth themes. A particular example of this has been the tilt to supporting SMEs. Specific balance sheet optimization strategies have also created the necessary capital and funding capacity to support our origination franchises. This slide shows that across brands, customer segments, and product lines, we have seen good growth in lending. Standouts here are West Bank, F&B Commercial, and all the more. The pie chart on the right unpicks the results of the sector-specific lending strategies we have been pursuing. The UK operations did very well to deliver book growth and continue to anchor origination to protecting margins in a competitive market combined with soft macros, particularly for mortgages. The embedment of FRM principles in the UK has also resulted in improving risk-adjusted margins. What this slide shows is that the originate and distribute strategy designed to improve margins and ROE and create funding capacity gained momentum in the year under review. So whilst year-on-year advances growth looks subdued at 1%, gross origination at 8% remained healthy. These activities help match assets originated by the bank to better balance sheets with lower regulatory friction costs. Overall, the credit performance based on the group's origination approach is well within expectations. As guided, the retail credit loss ratio has moved into the TTC range as pressure on households starts to ease. commercial credit loss ratio has trended into the midpoint of the TTC range. And this is to be expected, given where we are in the cycle and the front book strain emanating from our strategy to lean in and lend to SMEs that are well positioned to benefit from the early structural reform activity in South Africa. Outside our expectations are the two specific concepts in the commercial enterprise sub-segment, but these are fully collateralized. The next theme I will unpack is the results anchored to our strategy to grow the deposit franchise, which is a key underpin to the group's ROE. It is extremely pleasing to see that all of the group's deposit franchises delivered good growth during the year. RMB's corporate deposit franchise continues to show increased momentum The steady strategy to build in-country deposit franchises in the broader Africa portfolio is also gaining traction. In South Africa, retail and commercial deposits continue to increase of an already high base, with a significant milestone reached during the year as F&B deposit base exceeded R1 trillion. The group's margin was up five basis points, and up six basis points when excluding UK operations. Asset margins benefited by four basis points from improved pricing, offset by two basis points due to mix. Deposit margins did experience margin compression, but supported better customer value propositions. These outcomes are a consequence of deliberate strategies to reward customers for their savings and ensure appropriate risk-adjusted pricing for lending. As an example, amidst fierce competition in home loans, particularly as this is a switch lever for main bank relationships, F&B home loans managed to improve front book pricing and margin, lifting the home loan's portfolio margin by four basis points, a commendable outcome in the circumstances. The group margin uplift was supported by the balance sheet management activities already mentioned as part of the distribution and risk sharing undertaken by RMB. This slide again demonstrates the benefits of the group's active management of interest rate and ALM risks, ensuring the group earns appropriate value from interest rate and credit premium. In the current year, the strategy produced an additional $300 million compared to an opportunity cost of $1.5 billion in the prior year. This represents a $1.8 billion year-on-year change, thus contributing around 2% to NII growth. With interest rates forecasted to reduce further, the ALM strategy is expected to yet again outperform as shown in the grey shaded area on the graph. I will now move to the third theme, the group strategy to grow and diversify sources of NIR. The group has consistently focused on diversifying sources of NIR, and this slide shows this diversification and how it's provided mitigation for a disappointing trading income result. I will cover these in more detail, but just to point out the fee and commission income unpacked on the left-hand side of the slide. We can see that F&B benefited from new customer acquisition and improved volumes growth. F&B also benefited from growth generated by value-added services sold into the core transactional base, including F&B Connect, SendMoney, eBucks, and NavDot, with F&B Connect alone generating volumes worth R22 billion. 3 million customers use these value-added services, and the revenue from these services grew 15% to more than $2.9 billion in return only, an encouraging outcome of F&B's platform and app capabilities to scale offerings. This slide shows the resilience of the F&B fee and commission income, which continues to grow. It also impacts the customer growth at a segment level. The personal segment continues to face heightened competition. Customers with standalone products where the relationship is not entrenched are easily switched. In addition, F&B's strict application of new tax and FATF regulations resulted in constraints to onboarding new customers and furthermore resulted in accounts deemed non-compliant being closed. The business is, however, executing on a number of strategies to reverse the current attrition levels. F&B retail, private, and commercial segments continue to acquire new customers, as well as benefit from customer migration, which has provided a solid underpin to fee and commission growth. The shifting payment landscape is something we are very focused on, with dedicated senior resources building out a response framework to defend and attack, designed to address risks, but also to capitalize on the growth opportunities that are going to arise. The scale presented by the group's customer base combined with the payment rails we can provide to those customers cannot be underestimated. However, we are not complacent. Customer behavior, regulatory changes, and the nature of new competitors means we need to be front-footed. we have a clear roadmap of actions which is unpacked in this slide. This slide demonstrates the continued health of F&B's retail and commercial transactional franchise, despite the highly competitive environment. Shareholders will recall we took a knock to NIR last year when we repriced for the introduction of PayShap. What we can clearly see here from the growth in volumes is that this was the right outcome for customers who have adapted to the new payment rail. These volumes reflect organic growth driven by actual customer choice and usage and is supported by other cash to digital initiatives. I talked earlier about RMB's investment bank origination engine. Here we can see the continued growth in knowledge-based fees driven by the healthy origination levels which I have touched on earlier. And these have produced material structuring and advisory mandates. Structuring and arranging fees account for about 80% of the knowledge-based fees with advisory making up the rest. RMB's NIR also continues to benefit from further private equity realizations and stable annuity income flows. The business has adopted a more proactive management approach to increase the velocity and timing of exits to create a more consistent realization income stream going forward. A noteworthy call-out is that 2.6 billion of new investments made in the portfolio in the past year, providing an underpin to future annuity income and