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FSR
FSR - FirstRand Limited - Audited Results and cash dividend declaration for
the year ended 30 June 2010
FirstRand Limited
Registration No: 1966/010753/06
JSE Code: FSR ISIN: ZAE 000066304
("FSR") NSX share code: FST
Certain companies within the FirstRand Group
are Authorised Financial Services Providers
Audited Results and cash dividend declaration for the year ended 30 June 2010
Key financials
Attributable earnings R9 444 million
Headline earnings R 9 453 million
Normalised earnings R9 963 million
Normalised ROE 18%
Introduction
This report covers the audited financial results of FirstRand Limited
("FirstRand" or "the Group") for the year ended 30 June 2010 and deals with
the financial and operating performance of its main business units. The Group
consists of a portfolio of leading financial services franchises; these are
First National Bank ("FNB"), the retail and commercial bank, Rand Merchant
Bank ("RMB"), the investment bank, WesBank, the instalment finance business
and Momentum, the life insurance business.
FirstRand operates these franchises through various legal entities.
Comprehensive reports on the Banking and Momentum Groups, both of which are
wholly owned, are available on www.firstrand.co.za.
Operating environment
The global economy staged a recovery during the financial year, brought about
mainly by the respective radical fiscal and monetary policy responses in many
developed economies. The positive sentiment associated with the recovery was,
however, tempered towards the latter part of the financial year as it became
increasingly evident that global activity will experience severe "growth
headwinds" over the next few years.
The developed world is facing rising government debt from elevated levels and
an already over-indebted consumer. The risk these debt burdens pose to global
economic activity was evident by the actions of the IMF and EU to prevent a
sovereign debt default in Greece. These developments forced a number of
developed economies to recognise that economic growth will slow towards the
latter part of 2010.
While emerging markets were not isolated from these events, as balance sheets
are generally healthier and in a better position to sustain growth at or above
long term growth trends.
Lagging the global economic recovery somewhat, the South African economy
emerged from recession during the third quarter of 2009 and growth was
supported by significant monetary and fiscal policy stimulus and external
trade. Falling inflation allowed the South African Reserve Bank ("SARB")to cut
interest rates by a further 100 bps to 30 year lows. While this eased the
pressure on real disposable income, rising unemployment continued to weigh on
credit demand.
The lower interest rate environment and recovery in economic activity did
support an improvement in the housing market. However, overall economic
conditions remained challenging and uncertainty over the sustainability of the
recovery also weighed on credit growth.
The cumulative benefit of the interest rate cuts, the modest recovery in house
prices during the latter half of the financial year and higher equity prices
eased pressure on consumers. Whilst this resulted in a positive impact on
retail bad debt levels, credit growth was extremely subdued. Corporate balance
sheets remained robust, however, utilisation levels were low, reflecting a
lack of investment activity in most sectors.
Overview of Results
Against this difficult, albeit improving, macro background, FirstRand`s
diverse portfolio of banking and insurance businesses produced a strong
performance. Normalised earnings improved 39% to R9.96 billion with a
normalised return on equity ("ROE") of 18%.
The table below represents the contribution to normalised earnings from the
banking and insurance groups.
Year ended 30
June
R million 2010 2009 % % contri-
change Bution
Banking Group 8 535 6 056 41 85
Momentum 1 810 1 649 10 18
FirstRand and dividend paid to (382) (554) (32) (3)
non cumulative non redeemable
preference shareholders
Normalised earnings (unaudited) 9 963 7 151 39 100
The Banking Group`s results for the year under review reflect a significant
recovery in profitability in comparison to the 12 month period ended 30 June
2009. The total banking portfolio produced R8.5 billion of normalised
earnings, representing an increase of 41% compared to the previous comparative
period.
This recovery in earnings was driven mainly by a modest increase in topline
revenue and the reversal of the two most significant negative issues from the
previous comparative period, namely bad debts emanating from the large retail
lending books and losses from certain offshore trading portfolios within the
investment bank. Many of the banking operations also showed strong operational
performances and a significant private equity realisation positively impacted
earnings.
Overall impairments decreased 29% from R8.0 billion to
R5.7 billion, primarily in the retail franchises of FNB and WesBank,
reflecting the positive benefits of the lower interest rate environment. In
addition, non interest revenue increased 32 % from R20 billion to R26 billion
representing a strong recovery in RMB`s trading activities and the realisation
of Life Healthcare which produced R1.25 billion of profit.
Pressure remained on the net interest income component of the earnings base,
due mainly to declining asset growth and the negative impact of lower interest
rates on capital and endowment balances. This was, however, partly offset by
successful repricing strategies across all lending portfolios.
