FirstRand expects earnings jump

Johannesburg - Financial services group FirstRand [JSE:FSR] said on Thursday that it is expecting headline earnings per share for the year ended June to be 27%-37% higher than the 133.3 cents earned the previous year.
   
Earnings per share are expected to be 34%-44% higher than the 124.9 cents recorded in 2009, while diluted normalised EPS are expected to be 32% - 42% higher than the 126.8 cents earned last year.
    
Excluding the proceeds from the Life Healthcare realisation, diluted normalised EPS are expected to be between 20%-30% higher than the comparative period.
    
In a trading statement on Thursday, FirstRand said that when announcing results for the six-month period to December 2009, the group had indicated to shareholders that it expected its operating environment to remain challenging for the remainder of the financial year to June 2010.
    
"As expected, revenue from banking activities remained under pressure.

Net interest income in particular continued to be subdued as a result of low levels of borrowing due to the continued high indebtedness levels amongst retail customers. Corporate lending also remained at relatively low levels.
    
"Although decreasing interest rates have provided some relief to households, the negative endowment income on deposits and capital has been significant.
    
"Bad debts have continued to reduce in line with expectations. The Group previously indicated to shareholders a credit loss ratio range of
140bps to 150bps for the year to June 2010 (compared to 181bps in the year to June 2009) and now expects to report at the bottom end of this range.
    
"As a result of the improvement in bad debts; WesBank's earnings have recovered strongly, the losses at FNB Homeloans are reducing significantly and FNB Card has returned to profitability," the group said.
   
It added that the Equity Trading division of the RMB division will be profitable for the 12 months to June 2010, representing a significant
turnaround from the losses of R782m incurred in the comparative year.
    
"Momentum Group Limited has benefited from an improvement in equity markets and a strong performance from FNB Life. The recently announced listing of Life Healthcare Group Holdings Limited (Life Healthcare) has resulted in RMB and Momentum disposing of their respective shareholdings.
    
"The RMB shareholding represented an investment by its Private Equity division and this realisation will result in a net profit of approximately R800m which will be included in the normalised earnings of FirstRand.
    
"The Momentum shareholding is held in policyholder portfolios, and as such will have no direct impact on Group earnings," FirstRand added.
  
Details of FirstRand's results for the year ending June 2010 are expected to be released on SENS and published in the press on or about September 2010.
   
- I-Net Bridge