| Tue 13 Sep 2011, 8:00 | | FSR - FirstRand Limited - Audited results and cash and special dividend |
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FSR
FSR
FSR - FirstRand Limited - Audited results and cash and special dividend
declaration for the year ended 30 June 2011
FirstRand Limited
Registration No: 1966/010753/06
JSE code: FSR ISIN: ZAE0000066304 ("FSR")
NSX share code: FST - Certain companies within the FirstRand Group are
Authorised Financial Services Providers
AUDITED RESULTS AND CASH AND SPECIAL DIVIDEND DECLARATION FOR THE YEAR
ENDED 30 JUNE 2011
Key financials
- Normalised earnings R10 117 million + 22%
- Normalised ROE 19%
- Dividend per share 81 cents + 27%
- Special dividend per share 70 cents
Introduction
This report covers the audited financial results of FirstRand Limited
("FirstRand" or "the Group") from continuing and discontinued operations
based on International Financial Reporting Standards ("IFRS") for the year
ended 30 June 2011, as well as the results of the normalised continuing
operations of the Group, which are based on the audited IFRS results 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, commercial
and wholesale bank, Rand Merchant Bank ("RMB"), the investment bank, and
WesBank, the instalment finance business.
Effective 30 November 2010 FirstRand unbundled its 100% shareholding in the
Momentum Group. The audited IFRS results therefore include five months of
contribution from Momentum (treated as discontinued operations). The
audited IFRS results also include six months of contribution from
OUTsurance which was disposed of effective 4 May 2011.
The primary results are presented on a normalised continuing basis as the
Group believes this most accurately reflects its economic performance. The
normalised continuing operations specifically exclude the profit on
unbundling of Momentum, the earnings contribution of Momentum for the
current and comparative years, the profit on disposal of OUTsurance, as
well as the earnings contribution of OUTsurance for the current and
comparative years. A detailed description of the normalised results is
provided on www.firstrand.co.za. Commentary is based on the continuing
normalised results, unless indicated otherwise. Normalised results are
unaudited.
Normalised earnings 2011 2010 %
change
- Normalised (R million) 10 117 8 283 +22
- Diluted normalised earnings per share 179.4 146.9 +22
(cents)
Net asset value per share 2011 2010 %
change
- Normalised 1 044.0 875.9 +19
Dividend per ordinary share 2011 2010 %
change
- Continuing operations 81.0 64.0 27
Special dividend per share 2011 2010 %
change
- Special dividend per share (cents) 70.0 - 100
Return on equity % 2011 2010
- Normalised 18.7 17.7
Cost-to-income ratio % 2011 2010
- Normalised 55.4 55.0
- Industry adjusted 53.3 53.1
Capital adequacy ratio (Tier I) 2011 2010
- IFRS and normalised (%) 15.0 13.5
Credit loss ratio % 2011 2010
-?Normalised 0.93 1.39
Introduction
Although global economic activity picked up during the period under review,
the absolute rate of expansion slowed due to a number of factors. The
headwinds became particularly acute in the first half of 2011 and economic
growth across the globe started to moderate, particularly in highly-
indebted, developed economies. Concerns over a sovereign debt default in
Greece continued to dampen economic sentiment as worries over the fiscal
health of certain peripheral European nations increased.
Several other factors also weighed on global activity. The devastating
earthquake that hit Japan disrupted global supply chains and caused losses
in manufacturing output in the first few months of 2011. Unrest in North
Africa and the Middle East, adverse weather conditions and growing demand
from emerging market economies pushed oil and grain prices upwards. This
eroded disposable income and weighed on consumer spending. It also put
upward pressure on core inflation in many emerging economies, prompting
their central banks to start tightening monetary policy.
Against this uncertain global economic backdrop, the South African economy
held up well, registering quarterly growth rates above 2.5% during the
financial year. The main drivers behind the expansion were South African
consumers who benefited from low debt service costs and robust real income
growth. In addition, the increase in global commodity prices provided
support to the South African export sector. Inflation remained within the
South African Reserve Bank`s ("SARB") target band, with employment growth,
demand for credit and investment spending by the private sector staying
sluggish.
With regards to the African continent, sub-Saharan Africa`s economic
recovery is well under way, although there is variation in the speed of the
recovery across the region, and overall growth is almost back to pre-credit
crisis levels. Rising food and fuel prices continue to fuel inflation
pressures and present a challenge to macroeconomic management, however
exports have continued to rise. Trade and investment flows from the large
Asian economies of China and India continue to underpin growth in a number
of jurisdictions.
Overview of results
Despite this challenging background, FirstRand built further on its strong
first half performance to produce excellent results for the year ended 30
June 2011, achieving normalised earnings from continuing operations of R10
117 million, an increase of 22% on the previous period, and producing a
normalised return on equity ("ROE") of 18.7% (2010: 17.7%). The ROE has
continued to trend upwards, despite lower gearing resulting from higher
capital levels (this issue is covered in more detail under Strategic issues
below).
