| Tue 28 Feb 2012, 8:00 | | FSR/FSRP - FirstRand - Unaudited Interim Results and Cash Dividend |
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FSR/FSRP - FirstRand - Unaudited Interim Results and Cash Dividend
Declaration for the six months ended 31 December 2011
FirstRand Limited
(Incorporated in the Republic of South Africa)
(Registration No: 1966/010753/06)
JSE share code: FSR ISIN: ZAE0000066304
JSE "B" Preference share code: FSRP ISIN: ZAE000060141
NSX share code: FST
("FirstRand" or "the Group")
Certain entities within the FirstRand Group are Authorised Financial
Services and Credit Providers
UNAUDITED INTERIM RESULTS AND CASH DIVIDEND DECLARATION FOR THE SIX MONTHS
ENDED 31 DECEMBER 2011
KEY FINANCIALS
- Normalised earnings R5 771 million + 26%
- Normalised ROE 19.5%
- Dividend per share 44.0 cents + 26%
Introduction
This announcement covers the unaudited financial results of FirstRand
Limited (FirstRand or the Group) based on International Financial Reporting
Standards (IFRS) for the six months ended 31 December 2011, as well as the
normalised results of the Group, 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, and WesBank, the instalment finance business.
The primary results and accompanying commentary are presented on a
continuing normalised basis as the Group believes this most accurately
reflects its economic performance. The continuing normalised operations
specifically exclude the profit on unbundling of Momentum, the earnings
contribution of Momentum, the profit on disposal of OUTsurance, as well as
the earnings contribution of OUTsurance for the comparative periods. 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.
Financial highlights
Six months ended Year
31 December ended
30 June
2011 2010 % change 2011
Normalised earnings 5 771 4 572 +26 10 117
(R million)
Diluted normalised 102.4 81.1 +26 179.4
earnings per share
(cents)
Normalised net asset 1 053.0 924.4 +14 1 044.0
value per share
(cents)
Dividend per ordinary 44.0 35.0 +26 81.0
share (cents) from
continuing operations
Normalised return on 19.5 18.0 18.7
equity %
Introduction
The fragile global economic recovery that began in 2009 has been impacted
by a number of headwinds and risks in the six months to December 2011. The
global business cycle was negatively affected by a few unprecedented
events, such as the downgrade of the USA`s credit rating and the crisis in
the Eurozone. Business and consumer sentiment and risk appetite were
further depressed by increased concern that China would experience a
significant slowdown in growth.
The global economy continued to register positive, if slower, growth rates
over the period, however, the outlook remains uncertain. Developed markets
continue to experience muted growth and have limited policy space to
support further expansion. Although lower inflation and the easing of
monetary policy should support growth in emerging economies, some of these
countries continue to face structural risks associated with their growth
models.
Against this backdrop, growth rates in South Africa also moderated. Local
factors further amplified the effect of the global slowdown as significant
industrial action in the third quarter of 2011 depressed manufacturing and
mining output. Households continued to drive the expansion supported by
real income growth, while capital investment and overall corporate activity
remained subdued, albeit with pockets of moderate growth. Credit extension
recorded single digit growth, which was below increases in nominal GDP. The
risks to growth and stable core inflation over the period resulted in the
SARB maintaining a monetary policy stance designed to stimulate economic
activity.
Africa`s economic recovery is continuing and, excluding South Africa, GDP
in sub-Saharan Africa is expected to grow between 5% and 6% for the current
financial year, making it one of the developing regions with the highest
growth prospects.
Overview of results
Despite this challenging background, FirstRand produced excellent results
for the six months to 31 December 2011, achieving normalised earnings of
R5.8 billion, an increase of 26% on the comparative period, and producing a
normalised return on equity (ROE) of 19.5% (2010: 18.0%).
With regards to the Group`s overall performance, the unwind of bad debts
continued to impact positively on the results of the retail franchises of
FNB and WesBank. However, on a rolling six-month basis, the impairment
charge benefit was flat. The increase in earnings was delivered through
very strong operational performances from FNB and WesBank, driven by loan
and customer deposit growth, new customer acquisition, expanding lending
margins and robust transactional volumes.
RMB (including Global Transactional Services (GTS), previously FNB`s
Corporate Transactional Banking activities), experienced a 14% decline in
profit before tax which the Group considers a very creditable performance
given the tough trading environment and the high base created in recent
years.
The table below shows a breakdown of sources of normalised earnings.
Sources of normalised earnings
Six months ended % Year ended
31 December change 30 June
R million 2011 % com- 2010 % com- 2011 % com-
posi- posi- position
tion tion
Total FNB 3 364 58 2 658 58 27 5 327 53
- FNB South Africa 3 072 53 2 342 51 31 4 787 47
- FNB Africa 292 5 316 7 (8) 540 6
RMB and GTS 1 457 25 1 679 37 (13) 3 839 38
WesBank 1 193 21 750 16 59 1 862 18
Corporate Centre and (351) (6) (365) (8) (4) (708) (7)
consolidation
adjustments
FirstRand Limited 245 4 10 - >100 98 1
(company)
NCNR preference (137) (2) (160) (3) (14) (301) (3)
dividend
Normalised earnings 5 771 100 4 572 100 26 10 117 100
from normalised
continuing
operations
The Group`s income statement benefited from an excellent increase of 22% in
net interest income (NII). This was driven by good growth in advances at
FNB, WesBank and RMB. In addition, the Group`s asset margins expanded due
to the change in mix with a larger contribution from vehicle and asset
finance (VAF) and unsecured lending. Margins also continued to be
positively impacted by ongoing re-pricing strategies in the large retail
lending books such as vehicle and asset finance and residential mortgages.