Impairments were better than originally anticipated, coming in at the lower
end of management expectations with the bad debt ratio at 1.30% of advances
(retail 1.79% and wholesale 0.44%). Major components of the bad debt charge
are:
Year ended 30 June
2010 2009 2010 2009
Bad debts R R % % %
million million change
Residential 1 416 2 375 (40) 0.94 1.62
mortgages
Credit card 776 1 355 (43) 6.92 11.18
Vehicle and asset 1 722 2 222 (23) 1.94 2.41
finance
Retail other 1 075 1 434 (25) 3.75 5.37
Wholesale 675 982 (31) 0.44 0.62
Total bad debts* 5 686 8 024 (29) 1.30 1.81
* Total includes Corporate Centre and other.
The earnings of the insurance subsidiary, Momentum, were positively impacted
by a recovery in equity markets, particularly in the first half of the year,
combined with a continued strong operational performance. Overall normalised
earnings increased 10% to R1.81 billion with the ROE of 22% (2009: 23%)
remaining ahead of the Group`s target. Volumes of new savings and retirement
annuity business were subdued, as consumers remained under pressure, however
lump sum inflows showed strong growth and FNB Life continued to perform well.
The marginal increase in the value of new business was pleasing given the
challenging environment.
Overview of the operating franchises
Below is a brief overview of each operating franchise:
FNB (South Africa) Year ended 30 June
R million 2010 2009 %
change
Normalised earnings (unaudited) 4 303 3 756 15
Profit before tax 5 833 5 060 15
Total assets 204 309 206 799 (1)
Total liabilities 199 115 197 230 1
Bad debt ratio 1.70 2.39
ROE (%) 32 26
FNB`s South African operations produced a strong performance for the year
under review with both profit and ROE increasing. These results were driven
mainly by a 30% decrease in bad debts and 6% growth in non interest revenue
reflecting reasonable growth in clients and transactional volumes, despite
external pressures on customers. These positives were partly offset by
contracting deposit margins, due to the endowment impact, and lower net
interest income resulting from reduced balance sheet growth. The turnaround in
the ROE was driven largely by improved profitability together with efficient
capital management.
FNB continues to benefit from the execution of certain specific strategies in
response to the current macro environment. These include a strong focus on
efficiencies and sustainable containment of cost growth and specific
strategies to grow revenue.
FNB maintained cost growth to well below inflation for two years running and
the absolute increase in costs in the year under review is the lowest in
recent history. Whilst the cost to income ratio has deteriorated year-on-year,
this reflects pressure on revenues. The current cost initiatives should
support profitability in the medium term as topline growth is expected to
remain challenging.
FNB (Rest of Africa) Year ended 30 June
R million 2010 2009 % change
Normalised earnings (unaudited) 524 514 2
Profit before tax 1 251 1 222 2
Total assets 33 593 31 640 6
Total liabilities 29 544 28 180 5
Bad debt ratio 0.37 0.58
ROE (%) 23 27
The consolidated results of FNB Africa comprise the subsidiaries FNB Botswana,
FNB Namibia, FNB Swaziland, FNB Mocambique, FNB Lesotho and FNB Zambia as well
as the support centre in Johannesburg and a representative office in Angola.
Overall the African subsidiaries performed well, growing profits 2% despite
significant investment activity across the portfolio.
As part of its strategy to grow the existing franchise and operating footprint
further, FNB invested significantly in Zambia and Mocambique in the year under
review. This investment phase is expected to continue in the medium term with
a parallel focus on service and electronic delivery channels to increase the
customer base and drive up volumes and resultant non interest revenue.
RMB Year ended 30 June
R million 2010 2009 % change
Normalised earnings (unaudited) 3 261 1 536 >100
Profit before tax 4 623 2 055 >100
Total assets 268 819 275 097 (2)
Total liabilities 263 135 272 646 (3)
ROE (%) 24 12
RMB delivered a very strong performance with all of its divisions exceeding
prior year results. Profitability increased significantly with normalised
earnings increasing to R3.26 billion. Return on equity moved back above hurdle
rates at 24%.
Despite a very high base created in the previous year, the Investment Banking
division ("IBD") delivered another strong performance. Whilst this was driven
mainly by robust deal flow in South Africa, the increased focus on the China
- Africa business and the China Construction Bank ("CCB") relationship also
began to bear fruit for investment banking and several significant deals were
concluded.
The Fixed Income Currency and Commodities division ("FICC") experienced a
tough first half in an environment characterised by lower proprietary trading
profits, uncertainty in the markets, a decline in client flows, tighter
margins and a strong Rand. The second half showed a much improved performance.