realizations. The unrealized value of the portfolio now sits at 8 billion rand. As I mentioned earlier, the weak performance from global markets impacted overall NIR growth. There were some specific reasons, including the deliberate strategy to de-risk concentrated sovereign exposures in broader Africa. However, this was a disappointing year for the business. The team is busy executing on a strategy to reposition the GM business to build new capabilities and significantly improve operational efficiencies. Enforce APE, for insurance business, is a measure of the size and scale of the insurance book, which is currently sitting at about 10 billion rand. We are not only seeing steady growth in Sunerol, but we are seeing strong momentum across the newer product lines, underwritten and short-term insurance, and we are gaining traction into the commercial segment. The group's strategy has been to build a diversified insurance business, and the last number of years has seen significant investment in capabilities to enable this. Pleasingly, non-credit life business now accounts for 75% of this portfolio. In this portfolio, profitability has in the past been generated by the credit life and the core life businesses, and we are now at a stage where the other product lines are expected to be profitable in the next 12 months, which will materially lift the growth from the insurance business. We continue to generate good top-line growth in new business for insurance businesses. Credit Life New Business APE was impacted by lower levels of unsecured lending in F&B this year. We also saw reduced sales of the live simplified product due to risk appetite changes. The claims experience was adverse and a decision was made to reprice that product. However, the rest of underwritten business is 15% up. largely supported by growth in our advisory channel, which now accounts for 50% of the sales for underwritten policies. Moving on from NIR specifically, I wanted to touch on geographical diversification. This slide shows that the group's current geographic mix has mitigated for sluggish SA growth in the past. In 2023 and 2024, the broader Africa portfolio delivered excellent growth against a muted performance from the domestic business. The UK also contributed to the group's outperformance last year. This year, the picture has reversed to some degree. Looking forward, we still believe that our current mix supports profitability over the medium term. This slide is a quick snapshot of the performance metrics from the broader Africa portfolio, which continue to build good underlying franchise value demonstrated in growth in customers and deposits. The ROE is very healthy at 23%, supported by economic profits of R1.6 billion. impacted by increases in regulatory capital, but to a greater extent, the global market strategy to reduce concentrations in sovereign exposures. The macro conditions in market that have been impacted by sovereign distress and reforms, as I mentioned earlier, are expected to improve, providing opportunities for growth for the in-country and the cross-border businesses going forward. The UK's operational performance, excluding the impact of the motor provision, was pleasing. The performance was driven by healthy lending growth across all three core lending franchises. The operational efficiencies are starting to emerge, with focus on improving the cost-to-income ratio to mid-40s. The UK's strong capital position allowed Aldermore to pay a dividend of £125 million to First Rent, the first since Aldermore's acquisition in 2018, in alliance with Aldermore's strategy to distribute excess capital as they optimise their capital stack. This is expected to be supportive to an improving ROE from the UK operations going forward. I would like to spend some time on two specific growth strategies that we believe will be supportive of ongoing growth going forward. Our focus on SMEs and the informal economy, and secondly, the scaling of our corporate bank. The group has consistently focused on SME lending as it leans into the macro expectations that this sub-segment will be an early beneficiary of structural economic reforms underway in South Africa. This focus has resulted in a franchise representing 1.2 million customers and a significant lending book and deposit franchise. Just as a point of reference, Customers in SME have revenues, have businesses where the turnover of the business is below 60 million rand. In addition, the group has made strong headway in its strategy to service the needs of the informal economy. This has resulted in a sizable business within F&B Commercial, representing over a quarter of a million customers. F&B has a demonstrable track record here, and we believe there's significant runway for growth. Significant risk appetite has been facilitated through risk-sharing partnerships with DFIs. Products have been created and successfully rolled out to meet the specific needs of this client set, such as F&B Merchant Cash Advance, which is a starter limit credit card that enables users to build a track record and single invoice discounting. Additionally, supply chain financing was recently launched for mid-corporates into their value chains of their commercial partners. Development is also underway for a bespoke asset-based finance product. We are excited about the prospects of this sub-segment, and we believe it represents a growth trajectory far above system growth. This slide shows the current size of the group's corporate bank. which sits across two silos, R&B and F&B, and which has created some drag to unlocking growth opportunities from this client set. Large corporates and MNCs have been serviced by R&B, and you can see the size of that franchise on the left. On the right, you can see F&B's enterprise subsegment, which sits in commercial, representing 45,000 clients. These building blocks to a fully integrated corporate bank, which will be further enhanced by the corporate and MNC franchise that we are acquiring early next year from HSBC. The opportunity set to unlock here is meaningful, which is why we created a brand agnostic group executive role to establish what we refer to as commercial, corporate and MNC ecosystem. This will accelerate cross-sell, particularly in the F&B enterprise segment, where there are many sizable corporates requiring the same products as R&B clients. This will also improve our ability to service clients with broader Africa ambitions, and the strategy will also create growth for global markets business, which is currently subscale and would benefit from the much-needed flow from market access and risk management being part of a client ecosystem. The Group CT1 ratio over the past 12 months reflects both the return profile and active management of financial resources. The increase in CT1 was supported by strong earnings that even net of dividend exceeded risk-weighted asset consumption by 24 basis points. Risk-weighted asset optimization further added 34 basis points, lifting the Group CT1 ratio to 14%. Accreting $8 billion in capital over the past 12 months alone leaves the group in a strong position to support ongoing growth opportunities. The group's high return profile and solid capital position, together with sustainable active FRM, allows for a dividend cover at the bottom end of their board-approved range of 1.6 to 2 times. This generous dividend cover of 1.6 times still leaves a group with sufficient financial resources to deliver on the group's growth objectives. I will now hand over to Marcus to take us through the financial review and a detailed unpack of the UK provision matter. And I'll come back to close.