Sources of normalised earnings
R million 2011 % compo- 2010 % compo- % change
sition sition
Total FNB 5 562 51 4 731 47 18
FNB South Africa 5 022 46 4 276 43 17
FNB Africa 540 5 455 4 19
RMB 3 610 33 3 316 33 9
WesBank 1 862 17 953 10 95
Corporate Centre and (714) (5) (335) (3) (>100)
consolidation
adjustments
FirstRand Limited 98 1 (38) - >100
(company)
NCNR preference (301) (3) (344) (4) (13)
dividend
Normalised earnings 10 117 94 8 283 83 22
from continuing
operations
Momentum 508 5 1 394 14 (64)
OUTsurance 180 1 286 3 (37)
Normalised earnings 10 805 100 9 963 100 8
from continuing and
discontinued
operations
With regards to the Group`s overall income statement, its operating
franchises, FNB, RMB and WesBank, continued to show very strong operational
performances. Earnings also continued to be positively impacted by the
significant decrease in retail bad debts (impairment charge down 34% on the
previous period) particularly in the large books of FNB and WesBank,
although the absolute rate of reduction flattened in the second six months
of the year and has now reached a normalised level. The National Credit
Act`s debt review process and the resultant lengthened recovery periods
mean that absolute levels of non-performing loans ("NPLs") remain high with
a significant proportion in NPLs for longer than six months. Major
components of the bad debt charge and NPLs are shown in the table below.
Year ended 30 June
2011 2010
Impairment charge % %
Residential mortgages 0.79 0.95
Credit card 1.39 6.92
Vehicle and asset finance 1.11 1.80
Other retail 6.12 10.00
Corporate/Wholesale 0.66 0.93
FNB Africa 0.30 0.37
FirstRand impairment charge ratio* 0.93 1.39
NPLs (R million) 19 790 22 205
* Total includes Corporate Centre and other.
Overall non-interest revenue ("NIR") grew 7% as a result of ongoing
customer acquisition and robust transactional volumes at FNB, particularly
in electronic channels. WesBank generated strong fee and commission growth
and RMB`s knowledge-based fee income benefited from good deal flow
throughout the year.
Fair value income was robust, underpinned by a strong performance from
client activities, benefiting from refinancing opportunities and a strong
investment banking deal pipeline during the year.
Investment income also contributed strongly, driven by the private equity
and resources portfolios of RMB, and profits from the disposal of VISA Inc
shares.
Asset margins benefited from new business repricing across the large
lending books, although given the significant size of the in-force advances
(particularly in residential mortgages) compared to current levels of new
business, the benefits will take time to materialise. Margins also
continued to be impacted by the negative endowment effect on capital and
deposits as average interest rates for the financial year were 114 bps
lower than the previous period.
Overall group operating expenses reflect good ongoing cost control with
costs increasing only 9%.
The Group`s balance sheet showed reasonable overall growth in advances of
7% reflecting strong new business origination.
The following portfolios showed particularly good new business volumes:
- unsecured lending in FNB`s Mass and Consumer segments - R6
billion;
- RMB`s structured lending book - R29 billion;
- WesBank - R57 billion; and
- residential mortgages - R21 billion.
Overview of operating franchises
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 is achieved through two parallel growth strategies:
- Become a predominant South African player focusing on both existing
segments and those segments where the business is currently under-
represented.
- Further grow the existing African franchise, 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.
These strategies are executed through the operating franchises within a
strategic framework set by the Group. During the year these franchises
continued to make good progress against the strategic intent and below is a
brief overview of each.
FNB
FNB`s strategy, aligned with the overall FirstRand strategy, is to grow its
domestic franchise in market segments where it is currently under-
represented and target selective African countries for investment. It
enters these markets focusing on innovative products and delivery channels,
especially favouring electronic platforms.
FNB South Africa Year ended 30 June
R million 2011 2010 % change
Normalised earnings 5 022 4 276 17
Profit before tax 6 944 5 806 20
Total assets 223 174 204 309 9
Total liabilities 215 901 199 115 8
Bad debt ratio 1.20 1.70
ROE (%) 35.7 31.8
FNB South Africa produced a strong performance for the year, growing pre-
tax profits 20%. This was underpinned by a 29% decline in bad debts
emanating largely from HomeLoans and Card, and a 10% increase in NIR.
The NIR performance reflects 3% growth in customers and increased
transactional volumes (14%). Migration by customers to less expensive
electronic channels continued, reflecting FNB`s strategy to encourage
customers (particularly through pricing and convenience) to use these
cheaper channels.
Despite interest rates being at 36 year lows, advances growth was muted due
to continued deleveraging by over-indebted consumers. The low levels of
advances growth in HomeLoans (reduction of 2%) and Card (flat) indicated
that the credit market is still experiencing a slow recovery specifically
in the consumer segment or middle market.
FNB`s overall operating expenses grew 10%, due primarily to investment
costs, however core costs were contained at 7.7% which includes a staff
salary increase in excess of 8% and increased variable costs relating to
growth in volumes.
FNB has identified growth opportunities in certain of its segments and
executed on a number of these and other operational initiatives during the
period under review.
