FNB lifts FirstRand in challenging year

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FNB lifts FirstRand in challenging year

Published Date: 2019-03-13 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

FNB lifts FirstRand in challenging year

The banking group's first-half performance was also supported by a solid contribution from newly-acquired UK lender Aldermore.

FirstRand has reported a good start to its financial year helped by strong growth at FNB. But the banking group says the second half may not be as strong due to slower private equity realisations at its RMB investment banking business.

Retail and business bank FNB grew earnings by 13% to R8.67 billion helped by rising customer numbers and growth in transactions, including advances and deposits. The increase means FNB now makes up 65% of group normalised earnings, up from 61% a year ago.

RMB grew earnings by 5% to R3.32 billion to maintain its contribution to group earnings at 25%. The group said private equity realisations were slightly lower than the comparative period. A realisation is when a private equity investor sells or exits its investment and realises the return.

It said its WesBank vehicle and asset finance business remained resilient despite competitive pressures and low vehicle sales over the period. Earnings at the 'wheels bank' rose 1% to R957 million and now exclude DirectAxis, which has been moved into a personal loans cluster within FNB. They also exclude MotoNovo, the UK-based vehicle finance business which will be integrated with Aldermore, the UK bank it bought last April. Aldermore contributed R1.04 billion to group earnings but FirstRand said its growth trajectory was likely to slow marginally due to macro uncertainty in the UK and ongoing investment costs into the bank's systems and processes.

FirstRand's net interest income (NII) rose 8% and was up 20% including Aldermore. It said NII was supported by strong growth in deposits of 11% and advances growth of 9%. Including Aldermore, deposits rose 29% and advances jumped 28%. Non-Interest revenue increased by 7%, and was 8% higher including Aldermore, as income from fees and commissions rose 12%. Insurance revenue increased by 7%.

The bank's credit loss ratio increased by 19% to 96 basis points due to the growth in loans. However, it said it remained below its range of 100 to 110 basis points and most of its lending books were trending in line with expectations. The credit impairment charge was affected by an increase in credit cards, and higher operational non-performing personal loans, in line with growth in its loan book. These were offset by a lower charge in residential mortgages and an improvement at WesBank.

Normalised earnings increased by 7% to R13.3 billion, with normalised earnings per share also up 7% to 237.8c. Headline earnings per share rose 6% to 237.9c. These numbers exclude the R2.3 billion FirstRand received from Discovery for selling back its stake in the Discovery credit card ahead of the launch of the new Discovery Bank.

It's increased its interim dividend by 7% to 139c per share.

Its shares closed 2% higher at R63.39 yesterday.





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