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FirstRand produces strong top-line growth

18 September 2007 FirstRand Limited

FirstRand Limited (FirstRand), the integrated financial services group,announced results for the year ended 30 June 2007.

FINANCIAL HIGHLIGHTS


* Diluted headline earnings per share +29%
* Normalised earnings+32%
* Diluted normalised earnings per share+32%
* Dividend per share+25%
* Normalised return on equity+28%
* Normalised net asset value+23%


Commenting on the results, Paul Harris, CEO of FirstRand Limited said:

"FirstRand's diverse portfolio of leading financial services franchises continued to benefit from good market conditions, particularly in the retail, corporate and investment banking segments, and all of them exceeded the Group's two main performance targets of earnings growth of 10% real and ROE of 10% above the weighted average cost of capital."

Overall FirstRand Limited grew normalised earnings 32% and achieved a normalised return on equity of 28%. The banking activities contributed 35% growth in normalized earnings from R7.5 billion to R10 billion and an ROE of 31% with Momentum increasing normalized earnings 13% from R1.5 billion to R1.7 billion and an ROE of 25%. Discovery increased earnings 26% from R424 million to R536 million.

The performance of the Groups banking operations was underpinned by a particularly strong performance from the investment bank, RMB, which grew earnings 82% to R3.9 billion. This was driven by good performances across the entire portfolio with particularly significant earnings growth from the Investment Banking, Equity Trading and Private Equity divisions.

The commercial bank, FNB, achieved a significant increase in customer numbers, robust growth in deposits and advances, and strong volume growth, which all contributed to earnings growth of 27% to R 4.2 billion. This was achieved despite a 63% deterioration in bad debts which was predominantly in the retail portfolio and in line with expectations.

WesBank, the instalment finance business, continued to experience "negative gearing" in its local franchise with retail asset growth slowing and a significant increase in bad debts although corporate sales increased, representing 28% of total new business compared to 25% in the previous year. These issues, which are to be expected at this point in the cycle, combined with increased start up costs and operating losses in the international operations, resulted in normalised earnings decreasing 13% to R918 million.

The insurance operations performed well. Momentums insurance operations showed continued strong new business growth with margins improving compared to the first half of the year due to increased sales of higher margin products. Collaboration with FNB in the mass and middle markets also produced good growth. Momentum continued with its strategy to diversify its business with further investments in new distribution channels, products and markets.

Discovery's performance was underpinned by a solid operational performance across all its businesses.

Looking forward Harris said that the Group anticipates a more challenging operating environment, given the increased uncertainty in financial markets.

"Since the year-end the macro environment, both domestically and internationally has become more uncertain, and there is increased risk in the system" said Harris. "However we expect our banking businesses to show continued growth in assets and earnings, although the mix will change and WesBank and FNB are likely to experience stronger demand for credit from their corporate and commercial businesses. RMB will continue to benefit from increased infrastructure spend, corporate capacity building and BEE activity, however the exceptional performance in the current year from certain of the trading business will be a challenge to exceed. Momentum should continue to grow new business volumes, particularly as collaboration with FNB gains further traction and new distribution channels come on line."

"FirstRand's strategy remains focused on building a diverse portfolio of leading financial services franchises in South Africa, but with an increasing focus on selected niche international opportunities, particularly in Africa, India and Brazil. In line with this strategy RMB is currently building investment banking and private equity capacity in India, and WesBank has identified some specific vehicle financing opportunities in Brazil. FNB is accelerating its strategy to become a significant player within the SADC region and is actively seeking opportunities to establish greenfields or acquire platforms from which it can leverage its products and services into the region."

"We believe that the anticipated organic growth in the local franchises combined with growing returns from the international initiatives over the medium term, will underpin the Group's ability to continue to achieve a 10% real return to shareholders" Harris concluded.

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