Private Equity performed well on the back of a significant realisation, Life
Healthcare, in the second half of the year, which contributed R1.25 billion to
RMB`s profit. Equity accounted earnings remained under pressure due to market
conditions.
The significantly improved performance from Equity Trading was driven mainly
by the local portfolio positions combined with the derisking of the
international legacy portfolios.
WesBank Year ended 30 June
R million 2010 2009 % change
Normalised earnings (unaudited) 953 324 >100
Profit before tax 1 300 130 >100
Total assets 97 357 94 472 3
Total liabilities 95 452 94 363 1
Bad debt ratio 2.21 2.86
ROE (%) 15 7
WesBank`s overall profitability was positively impacted by an improving retail
credit environment which resulted in a significant improvement in the bad debt
charge. This was driven by retail bad debts, while corporate impairments
reflected the opposite trend.
Within the lending operations retail new business increased 29%, however
corporate new business declined 20% which is to be expected given the cycle.
Improved interest margins were experienced across the retail, corporate and
personal loans portfolios.
WesBank`s non lending operations contributed R208 million compared with R52
million in the prior year and the UK operation, Carlyle, produced profits of
R120 million compared with a loss of
R31 million in the prior year.
Momentum Year ended 30 June
R million 2010 2009 % change
Normalised earnings (unaudited) 1 810 1 649 10
Embedded value 17 683 16 086 10
Return on EV (%) 15 3
ROE (%) 22 23
Momentum produced a strong operational performance despite a more challenging
second half of the year, with normalised earnings increasing and the ROE
remained ahead of the Group`s targeted return. Capitalisation levels
strengthened to 2.1 times the Capital Adequacy Requirement ("CAR").
The employee benefits and healthcare businesses showed an improved performance
as the benefits of the systems integration and rationalisation in these
businesses started to emerge. The African operations generated a turnaround to
a breakeven position in the current year. The growth in FNB Life`s operating
profit is due to the continued success of the embedded credit life and funeral
products.
Strategic Issues
Progress on Group strategy
FirstRand`s vision is to be the African financial services group of choice,
creating long term franchise value and delivering superior and sustainable
economic returns to shareholders within acceptable levels of volatility.
This vision is driven through two clear growth strategies:
Become a predominant South African player focusing on both existing markets
and those markets where the Group is currently underrepresented.
Further grow the existing African franchises, targeting those markets that
are expected to produce above average domestic growth and are strongly
positioned to benefit from the trade and investment flows between Africa and
Asia, particularly China and India.
FirstRand continued to make significant progress on these growth plans, which
are executed through the operating franchises. Within its domestic markets FNB
continued to invest in its footprint, particularly electronic channels and
cellphone banking. This has been particularly successful in the Mass segment
where FNB continues to build a strong franchise and a platform for future
growth. FNB has historically been underrepresented in the "lending space" in
the Mass segment and this is being addressed through new strategies such as
the roll out of the Easy Plan branches and products.
In line with the Group`s strategy to rebalance its portfolio through a greater
weighting in the corporate sector, FirstRand significantly enhanced client
interface across corporate and investment banking through the coordination of
corporate and investment banking ("CIB") activities. CIB represents greater
alignment between RMB`s and FNB`s corporate banking businesses, whilst
preserving the respective strong brand equity and specialist skills within
each. A key part of this new approach has been the formation of an integrated
Client Coverage team, which is mandated to coordinate and enhance RMB and FNB
Corporate`s combination of products and services to clients. In addition the
Group adjusted certain prudential limits in investment grade and defensive
counters.
WesBank is developing strategies for growth in areas such as fleet management
and full maintenance rental opportunities as well as with larger corporate
asset finance customers.
The Group`s international expansion strategy is gaining traction, with the
business plans in Nigeria, Zambia, Angola and Tanzania on track. The
China/India-Africa corridor strategy resulted in a number of transactions
completed with a very healthy deal pipeline.
RMB India is focusing equally on investment and trade flows as part of its
strategy to build a robust client franchise and during the year formed a
strategic partnership with an established Indian advisory player.
Merger of Metropolitan and Momentum and unbundling of merged entity by
FirstRand
In March 2010 FirstRand, Momentum and Metropolitan announced that an agreement
was reached to merge Momentum and Metropolitan to create the third largest
listed insurer in South Africa with an embedded value of around R30 billion.
To facilitate the transaction and unlock shareholder value, FirstRand will
unbundle the new entity. Following implementation of the merger, FirstRand
shareholders will hold 59.3% and current Metropolitan shareholders 40.7% of
the share capital of the merged entity. Based on this ratio, when FirstRand`s
stake in the merged entity is unbundled, FirstRand shareholders can expect to
receive 16.9 shares in the merged entity for every 100 ordinary shares held in
FirstRand. The merger ratio was determined based on the consistently
calculated embedded values of the two entities as at 31 December 2009.
