INTRODUCTION

FirstRand’s relative underperformance in the year to June 2009 prompted a review of the Group’s strategy and operating model. FirstRand has been a successful integrated financial services group since its formation in 1998, however, recently the Group’s performance has been significantly impacted by the size of its exposures in offshore trading and principal investment activities which have borne the brunt of the world financial crisis.

For the Group to reclaim its former leading position, its strategy and to some extent its operating structure, needs to evolve in anticipation of changing trends and in response to the dynamic environment in which it operates.

As management moves from the “founding fathers” to professional managers, the Group has to retain the key characteristics which have made it successful whilst recognising that certain changes are required to produce the next phase of its growth.

FIRSTRAND’S REFINED STRATEGY

Analysing where the Group significantly underperformed, a few key issues were identified. The global financial crisis exposed flaws in RMB’s principal investment activities offshore where, in retrospect, RMB did not have a meaningful competitive advantage in the international markets where its Equity Trading and SPJi divisions operated. In addition, some of WesBank’s credit mono-line businesses offshore, such as Carlyle in the UK and MotorOne Finance in Australia, which relied on expensive and sometimes unavailable wholesale and capital markets funding, have been shown to be unsustainable. Finally, risk management needed strengthening.

The 2010 financial year represents an opportunity for the Group to consolidate and refocus. Given the implications of the turmoil in global banking the Group will refine its strategy to achieve a few key objectives, namely:

• become one of the leading African financial services groups;
• through a portfolio of leading franchises, be represented in all significant earnings pools across all chosen market segments playing across the full value chain (lending, transactional, savings and risk-taking);
• effectively leverage off all Group operating platforms and building blocks;
• operate within a shared business philosophy and Group strategy;
• build revenue streams that are diverse and create long term franchise value; and
• deliver sustainable economic profits and returns to share holders within acceptable volatility.

These objectives reflect the inherent strength of the Group’s franchises which will now operate within a tighter Group strategy which in turn will ensure greater alignment between the franchises themselves.

The operating franchises remain committed to being the leading franchises in their markets and will focus on growing sustainable economic profits (more important than market share) and excellence in execution with a bias for action.

It is important therefore that FirstRand continues to attract and retain the best industry talent, and key to this is ensuring that the Group’s empowering “owner manager” culture remains intact. In addition, the Group’s focus on entrepreneurship and innovation will remain one of the Group’s primary points of differentiation.