Despite good growth in the Mass segment, which is now servicing over four
million customers, FNB still remains relatively underweight in lending
activities to these customers. To address this gap, FNB has continued to
roll out its EasyPlan strategy which represents an appropriate low cost
banking offering to this segment. In the current year, FNB opened 102
EasyPlan representation points. These representation points are well
positioned in activity hubs, are open longer than the traditional branches,
are supported by low cost channels and have Automatic Deposit Terminals
("ADTs") to satisfy customer cash transactional needs.
FNB Africa Year ended 30 June
R million 2011 2010 % change
Normalised earnings 540 455 19
Profit before tax 1 350 1 146 18
Total assets 35 439 33 279 6
Total liabilities 31 493 29 313 7
Bad debt ratio 0.30 0.37
ROE (%) 21.4 20.0
Overall the African subsidiaries performed well growing profits before tax
18% and delivering an ROE of 21.4%. This performance was achieved despite
significant investment activity across the portfolio resulting in increased
operating expenses. As part of its strategy to further grow the existing
franchise and operating footprint, FNB invested significantly in Zambia and
Mozambique in the period under review as well as in starting operations in
Tanzania. 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 volumes and resultant NIR. Alongside other
group franchises, FNB continues to assess opportunities in identified
priority countries such as Nigeria and Ghana.
RMB
In line with Group objectives, RMB`s ongoing strategic imperatives remain
anchored around strengthening the client franchise both locally and on the
African continent with trading and investing activities being scaled
appropriately. RMB`s risk appetite framework remains central to ensuring
that its portfolio continues to reflect the appropriate mix of client,
trading and investing activities in order to preserve and enhance the
quality of earnings.
RMB Year ended 30 June
R million 2011 2010 % change
Normalised earnings 3 610 3 316 9
Profit before tax 4 959 4 728 5
Total assets 264 499 269 133 (2)
Total liabilities 258 821 263 366 (2)
ROE (%)* 28.7 24.9
* Includes Africa.
RMB reported pre-tax profits of R4 959 million, 5% higher than in the
comparative year. This is a pleasing result given an environment of limited
corporate recovery and continued weakness in market and investment flows.
It was also achieved against the high base of the prior year due to the
Life Healthcare realisation and despite conservative valuations on lending
and private equity portfolios and prudent provisioning.
Investment Banking again delivered a strong performance off a relatively
high base, with good contributions from advisory, financing, structuring
and principal investing activities. Reflecting RMB`s strategy to increase
its exposure to investment grade corporate credit the structured lending
book showed continued steady growth and whilst impairments increased
slightly over the period, credit quality remains robust. The advisory
business performed well with structuring activities in the property sector
delivering excellent results.
Overall client flows generally remained weak placing Fixed Income, Currency
and Commodity ("FICC") revenues under pressure. Trading volumes showed a
mixed picture for the year with the second six months struggling to keep
pace with the momentum set in the early part of the year. Revenues
generated by the FICC teams deployed into the African subsidiaries were up
marginally on the comparative period.
Private Equity produced a good result with Corvest realising a gain of R461
million (post tax and minorities) from the sale of Davita Trading. Revenues
from portfolio investments grew strongly, particularly in Ventures and
Corvest, reflecting the resilience of the underlying counters.
Equities` performance was mixed, with modest growth in most client
execution businesses, largely on the back of improving equity volumes.
RMB made good progress in growing its African franchise with a focus on
building investment banking and trading activities in jurisdictions where
FNB currently operates as well as capturing trade and investment flows into
Africa from key Asian markets such as India and China. A number of
transactions in key sectors such as resources, commodities, energy and
property were concluded in Africa. Representative offices in Angola and
Kenya have been commissioned and the Nigerian representative office
continues to function as a valuable hub for activities in West African
markets.
The integration of RMB`s investment banking and FNB`s corporate banking
teams, and the creation of the Corporate Investment Banking ("CIB")
Coverage unit is in line with expectations.
WesBank
WesBank continues to focus on its core strategy of partnering with key
industry players through representation at the point of sale. In line with
FirstRand`s strategy, it is also targeting domestic segments, such as fleet
management and full maintenance rentals as well as larger corporate asset
finance customers and the public sector.
WesBank Year ended 30 June
R million 2011 2010 % change
Normalised earnings 1 862 953 95
Profit before tax 2 548 1 300 96
Total assets 104 117 97 357 7
Total liabilities 101 171 95 452 6
Bad debt ratio 1.33 2.21
ROE (%) 26.3 15.4
WesBank produced an excellent performance for the year increasing profits
before tax 96% over the prior year to R2.55 billion. This performance was
driven by the ongoing retail and corporate credit unwind, strong new
business origination, improved interest margins across all portfolios and
good cost management.
Bad debts in the local lending business decreased 38% from R1.95 billion to
R1.21 billion (from 2.2% to 1.3% of advances). Retail and corporate bad
debts showed continued strong downward trends.
New business increased 28% over the comparative period. The year-on-year
growth comprised a 32% increase in retail new business and a 16% increase
in corporate new business. Interest margins showed an improving trend as a
result of the focus on written rates as well as the improvement in mix with
a higher component of fixed rate business written.
