| Tue 23 Jun 2009, 8:00 | | FSR / FSRP / FSPP / - FirstRand Limited - Trading Statement - June 2009 |
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FSR / FSRP / FSPP / - FirstRand Limited - Trading Statement - June 2009
FirstRand Limited
(Incorporated in South Africa)
(Registration number 1966/010753/06)
JSE Ordinary Share Code: FSR
JSE ISIN: ZAE000066304
JSE "B" Preference Share Code: FSRP
JSE ISIN: ZAE000060141
JSE "B1" Preference Share Code: FSPP
JSE ISIN: ZAE000070900
NSX Ordinary Share Code: FSR
("FirstRand" or "the Group")
TRADING STATEMENT - June 2009
When announcing results for the six months to December 2008, FirstRand
highlighted to shareholders that it expected the macro environment, both
domestically and globally, to deteriorate further. This scenario in fact
played out even more negatively than the Group anticipated.
Declining asset growth and further increases in bad debts, combined with
the negative impact of faster than anticipated reducing interest rates
on capital and endowment balances, continued to place pressure on the
earnings of FNB and WesBank. Impairments remain in line with
expectations, and the bad debt ratio is anticipated to be between 175
and 185 basis points for the year (dominated by retail).
The Group anticipates that economic activity will remain subdued. The
absolute severity of the cycle, combined with the current high levels of
consumer debt, means that the benefit of reducing interest rates is
still only expected to positively impact Group results in late 2009 or
early 2010.
The earnings from RMB, the Group`s investment banking franchise have
come under significant pressure in the second half of the financial
year:
- As previously indicated, RMB expected further market price
volatility in the legacy SPJI off-shore portfolios. In the second half
of the financial year these portfolios incurred losses of R200 million.
RMB still anticipates that these portfolios will return some value over
the medium term.
- In line with market conditions, Private Equity has not made any
realisations since December 2008, and its associate earnings, which
reflect the broader economy, are lower than previously anticipated.
Consequently, Private Equity expects to report a loss for the second
half.
- The Fixed Income, Currencies and Commodities (FICC) business had a
very poor second half. Strong sales and structuring income in the client
facing businesses was offset by counterparty credit related impairments
and losses in the fixed income trading and international lending
portfolios.
- The Investment Banking division continued to perform well. This was
despite a significantly slower second half due to lower corporate
activity, losses on the exit of marginal international activities and
increasing credit related impairments.
As a result of the above, RMB`s earnings for the year are expected to be
approximately 50%-55% down on the comparative period.
Momentum`s performance in the second half of the financial year was
similar to the first half.
FirstRand`s capital management strategy remains conservative. Economic
risk is backed by Tier 1 capital. FirstRand Bank
Holdings`(FRBH`s)capital adequacy ratios are robust with a current
Tier 1 ratio of 11.5%, which is well in excess of the regulatory minimum
and FRBH`s internal target, and overall capital adequacy is 13.6%.
Momentum`s CAR cover of 1.4x is within the targeted range.
When announcing results for the half year to December 2008 FirstRand
indicated to shareholders that the performance for the year to June 2009
would be similar to the first half of the financial year (diluted pro
forma normalised earnings per share decreased 23%). However, given the
impact of the losses in the off shore portfolios and the poor
performance of FICC, as well as the negative endowment effect, the Group
now expects diluted pro forma normalised earnings per share for the year
to 30 June 2009 to be down between 30% and 35% on the previous period.
Barring any unforeseen negative market developments, the Group is
reasonably certain that earnings expectations for the year to June 2009
compared to June 2008 will be as follows:
Year to Earnings
June 2008 guidance
for the year
to June 2009
Actual earnings per share 218.2 cents -39% to -44%
(EPS)* (R11.3bn)
Actual headline earnings per 191.5 cents -28% to -33%
share (HEPS)* (R9.9bn)
Diluted pro forma normalised 184.4 cents -30% to -35%
earnings per share (R10.4bn)
* Comparative period includes Discovery
The financial information on which this trading statement is based has
not been reviewed or reported on by FirstRand`s auditors.
Details of FirstRand`s results for the year ending 30 June 2009 are
expected to be released on SENS and published in the press on or about
15 September 2009.
Sandton
23 June 2009
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 23/06/2009 08:00:01 Produced by the JSE SENS Department.
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