RMB Holdings (RMH) results for the year ended 30 June 2014

RMH at a glance

RMH’s primary interest is its 33.9% investment in separately listed FirstRand Limited (“FirstRand”), generally regarded as Southern Africa’s pre-eminent financial services group.
The FirstRand group comprises a portfolio of leading financial services franchises, including:

• First National Bank (“FNB”), retail and commercial banking;
• Rand Merchant Bank (“RMB”), corporate and investment banking;
• WesBank, an installment finance business; and
• Asburton Investments, the group’s recently-established investment management business

Overview of results

RMH produced good results for the year ended 30 June 2014, reporting normalised earnings ofR6.2 billion (2013: R5.1 billion), an increase of 22%. Normalised earnings per share amounted to441.7 cents per share (2013: 361.7 cents).

These results were achieved on the back of the strong operational performances of all three of the main FirstRand brands.FNB, RMB and WesBank which continued to outperform the market.
The final dividend of 127.5 cents per share (2013: 104.5 cents) resulted in total dividends for the year increasing by 33%.

The apparent divergence in the growth in dividends relative to the growth in underlying earnings can be ascribed to FirstRand reducing its dividend cover ratio to 1.9. RMH currently follows a stated practice of returning net dividends (after providing for funding and operational costs incurred at the center) received by it in the ordinary course of business to shareholders and therefore also reduced its dividend cover to 1.9.

Outlook

The South African consumer will be placed under further pressure due to the current interest rate hiking cycle.

RMH believes that FirstRand’s strategy to:

• grow its customer base;
• drive non-interest revenue; and
• exercise discipline in its credit origination strategies in the retail market,
will place FirstRand in a good position to weather the difficult credit cycle that is expected to continue to emerge over the next 12 to 18 months.

FirstRand’s franchises have the appropriate strategies in place to continue to deliver good operational performance. FirstRand’s balance sheet is strong and its diverse income streams should put it in a position to continue to deliver sustainable and superior returns to its equity holders.