INTRODUCTION

In 1931 Keynes famously wrote that “a sound banker is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his peers so that no-one can really blame him.” Well the FirstRand Group does not always do things in a conventional way but has weathered a very tough cycle and a particularly challenging year, and is not ruined! In line with its peers, it has been impacted by the high levels of bad debts in the consumer lending books as expected at this point in the cycle. It has also been hurt by losses in its offshore trading portfolios – as expected given the massive volatility in those markets following the credit crisis. However, the Group is in great shape to capitalise on an improving environment.

FIRSTRAND’S UNIQUE CORPORATE CULTURE

Whilst the Group subscribes to sound banking practices there has always been a strong bias for innovation and entrepreneurialism both of which are deeply embedded in the corporate culture of FirstRand. The Group coined the phrase “greenfields” to describe its approach of growing new ventures from scratch. This approach has spawned some major businesses that have contributed significantly to the Group’s performance over the years. The bigger ones are RMB Asset Management, RMB Private Bank, RMB Private Equity, Discovery and OUTsurance. The Group still focuses on “greenfields” and there are currently a number of new and fledgling businesses that are expected to be major contributors in the future.

Another characteristic that differentiates FirstRand is the relentless focus on maintaining and inculcating the unique corporate culture that has developed over many years. Senior management conducts workshops, almost on a monthly basis, aimed at embedding the culture. Under the new management team there will be changes in strategy but the essence of the corporate culture will remain. As GT Ferreira once said, “each successive CEO receives this jewel which they polish and pass on to the next person”.

Central to the culture is that FirstRand is an employee-centric organisation that believes in empowering, rather than controlling people. The Group coined the phrase – “owner-manager” – to describe its culture. It means that the appropriate strategic framework is provided and then management is empowered to run their divisions with a minimum of bureaucratic interference.

The Group also remains committed to its multi-branding strategy, another point of differentiation, as it believes in creating champion brands in specific market segments. Alignment, cross sell and cost rationalisation remain important, however, separate brands are more powerful because customers identify with them more strongly. For example, despite FirstRand having a torrid time in the press, recently FNB was voted Number 1 Retail Banking brand in the Sunday Times survey of national brands and RMB swept the boards in the PwC peer group survey and The Dealmakers awards.

FirstRand has always emphasised the benefits of diversification derived from the portfolio of franchises. Therefore while they may not all fire at the same time, what is important is that on aggregate they do well, which has generally been the case. It is important that failure in some divisions, in any particular year, does not bring the house down.

Important to the Group’s culture is to “tell it like it is” and consequently it is conservative in its financial reporting. The Group, does not “spin” to its shareholders, sometimes to its detriment. For example, FirstRand was the first bank to warn that performance would be hit hard by the financial crisis and at that time its view was considered controversial and overly bearish by some commentators and shareholders. For the Group however, the deteriorating macro environment came as no surprise, and over time this conservatism, or rather realism, has proved to be accurate and appropriate.