Total NIR (including income from associates) decreased 14% reflecting the
loss of revenues following the disposal of WorldMark Australia, WorldMark
South Africa and Norman Bissett, which were included in the prior period`s
results. However, NIR in the local lending operation increased 36%.
Overall expenses decreased 8%, partly as a result of the disposal of the
non-lending subsidiaries. Expenses in the local lending operation increased
14% (this increase was 3% excluding the increased profit share payments to
alliance partners).
Growth initiatives in the larger corporate sector are gaining good
traction. Although the opportunities in full maintenance leasing and in the
public sector remain meaningful, the lead times to significant revenue
inflows are proving longer than anticipated and are only likely to realise
over the medium term.
WesBank is leveraging the FNB platform and presence in certain African
jurisdictions, both established and developing, and has deployed resources
where asset finance opportunities have been identified.
Strategic issues
Progress on African expansion strategy
The case for investing in Africa is persuasive, economies are strong,
political risks have improved, and the business climates continue to
improve. However, FirstRand fundamentally believes that building a
profitable African business does not require a presence in every African
country.
Africa is not a "single" continent. Sub-Saharan Africa itself comprises 46
countries (including South Sudan) with vastly different population sizes,
income levels, growth rates and operating conditions. For FirstRand, when
identifying priority countries for expansion outside of South Africa,
domestic market size and market growth are early key considerations.
According to recent research by RMB the top key countries in sub-Saharan
Africa, based on these considerations, are Nigeria, Ghana, Tanzania,
Botswana, Kenya, Uganda, Angola and Zambia.
The Group believes that these priority countries offer different commercial
opportunities and given that strategy is executed by the operating
franchises, FNB, RMB and WesBank pursue appropriate entry strategies,
albeit within the Group`s overall risk appetite and framework.
RMB is exploring opportunities in Angola through a representative office
that was established during the year. FNB continues to make significant
progress building out its infrastructure in Zambia and established a full
service banking operation in Tanzania towards the end of the financial
year. FNB is also assessing opportunities in Nigeria and Ghana.
RMB also opened a representative office in Kenya which is particularly well
placed to benefit from investment and trade flows with India. RMB`s Indian
operation is key to unlocking growth opportunities.
FirstRand has a very compelling strategy to grow its franchises on the
African continent, matched with a highly disciplined approach to protecting
shareholder returns. The Group has undertaken to protect its ROE as it
builds a presence outside of its core South African operations, it prefers
"greenfields" operations or small rather than significant acquisitions and
whilst this can mean expansion takes longer, potential dilution of returns
can be contained. "Bolt-on" acquisitions to existing "greenfields"
operations are also preferable, as these can bring additional scale more
rapidly.
Capital
FirstRand`s capital management strategy is aligned to the Group`s overall
objective to deliver sustainable returns to shareholders within appropriate
levels of volatility.
The Group`s current philosophy, given the uncertain regulatory environment,
is to operate at the higher end of its targeted capital levels. The
targeted levels have been increased in anticipation of Basel III and are
summarised in the table below:
FirstRand FirstRand Bank ("FRB")* Regu-
latory
minimum
% Actual Target Actual# Target
Capital 16.5 12.0 - 13.5 14.2 11.5 - 13.0 9.5#
adequacy
ratio
Tier 1 ratio 15.0 11.0 12.4 10.5 7.0
Core Tier 1 13.8 9.5 - 11.0 11.4 9.0 - 10.5 5.25
ratio
* Reflects solo supervision, i.e. FirstRand Bank excluding
branches, subsidiaries and associates.
# The regulatory minimum excludes the bank specific (Pillar 2b)
add on and capital floor.
These targets are balanced against the requirements of shareholders through
an efficient capital structure with limited excesses, but which supports
the business strategy, maintains an appropriate credit rating and fulfils
regulatory requirements. The Group does not seek to hold surplus capital
for acquisitions and the need for raising additional capital is assessed on
a transaction by transaction basis. However, it does currently hold buffers
for its growth strategies in selected African countries.
As indicated to shareholders in the Group`s interim results announcement,
it has now been through a process of assessing current ratios against
anticipated deployment, the implementation of Basel III regulatory changes
and the Group`s ability to generate future capital through earnings and is
of the view that it is currently operating above the appropriate target
levels. This is as a direct result of the following:
- the recent disposal of certain non-core assets, including the Group`s
stakes in VISA Inc and OUTsurance, has resulted in an excess that is not
required for the current expansion strategy and regulatory changes; and
- the Group`s operating franchises are generating good returns at a
time when there is limited opportunity to grow risk weighted
assets due to the current economic climate.
The Group believes that there are two appropriate mechanisms available for
dealing with the current excess and any anticipated build up of excess
capital going forward.
The Group has declared a special dividend of 70 cents per share due to the
disposal of the non-core assets. It is FirstRand`s view that as
shareholders were invested in these assets through FirstRand, the
opportunistic transactions led to the unlocking of shareholder value and
this realised value should be returned to shareholders.