Thank you, Mary, and good morning, everyone. I'm pleased to present the First Grand Group Financial Review for the year ended 30 June 2025. Despite a tough operating environment and the requirement to raise an additional provision for the UK Motor Commission matter, the Group has delivered a resilient financial performance with normalised earnings increasing 10% at a return on equity of 20.2%. This has resulted in NIAC growth of 12% and good net asset value accretion of 11%. The key drivers of this performance are reflected in the six basis points improvement in return on assets, which Mary highlighted earlier. A key additional call-out is that improved operational leverage resulted in a significant improvement in the cost-to-income ratio to 50.8%, and this is despite the additional income statement impact of the provision raised of £115 million or R2.7 billion during the period. The Group CLR remains below the midpoint of the TTC range and continues to benefit from the Group's origination strategies, including the overall advances mix and diversification. The Group's normalized earnings waterfall reflects the resilient top-line growth during the period and the benefit of the positive cost jaws and a slowing credit emergence. Earlier, Mary covered the operational performance and unpacked some of the key income drivers across NII and NIRR. My portion of the presentation will therefore focus on the financial review of the overall credit performance and operating expenses and includes a more detailed unpack of the UK Motor Commission matter. The group's credit impairment charge increased 12% during the period. Notably, this outcome was achieved despite the significant base impact of the £46 million or 1.1 billion provision release related to the prior year closure of the UK NOSIA matter Excluding this large base impact, the Group's impairment charge increased 3%, and is overall in line with our expectations considering the tough macroeconomic backdrop. The Group CLR remains anchored at the bottom end of its stated TTC range, and excluding the last year base impact, improved by 3 basis points to 85 basis points. In addition, the SA and broader Africa combined CLR trended marginally lower to 108 basis points, with an improvement in the domestic retail portfolios offset by the emergence of some strain in commercial. I will unpack these further shortly. The group's overall credit performance remains resilient. Last year I noted that the group believed, excluding the NOSIA benefit, our CLR had peaked. at 92 basis points, and should trend lower in the 2025 period. Pleasingly, this has played out, and despite book growth, the absolute six-month rolling impairment trend also remains positive. In addition, the group's impairment coverage remains appropriate for the current cycle, and notably includes a centrally raised geo-economic credit overlay of R300 million for the potential forward-looking impact of the latest tariff announcements by the US. Overall, performing coverage has reduced to 1.44%, driven by new origination and lower IFRS 9 forward-looking indicator provisions, as the interest rates and inflation economic forecasts have marginally improved during the period. The retail CLR has performed better than expectations at this time last year, when customer affordability pressures were coupled with a shallow rate-cutting cycle, sticky inflation, persistent debt counselling inflows and weak house prices that at the time resulted in a weak credit outlook for retail. Retail's origination thesis and proactive responses to some of these challenges, including improved collection processes, has resulted in a better income than expected at the time. The full-year CLR has improved to 1.98%, with slowing NPL and debt counselling inflows and overall improved arrears. The secured portfolio's performance continues to be dependent on asset values, with home loan LTVs remaining under pressure despite a gradual improvement in overall house prices. We expect that it will take some time before house price growth exceeds the NPL interest roll-up, but the overall trend during the period is viewed as net positive. West Bank VAF continues to perform ahead of expectations with its credit charge driven mainly by the front book strain from strong advances growth of 10%. Turning to the unsecured CLR, it benefited from lower front book strain than the prior period with advances up 3% this year. Credit performance has improved in the second half of the year and we expect advances growth to pick up as new origination vintages are showing better resilience. As a note, the F&B card CLR trended slightly up, but this is predominantly due to sluggish book growth and flat average balance utilization, which impacted the overall denominator in the CLR formula. As a final comment on retail, the improving inflation and interest rate outlook have positively impacted the performing portfolio's FLI impairment stock. As expected, the commercial arrears emergence has lagged retail by 12 to 18 months, and we note that the commercial CLR has trended much higher during the period, with a significant increase in the second half of the year. Key drivers of this growth can be attributed to the 10% total growth in commercial advances, which results in stage one front book strain, and in particular, the multi-year strong high double digit growth in the SME unsecured advances portfolio, which has seen some arrears emergence. The strain is predominantly attributed to older credit vintages originated around 18 to 24 months ago under a less mature scorecard at the time. The business utilizes a data-led credit strategy and has made significant improvements to its scorecard since then. New origination under the refreshed scorecard has resulted in dramatically improved underlying arrears performance and the back-book credit emergence has been adequately provided for. In addition, the two customers that went into default during the period resulted in a 13 basis points impact to the overall commercial CLR. Both these migrations into NPL have declined specific circumstances and factors that we do not believe infer into the rest of the portfolio. Whilst the work-out process is expected to be lengthy, there is good collateral underpin to the value of the exposures, and notably one of the customers has made a partial repayment post year-end. RMB's credit performance continues to perform ahead of expectations, with an overall good outcome. The main call-out is similar to that noted during the Intramus presentation, whereby a few counters migrated from Stage 2 to NPL during the first half of the year. These are debt restructures that were already in the Group Stage 2 watchlist, and adequately provided for in anticipation of migration to Stage 3 during the period. As a final comment, overall RMB coverage remains prudently struck at 1.66%. The UK's operations credit performance remains a little noisy due to the base impact of the NOSIA provision release. Normalizing for this reflects an improving overall underlying CLR performance from 0.14% to 0.1%, and includes some further cost-of-living overlay releases as overall customer affordability continues to gradually improve. Furthermore, advances growth picked up in the second half of the year, particularly in buy-to-let property finance, which resulted in some front-book strain. Broader Africa's credit performance was impacted by various country-specific pressure points, particularly in Mozambique, Namibia and Botswana, but despite this, the overall core credit performance of our client segments remained robust, with the Broader Africa CLR remaining below the TTC range. Only the Namibia commercial portfolio had some emergence of client-specific credit strain and has been adequately provided for with the appropriate credit responses implemented to date. I've already covered some of the key call-outs on the NPL formation for the group, but in summary, NPLs remain sticky with year-on-year growth of 10%. Most of this growth manifested in the first half of the year and relates predominantly to the R&B and commercial NPLs I've already highlighted. Turning to costs, operating costs are up 2%, including the impact of the UK motor provision. And without the provision, core cost growth also came in below average inflation at just under 3%. This outcome is as a result of management's deliberate focus on reducing the absolute level of the group's variable cost base. Furthermore, the group is evolving its cost management strategy to institutionalize costs under its financial resource management frameworks, which focuses on managing costs as a finite resource with similar allocation disciplines as capital and funding. Whilst it is still early days, we believe this focus has achieved and is generally showing