The new group will be renamed MMI Holdings but this will only apply to the
listed entity. The brands of Momentum and Metropolitan will continue to be
used in the client-facing businesses, where both have established strong and
trusted legacies.
FirstRand believes this is a very positive transaction for shareholders as it
brings together two businesses that have created very successful franchises in
different but complementary markets. It also facilitates a significant
expansion of the growth prospects for Momentum and Metropolitan.
The Group carefully evaluated the consequences of retaining ownership of the
new entity within the FirstRand Group, however, it reached the conclusion that
shareholders would benefit most from a complete unbundling.
Not only will any potential value trapped within FirstRand be unlocked but it
will also ensure that the new entity has sufficient free float on the JSE and
the necessary flexibility to realise its strategic objectives.
Following the unbundling, FirstRand remains committed to pursuing the
synergistic benefits that exist between banking, insurance and asset
management activities with the merged entity, particularly given the success
of FNB Life and the significant growth opportunities for the new entity. This
will be structured through a preferred strategic relationship based on
commercial terms.
Capital levels
The Group seeks to maintain capitalisation ratios appropriate to safeguard its
operations, aligned to the interests of its stake-holders and sufficient to
provide for its growth initiatives. Current internal resources and forecast
capital generation is expected to be sufficient to provide for the Group`s
domestic growth needs as well as for strategic international expansion plans
and regulatory changes.
The targeted capital levels as well as the current ratios for the Group are
indicated in the table below:
FRBH
Actual Target Regulatory
minimum
Capital adequacy ratio (%) 15.6 12.0 - 13.5 9.50*
Tier 1 ratio 13.5 10.00 7.00
FRB
Capital adequacy ratio (%) 14.0 11.5 - 13.0 9.50*
Tier 1 ratio 11.7 9.50 7.00
Momentum
Capital adequacy cover ratio 2.1 1.4 - 1.6
* The regulatory minimum excludes the bank specific (Pillar 2b) add on and
capital floor.
Basel III proposals
The recent global financial crisis has resulted in increased political and
regulatory pressure on banking systems worldwide. Some of these pressures are
likely to materialise in South Africa, particularly given its G20 membership.
For example, the SARB is expected to implement the Basel Committee on Banking
Supervision ("BCBS") proposals on capital and liquidity (the so-called Basel
III proposals).
The revisions to the proposals outlined in July 2010 have gone some way in
addressing banks` concerns. The most significant change affecting the South
African banking sector relates to the implementation of new liquidity
requirements. The impact of the proposed new requirements is expected to be
significant from a cost of liquidity perspective. The Liquidity Coverage Ratio
("LCR") will be revised by September 2010 specifically to cater for
jurisdictions such as South Africa, where there are not sufficient liquid
assets to meet the standard. The implementation of the Net Stable Funding
Ratio ("NSFR") has been postponed to 2018. Combined with changed assumptions
for runoff rates on deposits, funding for residential mortgages and the
treatment of interbank funding, these amendments are viewed positively, as the
potential for market disruptions inherent in the original proposals is
reduced.
Given the structural funding challenges in South Africa, banks will not be
able to comply with the net stable funding and liquidity coverage ratios as
set out in the current proposals. Government and industry set up a joint task
team to analyse the specific characteristics of the funding profile of South
Africa and its banking system. It is too early to quantify the potential
impact of the proposal on the South African economy and the industry.
FirstRand participated in the Quantitative Impact Study ("QIS") that the BCBS
conducted to assess the impact of the Basel III proposals on banks` capital
levels. Preliminary calculations carried out as part of this exercise show
that there would be a reduction in both the Tier 1 and total capital adequacy
ratios, however, FRB and FRBH will remain above the current regulatory minimum
levels. Although the new regulatory minimum has not been finalised, FirstRand
believes it will be adequately capitalised to meet the new requirements.
Prospects
The South African external economic environment looks to have stabilised and
whilst revenue growth in the medium term will remain challenging, the retail
credit environment is expected to continue to improve. Bad debts will further
unwind, which will provide support to the current earnings recovery in the
Group`s retail franchises, however growth in retail advances will remain
extremely low as levels of consumer indebtedness are still at historic highs.
Corporate balance sheets remain strong and have weathered the cycle well,
however in the current environment investment opportunities are limited and
therefore growth in corporate advances will remain subdued.
