| Tue 2 Dec 2008, 15:24 | | RMH - RMB Holdings Limited - Trading Statement In Respect Of The Six Months |
|
RMH
RMH
RMH - RMB Holdings Limited - Trading Statement In Respect Of The Six Months
Ending 31 December 2008
RMB HOLDINGS LIMITED
(Incorporated in the Republic of South Africa
ISIN: ZAE000024501
Share Code: RMH
(`RMBH` or `the Company`)
TRADING STATEMENT IN RESPECT OF THE SIX MONTHS ENDING 31 DECEMBER 2008
Shareholders are referred to the trading statement issued earlier today by the
Company`s associate FirstRand Limited ("FirstRand") on SENS and at
www.firstrand.co.za.
In that announcement FirstRand indicates that an already challenging macro
environment, both domestically and globally, is playing out more negatively than
expected. In particular:
- In FirstRand`s retail lending businesses impairment levels have continued
to increase as anticipated. Advances are flat year on year and corporate
lending is growing at materially lower levels than in the previous
corresponding reporting period.
First National Bank`s mortgage book is experiencing significant increases
in bad debts accentuated by the severe cyclical downturn in the property
market. As a result, profitability in the HomeLoans division has been
severely impacted. Whilst FNB`s other businesses, such as the commercial
and corporate segments, continue to perform well, the losses in the
mortgage business will result in FNB`s earnings being down on the previous
corresponding reporting period. Its balance sheet is not exposed to the
structured credit asset classes currently contaminating international
markets.
Similarly, WesBank`s profitability has been negatively affected and is
expected to be materially down on the six months to 31 December 2007. This
will negatively impact FirstRand`s earnings given the relative size of
WesBank in the overall retail lending portfolio.
FirstRand is of the view that while interest rates have probably peaked,
the deterioration in the credit cycle will continue into 2009. Risk in the
corporate sector is increasing, but FirstRand believes it is adequately
provided.
- Massive turmoil in global markets, particularly during October 2008,
resulted in greater than expected losses being incurred in Rand Merchant
Bank`s international equity trading portfolio while the portfolio was being
sold down. Its domestic equity division suffered significant losses after
it assumed the portfolios of a failed stockbroker. Its client franchise
businesses (Fixed Income, Currencies and Commodities as well as Investment
Banking) continue to perform well, and Private Equity has realised
significant profits in the first half of the financial year. The losses
incurred in the equities businesses are expected to result in RMB`s
earnings for the six months to 31 December 2008 being approximately 20%
down on the six months to 31 December 2007.
- While Momentum Group`s overall results are less geared to investment
markets, its earnings could not escape the impact of recent market
declines. Its investment businesses are impacted both in terms of asset-
based fees and lower expected net inflows, whilst the remaining businesses
are more correlated to the effects of lower levels of economic activity and
lower growth expectations. As a result, Momentum`s earnings are expected to
decrease in the current reporting period.
FirstRand`s focus in the current cycle is to ensure a resilient balance sheet
and it has adjusted its risk profile appropriately. The Group is adequately
capitalised and its capital management strategy remains conservative. It`s
funding position remains robust, with low reliance on funding in the
international markets and appropriate liquidity buffers given the level of
uncertainty in financial markets. Excess liquidity buffers are sufficient to
deal with roll-over risk in the international balance sheet, which has been
significantly de-risked.
Whilst four weeks remain until the end of the first half year, it is clear to
FirstRand that the combination of the acceleration of bad debts in the retail
businesses and the losses incurred in the investment bank will negatively impact
on it`s earnings for the financial year to 30 June 2009. Specifically:
- FirstRand`s headline earnings per share for the half year to December 2008
are expected to decline by between 14% and 22% when compared December
2007. Pro forma diluted normalised earnings per share(adjusted for the
unbundling of Discovery) are expected to be down by between 18% and 26%
compared to the half year to December 2007; and
- Barring any unforeseen circumstances and excluding any impact of changes in
current interest rates, FirstRand is reasonably certain that headline
earnings per share as well as pro forma diluted normalised earnings per
share (adjusted for the unbundling of Discovery) for the full year to 30
June 2009 will be down between 0% and 15%.
RMBH EARNINGS GUIDANCE
As its investment in FirstRand produces the bulk of RMBH`s earnings, it is
anticipated that the impact outlined in FirstRand`s trading statement will, to a
large extent, flow through into RMBH`s results for the half year to 31 December
2008 and for the year ending 30 June 2009.
RMBH`s other investments have in the main performed in line with the guidance
given to shareholders at the time of publishing the Company`s 2008 annual report
in middle September 2008.
However, the bespoke portfolio of emerging market financial shares in which RMBH
has invested and which is managed on our behalf by a leading independent
manager, did not escape the upheaval in international markets during October
2008. In the process the portfolio, which was valued at R650 million at the
beginning of the financial year, lost some R250 million of its value. Should
current market conditions persist to the 31 December 2008 reporting date, this
loss will need to be recorded in the portfolio for the six month period. The
existence of the portfolio and its composition is continuously evaluated and
refined.
This loss and, to a lesser extent, the cost of the funding raised and shares
issued by RMBH to fund the acquisition of our additional interest in Discovery
during November 2007, as well as the random impact of treasury share
eliminations, will have a further dampening effect on RMBH`s results.
RMBH therefore advises shareholders that it now expects EPS, HEPS and normalised
EPS for the six month period to 31 December 2008 to be in the following range:
Six months Earnings
to 31 guidance
December for the six
2007 months to 31
December 2008
Earnings per share (EPS) 189.2cents -38% to -30%
(R2,2bn)
Headline earnings per share 179.2 cents -32% to -24%
(HEPS) (R2.1bn)
Normalised earnings per 174.4 cents -38% to -30%
share (R2.1bn)
Barring unforeseen circumstances, RMBH`s results for the full year to 30 June
2009 should follow the trend projected by FirstRand.
The financial information on which this trading statement is based has not been
reviewed and reported on by the Company`s external auditors.
Details of RMBH`s interim results for the six months ending on 31 December 2008
are expected to be released on SENS and published in the press on or about 11
March 2009.
Sandton
2 December 2008
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Contact details: P Cooper, COO, RMBH
+27 21 658 9360 / +27 82 570 1400
www.rmbh.co.za
Date: 02/12/2008 15:24:06 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