directionally positive results. During the period, a deliberate decision was also made to invest in frontline marketing, advertising and sponsorship costs, as our franchises invest in long-term customer growth and embedded brand value. This marketing investment spend was offset by a reduction in some of the controllable costs in other expenses. On this slide, other expenses also includes the UK motor provision raised during the period of R2.7 billion, and I will cover the provision in detail shortly. Structurally, costs are also lower due to the at-acquisition Aldermore intangible asset that was fully amortized in the prior period and also benefited from the non-consolidation of MotorVantage due to the current period held for sale classification. I can also note that the sale process for MotorVantage has already been concluded in the new financial period. IT and platform costs continue to grow above inflation as the group invests in modernization initiatives and maintaining the enforced tech stack. Staff costs make up around 61% of the total group cost base and increased 5%, which is generally in line with the average salary increase during the period, and was partially offset by a reduction in contingent staff costs. This good cost outcome has resulted in an improvement in JAWS of 3.7%, which translates into a significantly improved cost-to-income ratio of 50.8% and 48.8% without the provision. Once the impact of the provision is out of the base, the group expects its cost-to-income ratio to be anchored below the 50% level. In summary, the group has produced a very resilient overall top-line performance that was enhanced by good cost and credit outcomes, and I will now turn to unpack the motor provision in some more detail. Up front, I'd like to note that the group welcomes the UK Supreme Court judgment, which has given legal clarity on this matter, and we're pleased to have successfully appealed the key grounds related to the duties of credit brokers under common law. As a note, we have included a detailed write-up in the Analysis of Financial Results booklet to summarise the pertinent facts related to this matter, and I will use this presentation to lift out some of the key items that are relevant in understanding the group's current position. A key starting point is to first recap how we got to where we are and how the matter has evolved from claims in the lower county courts and complaints to the Financial Ombudsman Service into a potential FCA redress scheme. If we go back to January 2024, the FCA had noted a large influx of Commission-related claims in the lower county courts. Importantly, at that stage, the group was successfully defending the majority of these on the basis of the underlying facts thereof. At the same time, the FOS ruled against two other lenders on DCA matters. These and other factors led to the FCA launching a Section 166 skilled persons review. Shortly after this, the FCA also noted that firms should at all times maintain adequate financial resources based on their own understanding of their data and complaints processes. This led, at the time, to the group raising an accounting provision of £127.4 million, which considered only DCA agreements between the period 2007 to 2021, and was based on a wide range of scenarios and possible outcomes, as there was limited information available at the time. It also considered some of the factors and approaches observed from the lower courts and previous redress schemes. In October last year, the UK Court of Appeal released its judgment on three cases, namely Johnson, Wrench and Hopcroft. Over this period, the group was granted leave to appeal on all six grounds and at the time chose not to revise its provision as it was the appellant's to two of the claims. However, we noted other lenders not involved in the Court of Appeals chose to increase their provisions for possible outcomes from the Supreme Court process during their own respective reporting periods. The UK Supreme Court process concluded in early April, and its decisive judgment was subsequently handed down on Friday, 1 August 2025. Critically, the UK Supreme Court overturned the most substantive appeal grants, which relates to the fact that motor dealers in their role as credit brokers do not owe fiduciary duties to customers, and therefore all the related grants to this matter, including a tort for bribery or lender dishonesty, were superseded. However, in the Johnson case only, the Supreme Court decided that there was an unfair relationship under the UK Consumer Credit Act. After the judgment, the FCA announced its plans to consult on an industry-wide redress scheme related to motor commissions and noted that post the Supreme Court judgment, it would also consult on including non-DCAs or fixed commissions in the scope of the scheme. Off the back of these new developments, First Train decided to increase its UK motor provision to £240 million and I will now unpack some of the considerations in arriving at this. The provision continues to consider multiple probability-weighted scenarios using all the additional information obtained from both the Supreme Court judgment and the statements made by the FCA to date. And this slide summarizes some of the key assumptions and judgments, as well as noting that the group's financial disclosures include a sensitivity analysis on some of these. At a high level, both sensitivity tests resulted in a potential provision impact of well less than 10%. The provision approach resulted in an increase of the provision to £240 million, with an increase in the redress cost relating to the Motenova front book, driven predominantly by the inclusion of scenarios for non-DCAs post-2021. I won't be able to cover all the specific details driving the increase, but at a high level, the first key impact relates to the unfairness ruling by the Supreme Court and the financial measures they considered in determining this, as well as the remedy awarded. Assumptions used do not specifically include fact-specific considerations that the Supreme Court stated must be considered in an unfairness assessment, and we will await the FCA's consultation process to consider these further. Management did, however, include additional scenarios for the potential remedy outcome based on the Johnson case, which included a full commission refund plus commercial interest. The second important update relates to the inclusion of non-DCAs post-2021, which I have mentioned is the largest driver of the Aldermore provision increase. Thirdly, the considerations around a potential opt-out scheme does result in higher operational and legal costs that would arise from a long-backdated redress scheme. One positive is that the proposed interest rate by the FCA is much lower than management considered when arriving at last year's provision. It is important to note that there are some considerations that have not been included in arriving at the provision. As of now, the provision does not cater for any contingent recoverable amounts, including, for example, any credit broker potential liability. In addition, it is first-hand opinion that there is a counterintuitive commercial challenge when using the commission as a percentage of total charge for credit as a standalone factor when considering whether it contributes to a potential unfair relationship. As context, the charge for credit component of this calculation is made up predominantly of the sum of interest to be paid by the customer over the term of the agreement. With this understanding, a simple illustration to best depict our concern is that in a basic fixed commission agreement where the numerator is also fixed, For a customer who is offered the lowest possible interest rate, let's say, for example, 5%, the dealer's commission as a percentage of the total charge for credit would result in a higher percentage versus if the same customer had received a much higher interest rate of, say, 15%. Therefore, if the customer gets the best possible interest rate, he or she could be flagged as treated unfairly because of the dealer's commission as a percentage of total charge for credit which would appear much higher. In our view, a similar approach to the Supreme Court which recommended multiple financial and non-financial factors will be required in the overall balancing act to assess potential unfairness and harm. Management also believes the inclusion of non-DCAs in a final redress scheme will require some consideration and debate, as they have a different inherent risk profile in determining customer outcomes to that of DCAs. In closing, something that will be important to assess in the overall outcome will also be proportionality. Thank you all, and I now hand you back to Mary to cover the group's prospects.