The Group continues to invest in its infrastructure in South Africa,
particularly where significant growth opportunities have been identified, and
is growing its footprint and client franchise in other selected African
markets. Notwithstanding these investment strategies, given the anticipated
pressures on topline growth, the Group`s operating franchises continue to
concentrate on cost efficiency.
The combination of the current growth strategy and the quality of its
underlying client franchises will allow the Group to take full advantage of
any major improvements in the cycle.
Basis of presentation
FirstRand prepares its consolidated financial statements in accordance with
International Financial Reporting Standards ("IFRS") including IAS 34, Interim
Financial Reporting. The accounting policies applied are consistent with those
applied in preparation of previous financial statements.
The results have been audited by PricewaterhouseCoopers Inc. and a copy of
their unqualified audit opinion is available at the company`s registered
office.
The Group believes normalised earnings more accurately reflect operational
performance. Headline earnings are adjusted to take into account non
operational and accounting anomalies. Details of the nature of these
adjustments and reasons therefore can be found on www.firstrand.co.za.
A table reflecting the reclassifications of the prior year and reasons
therefore can be found www.firstrand.co.za.
Events subsequent to reporting date
Merger of Metropolitan and Momentum and unbundling of merged entity by
FirstRand
The merger of Metropolitan and Momentum and the subsequent unbundling of the
merged entity by FirstRand is expected to be completed by the end of October
2010. A shareholders meeting to consider the transaction is to be held on 28
September 2010.
As a result of this transaction, the Group`s investment in Momentum Group
Limited has been reclassified as a discontinued operation for the 2010
financial results, as required by IFRS 5 Non current assets held for sale and
discontinued operations.
Barnard Jacobs Mellet scheme of arrangement
On 21 June 2010 FirstRand announced its intention to purchase the issued share
capital of Barnard Jacobs Mellet Holdings Limited ("BJM") by way of a scheme
of arrangement in terms of section 311 of the Companies Act 61 of 1973, as
amended. On 23 August 2010 the scheme meeting held by BJM approved the scheme
of arrangement.
In terms of the scheme of arrangement FirstRand Investment Holdings
(Proprietary) Limited, a wholly owned subsidiary of FirstRand Limited will
acquire all issued BJM shares for a cash consideration of R4.50 per share.
Once the sale has been finalised BJM shares will be delisted.
Legal restructure of FirstRand Group
Effective 1 July 2010, FirstRand Limited became a bank controlling company in
terms of the Banks Act. This change was approved by the SARB and shareholders
and has resulted in a streamlined operational and governance structure.
Board changes
The late Dr F van Zyl Slabbert retired as an independent non executive
director effective 25 November 2009.
Following the Group restructure and the designation of FirstRand as a bank
controlling company effective 1 July 2010,
Mr DJA Craig;
Mrs G Moloi and
Mr KC Schubane,
resigned from the board but have agreed to serve on and have been appointed to
FirstRand divisional boards.
The following independent non executive directors who have all served on
FirstRand Bank board for a number of years were also appointed to the
FirstRand board effective 1 July 2010:
Mr JJH Bester;
Mr WR Jardine and
Mrs EG Matenge-Sebesho.
The board memberships of certain FirstRand directors, who had not previously
served on the FirstRand Bank board, is subject to the approval of the
Registrar of Banks, in view of FirstRand`s status now, as a bank controlling
company. These directors, included in the list of directors below are:
Dr NN Gwagwa;
Mr AP Nkuna;
Mrs AT Nzimande
Mr D Premnarayen; and
Mr KB Schoeman.
Mr BW Unser was appointed as company secretary effective 1 June 2010.
Dividend policy
Fair value accounting continues to impact earnings volatility, particularly in
the investment bank. The Group does not wish to expose the dividend to this
volatility and therefore will focus on a sustainable growth rate, in line with
normalised earnings. This means that the dividend cover may vary from year to
year.
Cash dividend declaration
Ordinary shares
The following ordinary cash dividend was declared in respect of the 2010 and
2009 financial years:
Year ended 30 June
Cents per share 2010 2009
Interim (declared 8 March 2010) 34.00 34.00
Final (declared 13 September 2010*) 43.00 22.00
77.00 56.00
* The last day to trade in FirstRand shares on a cum-dividend basis in respect
of the final dividend will be Friday 8 October 2010. The first day to trade ex-
dividend will be Monday 11 October 2010. The record date will be Friday 15
October 2010 and the payment date Monday 18 October 2010. No dematerialisation
or rematerialisation of shares may be done during the period Monday 11 October
2010 and Friday 15 October 2010, both days inclusive.