The Group targets a sustainable pay-out ratio, which is a function of
returns and risk weighted assets growth. The increase in this year`s
dividend, over and above earnings growth, is a reflection of the Group`s
view that given the current macoeconomic outlook and growth strategy, a
higher sustainable pay-out ratio over the medium term is possible.
Liquidity Management and Funding Strategy
The Group funds its activities in a sustainable, efficient and flexible
manner underpinned by a very strong deposit franchise. This is actively
managed against certain structural characteristics of the South African
market such as a low discretionary savings rate and a higher degree of
contractual savings that are captured by institutions such as pension
funds, provident funds and providers of asset management services. A
portion of these contractual savings translate into institutional funding
for banks which has a higher liquidity risk than retail deposits.
The Basel III guidelines, published in December 2010, propose two new
liquidity metrics: The Liquidity Coverage Ratio ("LCR"), effective 1
January 2015, which measures short-term liquidity stress and the Net Stable
Funding Ratio ("NSFR"), effective 1 January 2018, which measures the
stability of long-term structural funding.
The Basel Committee of Banking Supervision ("BCBS") has put processes in
place to ensure the rigorous and consistent global implementation of the
Basel III Framework. The standards will be phased in gradually so that the
banking sector can move to the higher liquidity standards while supporting
lending to the economy. Both the LCR and the NSFR will be subject to an
observation period and will include a review clause to address any
unintended consequences.
When applying the above metrics to the Group`s balance sheet at 31
December 2010, FirstRand and most South African banks do not meet the
minimum quantitative requirements. This is due to the specific structural
characteristic described above .
These structural issues have been recognised by the South African
Regulators, banking industry and National Treasury. In response, and under
the guidance of National Treasury, a Structural Funding and Liquidity task
team has been established and mandated to assess the impact and
subsequently make recommendations to the Finance Ministry on how the
banking industry will effectively deal with the proposed regulations.
Prospects
Prospects for the global economy continue to deteriorate and fears of
another global recession have resurfaced. A growth collapse in highly
indebted European nations, would severely hamper their ability to service
their sovereign debt, and poses a risk of contagion. While the South
African economy has held up well, the Group expects the economic conditions
to remain subdued in the current financial year and for the level of
uncertainty to remain high.
Although inflation is expected to remain at the higher end of Government
targets, interest rates are likely to remain flat, with an increased
likelihood of cuts. Therefore the previously anticipated endowment margin
uplift is not expected to materialise. In addition bad debts are not
expected to provide any further significant benefit.
Growth in retail advances will remain low and, given the current muted
levels of business volumes and corporate activity, corporate advances will
also continue to be subdued, with the exception of WesBank which
anticipates a healthy lending landscape in both corporate and retail
portfolios.
Despite the slowdown in economic activity, NIR should remain healthy,
particularly given FNB`s focus on innovation and customer service delivery
and the strength of RMB`s investing, trading and advisory franchises.
GDP growth in sub-Saharan Africa is expected to be maintained in 2011 and
2012, although the region will not be insulated from a slowdown in global
activity or commodity prices. All of the Group`s franchises will continue
to capitalise on growth opportunities in those countries identified as
priorities for expansion. FNB will continue to grow its operating footprint
supported by its South African platform. RMB will mine the trade and
investment flows between Asia and Africa, leveraging off the existing FNB
African platforms and its own platform in India.
Investment in these growth opportunities will continue in the current year,
however, given the revenue pressures resulting from the low growth macro
environment, the Group continues to drive cost efficiencies.
The quality of the Group`s operating franchises and their respective
strategies domestically and in the rest of Africa should underpin
FirstRand`s ability to provide shareholders with sustainable superior
returns over the long term.
The prospects have not been audited or reported on by the Group`s external
auditors.
Board changes
Mr AP Nkuna resigned as non-executive director effective 31 July 2011. A
representative of the Mineworkers Investment Company will replace Mr Nkuna
once the necessary approval processes have been completed.
Dividend strategy
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 dividend cover may vary from
year to year.
Basis of presentation
The directors are responsible for the preparation of the consolidated
financial statements in accordance with:
- the framework concepts and the measurement and recognition requirements
of IFRS including IAS 34 Interim Financial Reporting
- the AC 500 standards issued by the Accounting Practices Board;
JSE Listing requirements; and
- the information as required by the Companies Act of South Africa.
The accounting policies applied are consistent with those applied in
preparation of previous financial statements.
The IFRS annual financial statements have been audited by PwC Inc and
Deloitte & Touche from which this announcement has been derived, and they
have expressed an unmodified opinion, which 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.
