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Johannesburg - First National Bank parent FirstRand has cut its interim dividend by 23% as headline earnings fell 19% for the six months to end-December, and warns pressures will remain in the second half.
"The world is experiencing the worst recession since World War II and expectations for global growth have reduced from 2% to 0.5%. The macro scenario in South Africa is likely to be less severe," the company said.
"However there will be some impact from the credit crisis and domestic growth is expected to slow down further from 3% last year to 0.5% for 2009."
FirstRand, the parent of First National Bank (FNB), Rand Merchant Bank, instalment finance operation Wesbank and life insurer Momentum, and also warned that a recovery was not on the cards anytime soon: "The benefits to consumers of reducing interest rates will only start to show in late 2009 or the early part of 2010 and economic activity will remain subdued.
"Therefore, given its expectations of declining asset growth and further acceleration of bad debts, combined with the negative impact of reducing interest rates on capital and on the endowment balances, earnings from its local retail franchises will remain under pressure in the second half of the year."
The group also said it expected volatility in financial markets was likely to continue for the remainder of the year and earnings for the second half of the financial year would be in line with those reported in the first half.
Headline earnings per share fell from 107.4c to 87.3c with the dividend being cut from 44c to 34c.
With the South African consumer under pressure and battling to meet vehicle financing obligations Wesbank's normalised earnings declined 62% to R159m year-on-year.
Earnings at insurance and fund management arm Momentum declined 19% to R740m, largely as a result of falling stock markets but some cross-selling benefits had been realised through the relationship with FNB.
- Fin24.com