FIRSTRAND

Finweek English Edition - - COVER STORY -

FirstRand is the coun­try’s big­gest banking group, based on mar­ket cap­i­tal­i­sa­tion. Its key fran­chises are re­tail and com­mer­cial bank First National Bank (FNB); Rand Mer­chant Bank (RMB), the cor­po­rate and in­vest­ment bank; ve­hi­cle fi­nancier Wes­Bank; and in­vest­ment man­age­ment firm Ash­bur­ton In­vest­ments.

KEY FI­NAN­CIAL NUM­BERS*:

■ Head­line earn­ings per share: 211.5c (+14%)

■ Div­i­dend per share: 119c (+10%)

■ Re­turn on eq­uity: 22.9% (2015: 23.4%)

■ Cost-to-in­come ra­tio: 51.3% (2015: 51.1%)

■ Credit loss ra­tio: 0.86% (2015: 0.77%)

■ Com­mon eq­uity tier 1 ra­tio: 14.8% (2015: 14.4%)

■ Of the eight an­a­lysts polled by IRESS, five rate the stock a hold and three a buy.

*Based on re­sults for the six months to end De­cem­ber 2016.

COM­MENT: FirstRand CEO Jo­han Burger says nor­malised earn­ings growth of 7% and an ROE of 22.9% were driven by solid op­er­a­tional per­for­mances from its busi­ness units and that these fig­ures were a “very sat­is­fac­tory” out­come given the level of on­go­ing in­vest­ment in new growth ini­tia­tives.

The group has lagged its com­peti­tors in ex­pand­ing on the con­ti­nent, with group-wide pre-tax prof­its from the rest of Africa flat at R1.5bn in the six months to end De­cem­ber. At FNB, profit be­fore tax from the bank’s African sub­sidiaries de­clined 29% over the pe­riod to R547m, driven by poor per­for­mances in Mozam­bique and Zam­bia, as well as the im­pact of the on­go­ing in­vest­ment in its foot­print and prod­uct roll-out out­side SA, it said.

De­spite the poor per­for­mance from its African op­er­a­tions, FNB’s to­tal fran­chise pro­duced pre-tax prof­its of R9.4bn, re­flect­ing a year-on-year in­crease of 3%. The bank re­ported a re­turn on eq­uity (RoE) of 38.5%, down from 40% in the same pe­riod in 2015. RMB grew pre-tax prof­its 3% to R4.1bn and pro­duced an RoE of 21.3%, while Wes­Bank saw profit in­creas­ing by 9% and RoE at 19.9% amid pres­sure on con­sumers’ dis­pos­able in­come, de­creas­ing new ve­hi­cle sales and a chal­leng­ing credit cy­cle.

Burger adds that the group con­tin­ues to ex­er­cise dis­ci­pline in al­lo­cat­ing cap­i­tal and “will not chase growth at the ex­pense of re­turns”. ■

Jo­han Burger CEO of FirstRand

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