Preference shares
Dividends on the "B" preference shares are calculated at a rate of 68% of the
prime lending rate of FNB. The "B1" preference shares were incorporated in the
"B" preference shares effective 4 January 2010. The following dividends have
been declared and paid:
Year ended 30 June
Cents per share 2010 2009
"B" "B" "B1"
Period 26 August 2008 - 23 518.9 518.9
February 2009
Period 24 February 2009 - 31 423.1 423.1
August 2009
Period 1 September 2009 - 22 342.3
February 2010
Period 23 February 2010 - 30 355.0
August 2010
697.3 942.0 942.0
BW Unser
Company secretary
13 September 2010
Consolidated statement of comprehensive income
for the year ended 30 June
R million 2010 2009
Profit for the year 10 674 7 838
Other comprehensive income
Cash flow hedges (226) (1 228)
Available-for-sale financial assets (69) 75
Exchange differences on translating foreign (74) (641)
operations
Share of other comprehensive income of 39 73
associates after tax and non controlling
interest
Other comprehensive income for the year before (330) (1 721)
tax
Income tax relating to components of other (17) 263
comprehensive income
Other comprehensive income for the year (347) (1 458)
Total comprehensive income for the year 10 327 6 380
Total comprehensive income attributable to:
Ordinary equity holders 9 097 5 064
Non cumulative non redeemable preference 344 464
shares
Equity holders of the Group 9 441 5 528
Non controlling interest 886 852
Total comprehensive income for the year 10 327 6 380
Consolidated income statement
for the year ended 30 June
Restated
R million 2010 2009 % change
Continuing operations
Interest and similar income 38 817 51 735 (25)
Interest expense and similar charges (22 467) (34 446) (35)
Net interest income before 16 350 17 289 (5)
impairment of advances
Impairment of advances (5 686) (8 024) (29)
Net interest income after impairment 10 664 9 265 15
of advances
Non interest income 26 761 20 339 32
Decrease/(increase) in value of 193 (284) >100
policyholder liabilities
Income from operations 37 618 29 320 28
Operating expenses (25 311) (23 028) 10
Net income from operations 12 307 6 292 96
Share of profit from associates and 700 1 577 (56)
joint ventures
Profit before tax 13 007 7 869 65
Tax (3 527) (1 411) >100
Profit from continuing operations 9 480 6 458 47
Discontinued operations
Profit attributable to discontinued 1 194 1 380 (13)
operations
Profit for the year 10 674 7 838 36
Attributable to:
Ordinary equity holders 9 444 6 501 45
Non cumulative non redeemable 344 464 (26)
preference shares
Equity holders of the Group 9 788 6 965 41
Non controlling interest 886 873 1
Profit for the year 10 674 7 838 36
Earnings per share (cents)
?Basic 179.9 124.9 44
?Diluted 178.1 124.7 43
Consolidated statement of cash flows
for the year ended 30 June
Restated
R million 2010 2009
Cash flows from operating activities from
continuing operations
Cash receipts from customers 60 073 66 955
Cash paid to customers, suppliers and (44 153) (52 391)
employees
Dividends received 3 148 4 214
Dividends paid (3 299) (3 700)
Dividends paid to non controlling interest (420) (804)
Net cash flows from operating activities from 15 349 14 274
continuing operations
(Increase)/decrease in income earning assets (34 194) 7 507
Increase/(decrease) in deposits and other 31 194 (21 321)
liabilities
Net cash flows from operating funds (3 000) (13 814)
Tax paid (2 697) (2 245)
Net cash inflow/(outflow) from operating 9 652 (1 785)
activities from continuing operations
Net cash (outflow)/(inflow) from operating (9 709) 11 546
activities from discontinued operations
Cash flows from investment activities from
continuing operations
Acquisition of property and equipment (2 197) (2 963)
Proceeds from the disposal of property and 389 278
equipment
Acquisition of investment properties (138) -
Proceeds on the disposal of investments 594 552
Acquisition of subsidiaries (982) (18)
Proceeds on disposal of subsidiary 537 -
Acquisition of associates and joint ventures (204) (1 542)
Proceeds on the disposal of associates and 2 027 508
joint ventures
Proceeds on sale of advances books 22 1 768
Acquisition of intangible assets 114 (1 474)
Net cash inflow/(outflow) from investing 162 (2 891)
activities from continuing operations
Net cash inflow/(outflow) from investing 33 (2 223)
activities from discontinued operations
Cash flows from financing activities from
continuing operations
Proceeds from/(Repayment of) from long term 1 085 (1 397)
borrowings
Net cash inflow/(outflow) from financing 1 085 (1 397)
activities from continuing operations
Net cash inflow from financing activities 2 117 491
from discontinued operations
Net increase in cash and cash equivalents 3 340 3 741
from continuing and discontinued operations
Cash and cash equivalents at the beginning of 57 266 53 555
the year
Cash and cash equivalents at the end of the 60 606 57 296
year
Cash and cash equivalents acquired - 35
Cash and cash equivalents disposed of* (36) -
Effect of exchange rate changes on cash and (95) (65)
cash equivalents
Transfer to non current assets held for sale (33 408) -
Cash and cash equivalents at the endof the 27 067 57 266
year
* Cash and cash equivalents sold and bought relate to cash balances
held by subsidiaries acquired and sold during the year.
