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FirstRand jumps on profit forecast

Johannesburg - FirstRand [JSE:FSR] shares rose after SA's second-largest bank, said  on Tuesday its full-year earnings likely rose by as much as 27%.

FirstRand said it expects diluted normalised earnings per share to increase by between 22% to 27% from 179.4 cents for the year to end-June. A poll of 17 analysts by Thomson Reuters showed an average forecast for 20% profit growth.

“It’s an excellent performance, a very good result. It’s definitely better than consensus,” said Adrian Cloete, an analyst at Cadiz Asset Management.    

The bank did not give a reason for the expected rise in profit. Earnings likely rose as a result of a strong performance by the retail arm First National Bank (FNB) and vehicle financing unit Wesbank, Cloete said.

FNB has waged a fierce campaign for its competitors' customers, which analysts expect will boost its non-interest revenue.

FirstRand is due to report full-year results on September 11. Its local rivals, all of whose financial year end in December, have so far reported leaner first-half results.

Industry lender Standard Bank Group [JSE:SBK] posted a slim 9% rise in first-half earnings, while third-ranked Nedbank Group [JSE:NED] returned a 24% improvement.

South African banks have been pushing high-margin unsecured lending to counteract a drop in long-term loans like mortgages, and falling transactional account fees.

FirstRand has also been creeping north away from its traditional South African base to secure more business. It announced last month a $91m purchase of a 75% stake in Merchant Bank Ghana.

It also has its eye on Nigeria, Africa’s most populous nation that is also expected to be the continent’s biggest economy in a few years.

FirstRand's shares were up over 2% at R27.95, and nearly 35% stronger so far this year. The Top 40 - (Tradeable) [JSE:J200] index  was 0.36% lower on the day.


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