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FirstRand maintains momentum
FirstRand maintains momentum
Published Date: 2019-09-06 | Source: Stephen Gunnion | Author: Stephen Gunnion
The banking group has grown earnings and its dividend despite subdued growth and rising risks.
FirstRand says it doesn't expect any letup in the pressure on the economy for the foreseeable future. But the banking group has still reported what it described as 'quality real growth' in earnings for the year to end-June despite a challenging operating environment. It also came off a high earnings base in its 2018 financial year due to private equity realisations within its RMB business.
Retail bank FNB's SA business contributed R17.6 million to earnings for the year as it held onto customers despite new digital competitors entering the market. It said it successfully executed its own digital platform strategy, cross-selling and up-selling products using data and behavioural analytics. It grew premium and commercial customers by 17% and 11% respectively.
RMB reported a fall in normalised earnings as its private equity business approved R2.1 billion in new investments. This was offset by strong growth in client franchises, helping it contribute R7.1 billion to earnings.
Vehicle and asset finance business Wesbank delivered a 2% decline in earnings due to difficult trading conditions during the year. It said the wheels bank was focused on protecting returns and extracting efficiencies.
UK specialist bank Aldermore, which it bought in April last year, contributed R1.7 billion in normalised earnings. It said it completed the integration of MotoNovo, previously part of WesBank, early in May this year.
Advances net of impairments increased by 8%, while it grew deposits by 10%. FNB card impairments jumped 56% on the back of 23% growth in advances. The FNB personal loans charge increased by 63%, also driven by strong book growth of 36%. However, conservative lending in its residential mortgages business resulted in a small increase in its credit loss ratio to 11 basis points.
Excluding Aldermore in the UK, the group's credit loss ratio increased to 0.99%, remaining below its through-the-cycle range of 100 to 110 basis points. Including Aldermore, it increased to 0.88% from 0.84%.
Overall, FirstRand grew normalised net interest income by 18% to R60.3 billion over the year, while non-interest revenue rose 6% to R44.3 billion. Normalised earnings rose 6% to R27.9 billion on the back of the strong performances from FNB, RMB's client-facing businesses and the inclusion of Aldermore for the full year. Headline earnings increased by 5% to R27.8 billion and normalised earnings per share (EPS) increased by 6% to 497.3c. Headline EPS were up 5% to 497.2c and it has raised its total dividend for the year by 6% to 291 cents per share.
Its normalised return on equity (ROE) declined slightly to 22.8% from 23%. ROE is an important measure of profitability, measuring how much profit is generated by shareholders' equity in a group.
Its shares rose 1.7% to R61 yesterday.
Firstrand results are out. They appear to be in line with market expectations with a 6% increase in earnings. Do not on initial glance seem to be any surprises.-- Wayne McCurrie (@WayneMcCurrie) September 5, 2019
FNB continues to be the "crown jewel", growing earnings at more than double the rate of SA peers.-- Chris Harmse (@chrisharmse89) September 5, 2019
FIRSTRAND LIMITED - FSR,FSRP : Provisional audited results and cash dividend declaration for the year ended 30 June 2019 https://t.co/A55Xupkhcv via @Moneyweb