FirstRand bucks low economic growth trend

Johannesburg – FirstRand group [JSE:FSR] reported growth in its earnings, despite a challenging global and local economic environment.

This is according to the group’s unaudited interim financial results ending 31 December 2016, which was released on Thursday. The group consists of First National Bank (FNB), Rand Merchant Bank (RMB), WesBank and Ashburton Investments, all of which grew their earnings.

Overall, FirstRand’s earnings grew 7% to R11.6bn. Return on Equity was at 22.9%, which is down from 23.4% reported in 2015. A dividend of 119c was declared, up 10% from the previous year.

Retail and commercial bank, FNB’s earnings grew 3% to R6.4bn. Corporate and Investment bank RMB reported a growth of 2% to R2.8bn, and finance business WesBank reported a 9% growth to R1.9bn.

"The group continued its delivery of real growth in earnings and premium returns off a long track record of outperformance,” said CEO Johan Burger.

Burger added that the outcomes were satisfactory and new growth initiatives are expected to deliver “outperformance” in the medium term.

“The group continues to exercise discipline in allocating capital and will not chase growth at the expense of returns,” he added.

FNB

FNB generated pre-tax profit of R9.4bn, ROE was down to 38.5% from 40% in the previous year.

The bank’s operations in Africa earnings declined by 29% to R547m. This was due to poor performance in Mozambique and Zambia.

FNB Namibia reported strong operational performance but profitability was impacted by the current investment cycle, the group said.

RMB

RMB operates locally, across the African continent and in India. ROE was down to 21.3% from 22.2% reported in 2015. RMB reported profit before tax at R4bn, up 3% from R3.9bn previously.

WesBank

WesBank’s profit before tax was at R2.7bn. This is up 9% from R2.5bn reported in the previous period. ROE was down to 19.9%, from 20.5% reported in 2015. The group views WesBank’s performance as “pleasing”, “particularly in its domestic businesses, which are operating in an environment characterised by constrained consumer disposable income and a challenging credit cycle.”

The group expects economic growth to pick up in 2017, however it may not be enough to provide “significant support” to revenue growth.  

“In addition, global and domestic political risks continue to pose downside risk to this expectation,” the group said. However the group is optimistic that it will continue to deliver growth in earnings with an ROE targeted between 18% and 22%.

FirstRand's shares were trading 0.37% lower at R51.05 at 10:00 in Johannesburg.