Thanks, Marcus. Good job. And, I mean, I think it was important for Marcos to unpack the UK motor provision, the assumptions we made at arriving at the £240 million provision. Although this provision is material, it is still significantly lower than the amount we would have had to set aside if the substantive arguments on fiduciary duty made to the UK Supreme Court had been unsuccessful. So we welcome the Supreme Court judgment, which provides useful legal clarity. The subsequent statements by the FCA, however, have unfortunately created further uncertainty, and we await the consultative paper on a proposed redress scheme which is scheduled for October. The accounting provision, which we believe has been conservatively struck in light of this ongoing uncertainty, and this provision does not take into account any potential recoveries which we believe it would have a basis to pursue. The First Front believes that any FCA redress scheme must be proportionate and fair. It must be in accordance with the FCA's own principles that they have communicated, that they will undertake in applying a redress scheme. And we also believe that the FCA redress scheme needs to comply with the legal principles as determined by the UK Supreme Court. If this does not prove to be the final outcome, The group preserves its rights to protect the interests of its various stakeholders. We hope that in the next year ahead, this matter will be behind us. So as I finally come to prospects, the macro underpin in our prospect is an expectation of a further easing in South African monetary conditions and a greater degree of inflation certainty. That said, ongoing global policy and economic uncertainty alongside the government's tighter fiscal stance are significant risks that could upend the expectations of further policy relief. We expect Botswana and Mozambique to continue tough macro conditions, and we expect the Although the structural economic reforms taking place in South Africa look like they are slow, but we do expect that there will be positive momentum and trickle-down effects that start coming through the system. I'm excited by the group's prospects looking ahead, despite some of the challenges we continue to face. I expect First Friend to deliver another strong operational performance in the coming year, the drivers of which are unpacked on this slide. Again, the group is expected to significantly outperform its long-term stated target range for earnings growth, and the ROE will trend up to the top end of our 18% to 22% target range. The combination of growing the top line and managing costs will result in positive jaws, something this management team is fully committed to. This brings me to the end of the results presentation. I'd like to thank employees across the first-rank group for their diligent efforts in looking after our franchises and ensuring that the group executes on its vision of delivering shared prosperity to our customers, employees, and the communities that the group serves. You can be proud of what the group has delivered for our shareholders. Lastly, thank you to our customers across the group. Your trust in us inspires us to innovate to support your current and evolving needs. I will not pause here and take questions. I am joined by various members of the senior leadership team to field any questions that Marcos and I feel they can add better context to. Thank you. We started with the questions of the people in the room as we get the online questions.