Cash dividend declarations
Ordinary shares
The following ordinary cash dividend was declared in respect of the year
ended 30 June 2011:
Year ended 30 June
Cents per share 2011 2010
Interim (declared 7 March 2011) 35.00 34.00
Final (declared 12 September 2011*) 46.00 43.00
81.00 77.00
* The last day to trade in FirstRand shares on a cum-dividend
basis in respect of the final dividend will be Friday 7 October
2011, the first day to trade ex-dividend will be Monday 10 October
2011. The record date will be Friday 14 October 2011 and the
payment date Monday 17 October 2011. No dematerialisation or
rematerialisation of shares may be done during the period Monday
10 October 2011 to Friday 14 October 2011, both days inclusive.
Ordinary shares: special dividend
Year ended 30 June
Cents per share 2011 2010
Special (declared 12 September 2011*) 70.00 -
70.00 -
* The last day to trade in FirstRand shares on a cum-dividend
basis in respect of the special dividend will be Friday 7 October
2011, the first day to trade ex-dividend will be Monday 10 October
2011. The record date will be Friday 14 October 2011 and the
payment date Monday 17 October 2011. No dematerialisation or
rematerialisation of shares may be done during the period Monday
10 October 2011 to Friday 14 October 2011, both days inclusive.
Preference shares
Dividends on the "B" preference shares are calculated at a rate of 68% of
the prime lending rate of banks.
The following dividends have been declared and paid:
Year ended 30 June
Cents per share 2011 2010
Period 1 September 2009 - 22 February 342.3
2010
Period 23 February 2010 - 30 August 2010 355.0
Period 31 August 2010 - 28 February 2011 313.6
Period 1 March 2011 - 29 August 2011 305.2
618.8 697.3
BW Unser
Company secretary
12 September 2011
Consolidated statement of comprehensive income - IFRS
for the year ended 30 June
R million 2011 2010
Profit for the year 21 527 10 674
Other comprehensive income
Cash flow hedges 21 (226)
Available-for-sale financial assets (41) (69)
Exchange differences on translating (266) (74)
foreign operations
Share of other comprehensive income of 35 39
associates after tax and non-controlling
interests
Other comprehensive income for the year (251) (330)
before tax
Income tax relating to components of other (44) (17)
comprehensive income
Other comprehensive income for the year (295) (347)
Total comprehensive income for the year 21 232 10 327
Total comprehensive income attributable
to:
Ordinary equity holders 19 837 9 097
NCNR preference shares 301 344
Equity holders of the Group 20 138 9 441
Non-controlling interests 1 094 886
Total comprehensive income for the year 21 232 10 327
Consolidated statement of changes in equity - IFRS
for the year 30 June
Ordinary share capital and ordinary equity holder`s funds
R million Share Share Share General
capital premium capital risk
and reserve
share
premium
Balance as at 1 July 2009 52 1 300 1 352 9
Issue of share capital - - - -
Movement in other reserves - - - -
Ordinary dividends - - - -
Preference dividends - - - -
Transfer to/(from) reserves - - - 3
Changes in ownership interest - - - -
in subsidiaries
Consolidation of treasury - 191 191 -
shares
Total comprehensive income for - - - -
the period
Balance as at 30 June 2010 52 1 491 1 543 12
Issue of share capital - - - -
Movement in other reserves - - - -
Ordinary dividends - - - -
Preference dividends - - - -
Transfer to/(from) reserves - - - 1
Changes in ownership interest - - - -
in subsidiaries
Consolidation of treasury 1 3 454 3 455 -
shares
Total comprehensive income for - - - -
the period
Momentum unbundling - - - -
Balance as at 30 June 2011 53 4 945 4 998 13
R million Cash Share- Avail- Currency
flow based able- Trans-
hedge payment for-sale lation
reserve reserve reserve reserve
Balance as at 1 July 2009 (292) 2 306 1 107 750
Issue of share capital - - - -
Movement in other reserves - 181 - -
Ordinary dividends - - - -
Preference dividends - - - -
Transfer to/(from) reserves - - - -
Changes in ownership interest 2 - - -
in subsidiaries
Consolidation of treasury - - - -
shares
Total comprehensive income for (176) - (138) (52)
the period
Balance as at 30 June 2010 (466) 2 487 969 698
Issue of share capital - - - -
Movement in other reserves - 341 - -
Ordinary dividends - - - -
Preference dividends - - - -
Transfer to/(from) reserves - - - -
Changes in ownership interest - - - -
in subsidiaries
Consolidation of treasury - - - -
shares
Total comprehensive income for 15 - (80) (206)
the period
Momentum unbundling - (89) (664) (18)
Balance as at 30 June 2011 (451) 2 739 225 474
R million Other Retained Reserves Non-
reserves earnings Attri- Cumu-
butable lative
to non-
ordinary
equity redeemabl
holders e
preferenc
e
shares
Balance as at 1 July 2009 (198) 40 451 44 133 4 519
Issue of share capital - - - -
Movement in other reserves (440) 150 (109) -
Ordinary dividends - (2 955) (2 955) -
Preference dividends - - - (344)
