FirstRand warns it is not immune to serious macroeconomic challenges facing South Africa

FirstRand Limited, on Tuesday (10 March), reported a 5% rise in headline earnings to R13.99 billion for the six months ending December 2019, in a deteriorating domestic operating environment.

FirstRand’s portfolio of integrated financial services businesses comprises FNB, RMB, WesBank, Aldermore, and Ashburton Investments.

Chief executive officer, Alan Pullinger said: “This is a commendable performance given the speed of deterioration experienced in the domestic operating environment during the period, and testament to the strength of the portfolio and the quality of the strategies executed by FNB, RMB, and WesBank in South Africa and the broader region.

“Aldermore continues to perform well and contributed again to growth and returns.”

Key group financial highlights:

  • Normalised earnings rose 5% to R14 billion;
  • Basic and diluted headline earnings per share (cents) rose 5% to 249.4 cents;
  • Growth in normalised net interest income (NII) of 8% to R31.9 billion;
  • Normalised non-interest revenue (NIR) growth of 5% to R25.9 billion;
  • Normalised return on equity of 21.2%;
  • Normalised net asset value up 9% to 2 402.2 cents per share, and
  • Dividend paid to ordinary shareholders up 5% to 146 cents per share.

FNB, the group’s largest earnings contributor, grew earnings 5% to R9.2 billion as customer gains and transactional volumes lifted NIR, and it continued to grow deposits. However, some of these drivers have slowed relative to the previous six months to June 2019, in line with the weakening economic conditions, FirstRand said.

RMB’s diversified portfolio grew earnings 6% to R3.5 billion, benefiting from strong growth in markets and structuring and healthy overall client annuity income, it said. “This was despite investing activities being down 46% for the period due to the non-repeat of private equity realisations, with the business continuing its investment cycle.”

The rest of Africa portfolio remains key to RMB’s growth strategy, producing pre-tax profits of R1.1 billion, up 29% on the prior period and contributing 23% of RMB’s overall pre-tax profits, FirstRand said.

WesBank’s normalised profit before tax increased 1% to R1.4 billion.

“In the face of increasing competitive challenges and the weak economic environment, WesBank is focused on protecting its returns and extracting efficiencies,” the group said.

Excluding the impact of a loan portfolio hedge, Aldermore’s operational profit before tax increased 5% to £71.6 million, driven by strong growth in invoice finance, residential mortgages, and SME commercial mortgages.

Looking forward to the second half of the year, Pullinger said: “As a large systemic financial services group FirstRand is not immune to the serious macroeconomic challenges facing South Africa, and the damaging impact of ever declining GDP growth is becoming evident in all of the group’s customer segments in South Africa.

“Looking forward to the second half of the year, the group is of the view that the South African macroeconomic environment will continue to deteriorate, probably at a faster rate than in the first half.”


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FirstRand warns it is not immune to serious macroeconomic challenges facing South Africa