Good morning. Thank you for a lovely presentation and congratulations on the results. I'm a little confused on the numbers of your UK provision. If you look at page 29, the provision is set to grow from 127 to 240, which is 113. Then if you go to page 17, sorry, excuse me, on page 22, you talk about 150 million. And I'm afraid those numbers don't make sense to me. Thank you.

Thank you for the question, Marcus. I think it provides some clarity here.

Yes, so there is some context that is in the booklet around this. I think I didn't hear you clearly. I think it's 115 million pounds on that slide. On which slide is that, sorry? Page 22. Page 22. Yeah, 115, sorry. It was 115 million. Yeah, 115 million pounds. And the difference of around 2 million pounds was that in setting up the scheme for last year, some of the operational costs were utilized against the provision, but only the delta raised in the current year in the income statement. So there's a small difference between the two. Apologies for that.

Thank you for keeping my content in check.

In your slide on the bottom, what is covered by the distribution cost against origination? Is that your operating cost?

So that is our strategy where RMB, in particular in this year, originated assets, and assets that we believe are probably better placed onto other balance sheets, so assets that ultimately get owned by pension funds, as an example. So those are longer-tenured assets, for example. So RMB undertook this activity this year to distribute these assets. So that's what we refer to as distribution. So they originated up to 8% and then managed to syndicate and pass on some of those assets to different parties.

Is that a significant part of your business?

It's something that we would like to ensure that we continue doing because RMB, as I showed, the structuring fees are quite – the structuring and advisory fees we get from these mandates are quite significant. And in certain instances, the bank's balance sheet, due to higher regulatory capital requirements, is not actually the best place to put those long-tenured assets. So this is something we'd like the business to continue doing. We're pleased that they got going this last six months.

Thank you. On page seven. Your ROE in Aldermore of 10.7, what would you say is a long-term target ROE?

So our aspiration for this business is for the ROE to be between 14% and 15% in pounds terms. So that's obviously still way off. The one place where the strategy execution lagged in this year was the capital optimization. So because of the uncertainty with the courts, It took long for us to start getting a dividend from Aldermore. So as I mentioned, we started that process. The other two places where it's going to improve in the ROE is I think if they carry on with the origination as they are doing at good margins. be a lot more efficient because that's the one place where we look at the business and our cost-to-income ratio could be a lot better. And I think ultimately that's what's going to – and then obviously an improvement in our motor business ROE, which we said that's actually the one that's got to drag. So if we get all those things right, the ROE should lift. And that is still our strategy for the medium term. Are we going online? There seem to be no more questions in the room.

Okay. Hi, Mary. We've got some questions from the webcast. Warren Riley from Battler. I think you've answered his first question already. His second question is, will the investment in the UK be reviewed post the UK motor matter conclusion?

So the simple answer is that I think we, as a discipline management team, have to review all our businesses on an ongoing basis. We are quite comfortable that the strategy execution, that all the more business is on, that I think we are on track, so that part is fine. What we've had to navigate in this last year is reputational issues as a result of the industry matters. So it's obviously quite important to see where the FCA redress scheme lands. If it's obviously not proportionate and fair, it leaves us with very little resources as we think about going forward. So I would have to say that, okay, we've got the legal cases behind us, the court cases behind us. Let's wait to see the FCA redress, understand what the UK market thinks, But let's separate issues from the UK market to also our business, which I think you need to trust us that we will manage the business prudently, grow it, and do the right thing.