Transfer to/(from) reserves - (3) - -
Changes in ownership interest 2 (27) (23) -
in subsidiaries
Consolidation of treasury - (254) (254) -
shares
Total comprehensive income for 19 9 444 9 097 344
the period
Balance as at 30 June 2010 (617) 46 806 49 889 4 519
Issue of share capital - - - -
Movement in other reserves (8) 48 381 -
Ordinary dividends - (4 179) (4 179) -
Preference dividends - - - (301)
Transfer to/(from) reserves - (1) - -
Changes in ownership interest 12 (34) (22) -
in subsidiaries
Consolidation of treasury - 1 074 1 074 -
shares
Total comprehensive income for 43 20 065 19 837 301
the period
Momentum unbundling 583 (15 159) (15 347) -
Balance as at 30 June 2011 13 48 620 51 633 4 519
R million Non- Total
Con- equity
trolling
interest
Balance as at 1 July 2009 2 093 52 097
Issue of share capital 7 7
Movement in other reserves (62) (171)
Ordinary dividends (420) (3 375)
Preference dividends - (344)
Transfer to/(from) reserves - -
Changes in ownership interest in subsidiaries 508 485
Consolidation of treasury shares - (63)
Total comprehensive income for the period 886 10 327
Balance as at 30 June 2010 3 012 58 963
Issue of share capital 7 7
Movement in other reserves (342) 39
Ordinary dividends (583) (4 762)
Preference dividends - (301)
Transfer to/(from) reserves - -
Changes in ownership interest in subsidiaries 46 24
Consolidation of treasury shares - 4 529
Total comprehensive income for the period 1 094 21 232
Momentum unbundling (165) (15 512)
Balance as at 30 June 2011 3 069 64 219
Consolidated income statement - IFRS
for the year ended 30 June
R million 2011 2010 % change
Continuing operations
Interest and similar income 38 187 38 817 (2)
Interest expense and similar charges (20 818) (22 467) (7)
Net interest income before impairment of 17 369 16 350 6
advances
Impairment of advances (3 778) (5 686) (34)
Net interest income after impairment of 13 591 10 664 27
advances
Non-interest income 31 882 26 954 18
Income from operations 45 473 37 618 21
Operating expenses (26 901) (24 865) 8
Net income from operations 18 572 12 753 46
Share of profit from associates and 868 700 24
joint ventures
Income before tax 19 440 13 453 45
Indirect tax (614) (446) 38
Profit before direct tax 18 826 13 007 45
Direct tax (4 582) (3 527) 30
Profit from continuing operations 14 244 9 480 50
Discontinued operations
-?Profit attributable to discontinued 415 1 194 (65)
operations
-?Profit after tax on unbundling of 6 868 - >100
discontinued operations
Profit for the year 21 527 10 674 >100
Attributable to:
NCNR preference shareholders 301 344 (13)
Ordinary equity holders 20 065 9 444 >100
Equity holders of the Group 20 366 9 788 >100
Non-controlling interests 1 161 886 31
Profit for the year 21 527 10 674 >100
Earnings per share (cents)
-?Basic 372.7 179.9 >100
-?Diluted 365.3 178.1 >100
Headline earnings per share cents
-?Basic 183.1 180.1 2
-?Diluted 179.4 178.3 <1
Earnings per share (cents) - IFRS
continuing
-?Basic 236.6 156.1 52
-?Diluted 231.9 154.5 50
Headline earnings per share cents - IFRS
continuing
-?Basic 174.7 152.8 14
-?Diluted 171.3 151.3 13
Earnings per share (cents) -
discontinued
-?Basic 136.1 23.8 >100
-?Diluted 133.4 23.6 >100
Headline earnings per share cents -
discontinued
-?Basic 8.4 27.3 (69)
-?Diluted 8.1 27.0 (70)
Consolidated statement of cash flows - IFRS
for the year ended 30 June
R million 2011 2010
Net cash flows from operating activities 16 923 15 795
continuing operations
Net cash flows from operating funds (803) (3 000)
Tax paid (3 965) (3 143)
Net cash inflow from operating activities 12 155 9 652
continuing operations
Net cash outflow from operating activities from - (9 709)
discontinued operations
Net cash inflow from investing activities from 1 777 162
continuing operations
Net cash inflow from investing activities from - 33
discontinued operations
Net cash (outflow)/inflow from financing (6 725) 1 085
activities from continuing operations
Net cash inflow from financing activities from - 2 117
discontinued operations
Net increase in cash and cash equivalents from 7 207 3 340
continuing and discontinued operations
Cash and cash equivalents at the beginning of the 27 067 57 266
year
Cash and cash equivalents at the end of the year 34 274 60 606
Cash and cash equivalents acquired* 200 -
Cash and cash equivalents disposed of* (83) (36)
Effect of exchange rate changes on cash and cash (151) (95)
equivalents
Transfer to non-current assets held for sale - (33 408)
Cash and cash equivalents at the end of the year 34 240 27 067
* 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 12 173 11 370
Consolidated statement of financial position - IFRS
as at 30 June
R million 2011 2010
ASSETS
Cash and short-term funds 34 240 27 067
Derivative financial instruments 37 206 39 764
Advances 464 593 434 793
Investment securities and other investments 124 756 117 171
Commodities 4 388 2 365
Accounts receivable 7 289 5 743
