FirstRand has published is financial results for the year ended June 2018, showing strong revenue growth and an 8% jump in profits – off the back of a solid performance from its retail banking segment, FNB.
The group reported an 8% increase in normalised earnings to R26.4 billion, up from R24.5 billion in 2017. Diluted normalised earnings per share were at 470.8 cents, up from 436.2 cents the year prior.
Income for operations was up 9% to R84.6 billion (2017: R77.8 billion), while income before tax was at R36.95 billion (2017: R34.07 billion).
Profit for the year was reported at R28 billion, up 8% from R26 billion the year before. The group declared a dividend per share at 275 cents.
According to the group, the South African market was hit with two very different 6 month periods, with the first half of the financial year (to December 2017) dragged by ongoing political uncertainty, and the second half (to June 2018) bolstered by political change and market optimism.
“Against this mixed economic backdrop, FirstRand’s portfolio of businesses once again produced quality top-line growth. The group continued to strengthen its balance sheet and protect its return profile,” it said.
However, it cautioned that the current economic climate and political landscape would make things more challenging going forward.
FirstRand CEO, Alan Pullinger said that the group’s portfolio of businesses “once again produced quality top-line growth and a superior ROE.”
“FNB’s results reflect another strong performance from its South African business, growing earnings 16% on the back of growth in customers, volumes and balance sheet, and successful cross-sell strategies.
RMB’s diversified corporate and investment banking portfolio delivered a solid performance in a challenging market. WesBank had a tough year, however, it still delivered an acceptable return on equity,” he said.
FNB, which represents FirstRand’s retail and commercial segment, contributed 57% to the group’s revenue share in the 2018 financial year.
FNB grew its pre-tax profits 15% to R21.4 billion, driven by a strong performance from its South African business, which grew pre-tax profits 16%.
The turnaround in the rest of Africa portfolio continued, with that business segment showing a decline of 11% – an improvement compared to the 29% decline in the prior year.
FNB produced an ROE of 40.7%, FirstRand said.
“The strength and quality of FNB’s transactional franchise is clearly demonstrated in the strong NIR growth of 10% resulting from good growth in customers (total up 4% to 8.15 million) and transaction volumes,” it said.
Inside the customer growth, the premium segment performed particularly well, FirstRand said, with premium client growth at 14%. Consumer growth was recorded at 3% for the year and commercial customers grew 2%.
FirstRand’s other business segments, which include Rand Merchant Bank (RMB), WesBank, Aldermore (UK) and Ashburton Investments.
RMB represents FirstRand’s interests in the corporate and investment banking segments. The group recorded pre-tax profits increasing 6% to R10.4 billion with ROE at 25.3%.
The ROE was underpinned by RMB’s high quality earnings and solid operational leverage, FirstRand said.
WesBank represents the group’s activities in instalment credit and related services in the retail, commercial and corporate segments. It had a tougher year than other segments, with total pre-tax profits declining 9%. The business delivered an ROE of 17.4% and an ROA of 1.6%.
FirstRand said that the outlook for the 2019 financial year is that the economy will remain subdued, and consumers under pressure.
“Global financial conditions will prevent the SARB from easing monetary policy despite the low growth outlook. This, combined with lower commodity prices and prospects of a slowdown in global . growth next year, means that domestic economic activity will remain subdued in 2019,” it said.
“Against this backdrop, private sector activities such as corporate investment and household consumption will most likely remain under pressure.”
In the longer term, however it said that its business is “strategically well positioned” to benefit from renewed system growth.
“FNB’s momentum is expected to continue on the back of customer and volume growth, and cross-sell and up-sell strategies will deliver higher insurance revenues and good deposit and advances growth,” it said.
“RMB’s private equity realisations are expected to be lower in the current year compared to previous financial years.”