Mandatory reserve balances included above 11 370 11 661
Banks are required to deposit a minimum average balance, calculated
monthly with the Central Bank, which is not available for use in the
Group`s day to day operations. The deposit bears no or low interest.
Money at short notice constitutes amounts withdrawable in 32 days or
less.
Consolidated statement of financial position
as at 30 June
Restated C
R million 2010 2009 2008
ASSETS
Cash and short term funds 27 067 57 266 53 555
Derivative financial instruments 39 764 68 608 57 106
Advances 434 793 416 488 446 286
Investment securities and other 117 171 209 249 220 105
investments
Commodities 2 365 1 323 1 916
Accounts receivable 5 743 11 068 7 417
Investments in associates and joint 6 901 15 294 13 303
ventures
Property and equipment 10 018 10 220 8 859
Deferred tax asset 443 2 034 1 456
Intangible assets and deferred 2 104 5 698 4 497
acquisition costs
Investment properties 138 2 156 3 808
Policy loans on insurance contracts 27 626 772
Reinsurance assets 524 8 430 939
Tax asset 935 883 833
Non current assets held for sale 197 247 508 3 092
Total assets 845 240 809 851 823 944
EQUITY AND LIABILITIES
Liabilities
Deposits 512 469 478 083 488 423
Short trading positions 16 735 25 002 33 450
Derivative financial instruments 36 035 55 556 46 595
Creditors and accruals 12 115 18 217 16 836
Provisions 3 359 2 961 3 275
Tax liability 157 331 666
Post retirement liabilities 2 162 2 089 1 980
Deferred tax liability 2 132 3 977 5 372
Long term liabilities 9 183 12 928 13 941
Policyholder liabilities under 1 868 40 725 43 417
insurance contracts
Policyholder liabilities under 101 109 196 111 344
investment contracts
Liabilities arising to third parties - 8 114 7 283
Deferred revenue liability - 322 296
Liabilities directly associated with 189 961 253 -
non current assets classified as
held for sale
Total liabilities 786 277 757 754 772 878
Equity
Capital and reserves attributable to
equity holders
Ordinary shares 52 52 52
Share premium 1 491 1 300 1 036
Reserves 49 889 44 133 43 082
Capital and reserves attributable to 51 432 45 485 44 170
ordinary equity holders
Non cumulative non redeemable 4 519 4 519 4 519
preference shares
Capital and reserves attributable to 55 951 50 004 48 689
equity holders
Non controlling interest 3 012 2 093 2 377
Total equity 58 963 52 097 51 066
Total equity and liabilities 845 240 809 851 823 944
Key financial results and ratios
for the year ended 30 June
Year ended 30 June
R million 2010 2009 %
change
From continuing and discontinued
operations
Attributable earnings to ordinary 9 444 6 501 45
equity holders
Headline earnings 9 453 6 939 36
Normalised earnings (unaudited) 9 963 7 151 39
Normalised net asset value 58 953 52 905 11
(unaudited)
Normalised return on equity (%) 18 14
(unaudited)
Normalised price to book (times) 1.73 1.50
(unaudited)
Normalised earnings per share
(cents) (unaudited)
- Basic 176.7 126.8 39
- Diluted 176.7 126.8 39
Earnings per share (cents)
- Basic 179.9 124.9 44
- Diluted 178.1 124.7 43
Headline earnings per share (cents)
- Basic 180.1 133.3 35
- Diluted 178.3 133.1 34
Ordinary dividend per share (cents) 77.0 56.0 38
Non cumulative non redeemable
preference dividend per share
(cents)
B Class (68% of FNB prime lending 765.4 1 030.3 (26)
rate)
B1 Class (68% of FNB prime lending 423.1 1 030.3 (59)
rate)*
From continuing operations
Normalised earnings (unaudited) 8 569 5 836 47
Normalised return on equity (%) 18 13
(unaudited)
Normalised earnings per share
(cents) (unaudited)
- Basic 152.0 103.5 47
- Diluted 152.0 103.5 47
Capital adequacy
FirstRand Bank Holdings
- Capital adequacy ratio 15.6 14.6
- Tier 1 ratio 13.5 12.3
Momentum
- Capital adequacy cover rate 2.1 1.8
* The "B1" preference shares were incorporated with the "B"
preference shares effective 4 January 2010.