Investments in associates and joint ventures 6 029 6 901
Property and equipment 10 542 10 018
Deferred tax asset 560 443
Post-retirement benefit asset 2 -
Intangible assets and deferred acquisition costs 1 691 2 104
Investment properties 203 138
Policy loans on insurance contracts - 27
Reinsurance assets 484 524
Tax asset 139 935
Non-current assets held for sale 5 805 197 247
Total assets 697 927 845 240
EQUITY AND LIABILITIES
Liabilities
Deposits 553 657 512 469
Short trading positions 12 413 16 735
Derivative financial instruments 36 361 36 035
Creditors and accruals 9 930 12 115
Provisions 3 621 3 359
Tax liability 288 157
Post-retirement liabilities 2 292 2 162
Deferred tax liability 2 223 2 132
Long-term liabilities 6 690 9 183
Policyholder liabilities under insurance contracts 1 047 1 868
Policyholder liabilities under investment 94 101
contracts
Liabilities directly associated with non-current 5 092 189 961
assets classified
as held for sale
Total liabilities 633 708 786 277
Equity
Ordinary shares 53 52
Share premium 4 945 1 491
Reserves 51 633 49 889
Capital and reserves attributable to ordinary 56 631 51 432
equity holders
NCNR preference shares 4 519 4 519
Capital and reserves attributable to equity 61 150 55 951
holders of the Group
Non-controlling interests 3 069 3 012
Total equity 64 219 58 963
Total equity and liabilities 697 927 845 240
Statement of headline earnings from continuing and discontinued operations
- IFRS
for the year ended 30 June
R million 2011 2010 % change
Continuing operations
Profit from continuing operations 14 244 9 480 50
Non-controlling interest (1 164) (887) 31
NCNR preference shares (301) (344) (13)
Attributable earnings to ordinary equity 12 779 8 249 55
holders*
Adjusted for: (3 341) (174) >100
(Gains)/loss on disposal of investment (12) -
securities and other investments
Gain on disposal/impairment of available- (341) (177)
for-sale assets
Gain on disposal of associates or joint (2 792) -
ventures
Gain on the disposal of subsidiaries (571) (115)
(Gain)/loss on the disposal of property (9) 2
and equipment
Impairment of goodwill 96 82
Impairment of assets in terms of IAS 36 37 175
Gain from a bargain purchase (9) (203)
Other - 4
Tax effects of adjustments 16 55
Non-controlling interest adjustments 244 3
Headline earnings from continuing 9 438 8 075 17
operations
Discontinued operations
Profit from discontinued operations 7 283 1 194 >100
Non-controlling interest 3 1 >100
Attributable earnings to ordinary 7 286 1 195 >100
shareholders
Adjusted for: (6 868) 183 (>100)
Profit on dividend in specie (6 868) -
Loss due to the fair value adjustment of 100
a non current asset held for sale
Impairment of goodwill - 71
Impairment of intangible assets - 12
Headline earnings from discontinued 418 1 378 (70)
operations
Headline earnings from continuing and 9 856 9 453 4
discontinued operations
Reconciliation from headline earnings to normalised earnings for continuing
and discontinued
R million 2011 2010 % change
Headline earnings from continuing 9 438 8 075 17
operations
Adjusted for: 859 494 74
IFRS 2 Share-based payment expense (20) 235
Treasury shares 418 259
-?Consolidation of share trust 210 313
-?FirstRand shares held by policyholders 208 (54)
Private equity subsidiary realisations 461 -
Normalised earnings from continuing 10 297 8 569 20
operations
Headline earnings from discontinued 418 1 378 (70)
operations
Adjusted for: 90 16 >100
-?IFRS 2 Share-based payment expense - 6
-?FirstRand shares held by policyholders 90 10
Normalised earnings from continuing and 10 805 9 963 8
discontinued operations
Reconciliation of IFRS continuing operations to normalised continuing
operations
R million 2011 2010 %
change
Attributable earnings to ordinary equity 12 779 8 249 55
holders (see above*)
OUTsurance equity-accounted income for (180) (286) (37)
the year ended 30 June
Profit on sale of OUTsurance (2 710) - (100)
Attributable earnings from continuing 9 889 7 963 24
normalised operations
Headline earnings 9 438 8 075 17
OUTsurance equity-accounted income for (180) (286) (37)
the year ended 30 June
Headline earnings from continuing 9 258 7 789 19
normalised operations
Normalised earnings 10 297 8 569 20
OUTsurance equity-accounted income for (180) (286) (37)
the year ended 30 June
Normalised earnings from continuing 10 117 8 283 22
normalised operations
Directors: LL Dippenaar (Chairman), SE Nxasana (Chief executive officer),
VW Bartlett, JJH Bester, JP Burger (Financial director and chief operating
officer), L Crouse, PM Goss, Dr NN Gwagwa, PK Harris, WR Jardine, EG
Matenge-Sebesho, 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 8088 Sponsor: Rand
Merchant Bank (a division of FirstRand Bank Limited)
Additional information is available at www.firstrand.co.za
FNB
Rand Merchant Bank
WesBank
Date: 13/09/2011 08:00:02 Produced by the JSE SENS Department.
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