So there's a few questions from Charles Russell. So the first one is, can you comment on the impact of lower diamond prices on your Botswana business, noting 7% increase in F&B Botswana in full year 25?

Andrews, can I pass this one on to you? Did you hear the question? Okay, thanks.

So Botswana's going through a very difficult macro environment, linking to the diamond prices. We, through our Botswana activities, closely involved with government and the various actions they've employed. They've also hired international advisors, but through the short to medium term, we see more headwinds than tailwinds. And from a forecast both on GDP and inflation will be obviously GDP low and high, but we actively manage as part of the ongoing balance sheet.

So actually James Stark has got some follow-up questions on Botswana Andries. Well, he said, what mitigations can be put in place, if any, and to what extent pre-emptive provisions have already been taken?

So first of all, it is a, let's call it a macro crisis, fiscal crisis for the country. Fortunately, Botswana has high investment grade. They're sitting with five months reserves and have capacity to borrow. So I can't, only from a fiscal, that's where to start. So we assume that if the fiscals make the right decision, But obviously, we as a banking institution, first and foremost, is the robustness and stability of our deposit and country. And we've already taken strengthening origination franchises, also lengthening our profile, and also reduced some of our long-term funding in that business.

Yeah, but Botswana is one that we are concerned about. As Andrew says, we are watching this closely and I guess already some provisions have been taken in light of the fact that it is going to be a tougher macroeconomic environment going forward.

Thanks. I'll go back to Charles' second question. What do you think the probability is of further provisions post the FCA consultation later in the year?

Look, I mean, I think we have gone to great pains to say, okay, we've now raised this provision, despite not having full information on the redress scheme, but we've made assumptions where we believe we've been conservative, and it's all based on what we know now. I mean, I think we obviously await the redress scheme, but from where we sit – Beyond this number, I think it's really inconceivable to think how that's possible at this point in time. But all of that is qualified by the fact that I don't know. But I believe Marcus has been very conservative in setting up this provision.

So Ross Cricker also has a question on this which I'll just cover before I go back to Charles. He's asking, what are the key sensitivities in your assumptions that could have the largest impact on an eventual liability?

Are we still in the UK provision?

Yes, we are.

It would be great to come back to the rest of our group and our franchises, but Marcos, please answer that.

Okay, we're nearly at the end of these questions.

Thanks, Ross. I mean, obviously it's multiple scenarios, and I guess kind of using the anchors that if you think back to the Supreme Court judgment on that percentage charge of credit, the percentage of advance as a calculation from a financial perspective, some of the factors that in the booklet you'll see we call out that the FCA is going to use from a qualitative perspective, and how those all measure. The most sensitive factor will be where they decide harm begins on those as a starting point.

Okay. Charles' last question is about West Bank. Please, can you elaborate on the increased risk appetite in West Bank in recent months?

Harry, can I give this one to you? I'm looking at the execs.

So, I mean, you would have a consideration around where you look at the macro environment and the rate environment, interest rate environment. And that actually is a forward-looking view. of customer affordability, rate cycle, and as Mary has covered, we're expecting one more rate cycle and then effectively a pause. That way you would see marginal change in terms of the risk appetite for higher risk. You would see something similar in home loans as well. So it's in the secured asset classes that you'll see both sides.

In Ghana, I mean, not so long ago you were the CEO of West Bank. Do you want to add?

Yeah, thank you for that. So I think on top of what Harry is saying is our deeper play into the F&B banked base allows us to be able to go deeper on the back of the data that we've got. So I think that's helping us quite substantially. And I think the backdrop of the strength of the partnerships that we've built over the last two and a half years equally allows us to better price and better select as a function of the schemes that we're able to put together. So I think it's a combination of factors. But we still remain, I think, quite disciplined in terms of the parameters where we're playing from a risk perspective.

Okay, thanks Harry and thanks Gana. Okay, I'm going back to Ross's second question. Do you expect a strong recovery in global markets NIR after the worse than expected second half performance or will this take a bit longer to eventuate?

I will start by saying I do expect a better performance on global markets, but I'll give Emery to give color to this expectation. And Emery, I think you can comment on how the last two months have been.

Thanks, Mary. Yes, I think that for us the last year, as Mary and Marcus have said, has been a disappointing performance. But we have thought deeply about our strategy. And the focus really for us is to build this part of our business to be more diversified from a client geography and product perspective. And in that, we are confident that we'll see the necessary lift in our line. And to Mary's point, the first two months have already been a strong performance in that part of our business. So we have made the necessary investments in our systems and our platforms, and now it is really about growing our top line. And the big thing in the last year was big concentrated positions, and that is being actively addressed by the team. So we believe the outlook for global markets is... As Mary has also indicated on her slide where she spoke around corporate and enterprise banking, that is a part of our client base that we have got significant growth opportunities in, and that part of our strategy comes together nicely, which actually further supports our outlook for that part of our business.