Consolidated statement of changes in equity
for the year 30 June
Ordinary share capital and ordinary equity holder`s funds
R million Share Share Share General Cash flow Share based
capital premium capital risk hedge payment
and reserve reserve
share reserve
premium
Balance as at 52 1 036 1 088 8 602 2 248
1 July 2008
Issue of - - - - - -
share capital
Movement in - - - 1 - 58
other
reserves
Ordinary - - - - - -
dividends
Preference - - - - - -
dividends
Changes in - - - - - -
ownership
interest in
subsidiaries
Consolidation - 264 264 - - -
of treasury
shares
Total - - - - (894) -
comprehensive
income for
the year
Balance as at 52 1 300 1 352 9 (292) 2 306
30 June 2009
Issue of - - - - - -
share capital
Movement in - - - - - 181
other
reserves
Ordinary - - - - - -
dividends
Preference - - - - - -
dividends
Transfer - - - 3 - -
to/(from)
reserves
Changes in - - - - 2 -
ownership
interest in
subsidiaries
Consolidation - 191 191 - - -
of treasury
shares
Total - - - - (176) -
comprehensive
income for
the year
Balance as at 52 1 491 1 543 12 (466) 2 487
30 June 2010
Ordinary share capital and ordinary equity holder`s
funds
R million Available- Currency Other Retained
for-sale translation reserves earnings
reserve reserve
Balance as at 1 July 1 107 1 365 (185) 37 937
2008
Issue of share capital - - - -
Movement in other - - (51) -
reserves
Ordinary dividends - - - (3 764)
Preference dividends - - - -
Changes in ownership - - (34) -
interest in
subsidiaries
Consolidation of - - - (223)
treasury shares
Total comprehensive - (615) 72 6 501
income for the year
Balance as at 30 June 1 107 750 (198) 40 451
2009
Issue of share capital - - - -
Movement in other - - (440) 150
reserves
Ordinary dividends - - - (2 955)
Preference dividends - - - -
Transfer to/(from) - - - (3)
reserves
Changes in ownership - - 2 (27)
interest in
subsidiaries
Consolidation of - - - (254)
treasury shares
Total comprehensive (138) (52) 19 9 444
income for the year
Balance as at 30 June 969 698 (617) 46 806
2010
R million Reserves Non Non Total
attributable cumulative controlling equity
to ordinary non interest
equity redeemable
holders preference
shares
Balance as at 1 July 43 082 4 519 2 377 51 066
2008
Issue of share capital - - 13 13
Movement in other 8 - (138) (130)
reserves
Ordinary dividends (3 764) - (804) (4 568)
Preference dividends - (464) - (464)
Changes in ownership (34) - (207) (241)
interest in
subsidiaries
Consolidation of (223) - - 41
treasury shares
Total comprehensive 5 064 464 852 6 380
income for the year
Balance as at 30 June 44 133 4 519 2 093 52 097
2009
Issue of share capital - - 7 7
Movement in other (109) - (62) (171)
reserves
Ordinary dividends (2 955) - (420) (3 375)
Preference dividends - (344) - (344)
Transfer to/(from) - - - -
reserves
Changes in ownership (23) - 508 485
interest in
subsidiaries
Consolidation of (254) - - (63)
treasury shares
Total comprehensive 9 097 344 886 10 327
income for the year
Balance as at 30 June 49 889 4 519 3 012 58 963
2010
Directors: LL Dippenaar (Chairman), SE Nxasana (Chief executive officer), JP
Burger (Chief operating officer/Chief financial officer), VW Bartlett, JJH
Bester, L Crouse, PM Goss, Dr NN Gwagwa, PK Harris, WR Jardine, EG Matenge-
Sebesho, AP Nkuna, AT Nzimande, D Premnarayen (Indian), KB Schoeman, RK Store,
BJ van der Ross, Dr JH van Greuning, MH Visser. Company secretary: BW Unser
Registered office: 4 Merchant Place, Corner Fredman Drive and Rivonia Road,
Sandton, 2196 Postal address: PO Box 786273, Sandton, 2146 Telephone: +27 11
282 1808 Telefax: +27 11 282 Sponsor: Rand Merchant Bank (a division of
FirstRand Bank Limited)
Additional information is available at www.firstrand.co.za
Date: 14/09/2010 08:00:03 Produced by the JSE SENS Department.
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