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