Thanks, Sam. Question from Harry Boater. How should we think about full year 26 NIR growth potential excluding private equity realizations?

With private equity realizations, I think that we've said with overall NIR expectations of NIR growth is to grow strongly. And the private equity realizations, we think that we are at a level where the run rate is sustainable. And I think the big recovery on that NIR line is going to come from global markets. I think the other source of NIR will continue at similar rates to how they've been growing. So the big shift really will be global markets. Anything else you expect, Marcus?

No, I think you've covered it, Mary. I think on the private equity side, if you think about the base created this year, most of the guidance is actually coming from the rest of the portfolio, the other factors in NIR actually.

Laurem Capital, previously you spoke about insurance as a major driver of growth. It's not listed today as a growth focus in this year's presentation. Is it fair to say that they have found it more difficult to compete in underwritten life and the open short-term insurance market?

I did cover insurance. I think there were two slides that we used to reflect on the insurance business. But in short, I can say it's still an important strategy of diversifying our NIR, of further entrenching our customers in our solutions in the group. And I also highlighted the fact that, you know, to date, non-credit life business, so that is underwritten life, core life, the business we sell into commercial, that all of that accounts now for 75% of the insurance business. So I think, you know, all of that shows the growth that's happening in all these other product lines. that we've been investing in. Under Written Life has been difficult, and I think we conceded that clearly this is an advised, it's a product line that requires advisory capacity. We started investing in increasing the number of advisors we have, and it's pleasing now that I think the contribution they're making is starting to come through. So Under Written Life, when you look at our booklet, It's down 15%, but that's because the life simplifies product. I think that we have reduced sales on significantly because the claims experience was not great. But the core underwritten life, you know, I now believe that we are on track to start growing it because now we've actually got a fair number of advisors and we continue to invest in that channel. So I don't think we – I mean, we found it difficult, but I think we have made plans along the way to – have the right strategies to provide advice. And short-term insurance, by the way, I think they made a record. They had gross written premiums at a billion rand this year. So it is a business that is growing.

Question from Chris Stewart from 91. Is the current structure of the corporate banking entities across the group sustainable or is a more fundamental restructuring required to achieve the full benefit of the opportunity available to the group?

Chris, I'll say that I think what we have is a big start. is a bold start. And let's see. I mean, I think we've got Munir Ismail that's joined us from July. He is working very well and closely with the teams. And I think we will be able to understand what needs to be done in the business to unlock the strategy. But, you know, he's working closely with the F&B and F&B teams and commercial and as well as Emory and RMB. So, So far, I think we're on track, and I think if there's anything that requires to be changed, I'm sure they will do it as a normal course of business. Anything you want to add? No? All good? Okay. Yeah, Chris, we at least have started the journey.

Okay, question from Stefan Pochita from UBS. Cost growth has been very low at 2.7%. Could you unpack the initiatives driving this and to what extent this is sustainable? Okay, Marcos.

Thanks for the question. I guess I called out two large items that are more structural in nature. One is that we have completely amortized the intangible assets from Aldermore at acquisition. That had a base impact, if you check in the booklet from last year, that is now no longer there this year. And the second one is obviously we're looking to optimize our variable cost base, which this year we structurally reduced some of the property-related expenses, if you look in other costs, quite significantly. And we don't expect those to have a significant bounce back in cost base. They're now lower as we've exited some of the costs themselves. The piece that we remain focused on is obviously some of the larger technology contracts reprice and we have to renegotiate. So we remain focused on those renegotiations and ensuring that we get the best outcome for the group from those renegotiations. So really, I mean, that point I made on focused on variable costs or controllable costs has really delivered this year. And that has created the step change in that core cost outcome. The motor vantage sale has obviously also removed the gross up of those costs on consolidation from the base on a permanent basis, and the new structure that will be in place will not have those repeats going forward. So those are kind of some key call-outs to give you a feel for the cost outcome.

A question from Chris Logan. In looking ahead, First Trend is pleasingly, quote, set to deliver higher earnings growth and ROE in the year ahead. Does First Trend believe this positive outlook will lead to growth in NIAC or economic profit, which has been flattish over the last number of years?

Thank you. I think the growth in earnings and the return profile that we aim to sustain will result in growth in NIAC unless our cost of equity goes up. That naturally should flow through. And Chris, I mean, I think if I look at – we've disclosed the numbers at the bottom of the slide where we show economic profit. And we show you the impact of that UK provision on economic profits. So I think the 2 billion rand knocked economic profits over the last two years is really the reason why NIAC has actually not gone up. But it remains a key performance measure for the group, and we are confident that when we have this noise behind us that those Manhattans only just go up. A 12% increase in this current year to 11.5 billion is decent.

That was the last question on the webcast, Mary.

Mary, there might be a question from the conference call. Irene, are there any questions?

At this time, we have a question in the queue from Simon Nellis of City. Please go ahead. Simon, your line is live. You may go ahead with your question. It seems there's no response from Simon's line, and we have no other questions in the queue.

Okay. With no further questions, let me thank you for listening into our results presentation and attending, and I wish you a good day further. Thank you.