NII growth included the benefit from the non-recurrence of a mark-to-market
loss on funding instruments incurred in the comparative period. Excluding
this impact, NII increased 17% year-on-year.
Total non-interest revenue (NIR) was marginally down on the comparative
period as a result of RMB`s subdued performance. However, fee and
commission income at FNB and WesBank was stronger than expected, increasing
17% on the comparative period and driven by ongoing new customer
acquisition and strong transactional volumes (particularly through the
electronic channels) at FNB and fees generated on higher new business
volumes at WesBank.
As a result of the continued focus on cost containment, total Group
operating expenses increased only 9%, which is in line with targets. Core
operational costs increased only 6%. The cost-to-income ratio improved
marginally to 54.7% (2010: 54.8%).
The Group`s balance sheet continued to show reasonable overall growth in
advances reflecting robust new business volumes. The following portfolios
showed particularly good growth as a result of the Group`s strategy to grow
its lending books in certain targeted segments.
R billion New
business
Unsecured lending in FNB`s Mass and Consumer segments 6.1
(excluding Card)
Unsecured lending at WesBank 2.0
VAF at WesBank 24.1
RMB`s structured lending book 23.7
Despite the growth in unsecured lending, this is still coming off a very
low base and total unsecured loans (excluding Card) across all of the
retail portfolios represent a small portion (3%) of total advances.
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
markets and those markets where the business is currently under-
represented; and
- further grow the existing African franchise, targeting those markets
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 Group`s operating franchises,
within a strategic framework set by the Group. During the year these
franchises continued to make good progress against this strategic intent
and below is a brief overview of each.
FNB
FNB`s strategy is to grow its domestic franchise in market segments where
it is currently under-represented and target selective African countries
and India for investment. It enters these markets focusing on innovative
products and delivery channels, especially favouring electronic platforms.
FNB Six months ended % Year
South Africa 31 December change ended
30 June
R million 2011 2010* 2011
Normalised earnings 3 072 2 342 31 4 787
Profit before tax 4 137 3 178 30 6 529
Total assets 228 124 209 333 9 220 525
Total liabilities 223 600 205 828 9 213 833
Credit impairment charge (%) 1.01 1.28 1.21
ROE (%) 37.7 34.0 34.9
* Prior year restated to exclude GTS.
FNB South Africa produced a strong performance for the year, growing pre-
tax profits 30% and producing a normalised ROE of 38%.
The strong growth in NIR of 14% reflects FNB`s strategy to grow customers
(+5%) and transactional volumes (+10%), which has been achieved through
FNB`s relentless introduction of innovative products and channels to
market. The growth in transactional volumes also reflects the ongoing
migration by customers to less expensive electronic channels as a direct
result of FNB`s strategy to encourage customers (particularly through
pricing) to use these cheaper channels. NIR also benefited from good market
share gains and growth in revenue from alternative sources, such as prepaid
commissions and insurance.
NII increased robustly as a result of strong deposit balance growth
slightly offset by reduced endowment margins, some advances growth with
particularly good growth in unsecured lending, which resulted in margin
expansion and lower suspended interest on NPLs. Advances growth was muted
in HomeLoans (flat) and Card (6%).
FNB`s costs for the period grew at only 10% despite ongoing investment in
the business, such as the rollout of the EasyPlan infrastructure,
innovative mobile platforms and customer acquisition strategies. There
remains a firm focus on cost reduction in those business units that are
experiencing pressure on revenues, however, investment will continue in
areas of the business where growth opportunities exist.
Impairments continued to improve, which is largely attributable to the
ongoing recovery in HomeLoans, and the decrease in NPLs and arrears and
ongoing post write-off recoveries in Card Issuing.
FNB continued to execute on certain growth strategies and other operational
initiatives during the period under review. For example, the Mass segment
sustained its rollout of EasyPlan, which represents an appropriate low-cost
banking offering to this segment. In both the Mass and Consumer segments,
FNB has focused on unsecured lending products where it is coming off a
historically low base. Innovative products and reward programmes have
driven good growth in customers and transactional volumes in the Consumer
segment.
FNB Africa Six months ended % Year
31 December change ended
30 June
R million 2011 2010 2011
Normalised earnings 292 316 (8) 540
Profit before tax 763 740 3 1 350
Total assets 39 930 33 705 18 35 439
Total liabilities 35 317 29 448 20 31 493
Credit impairment charge (%) 0.30 0.18 0.30
ROE (%)* 21.7 24.6 21.4
* ROE based on statutory view.
Overall, the African subsidiaries performed well despite significant
investment activity across the portfolio. Both NII and NIR showed good
growth, however, operating expenses increased 23%, resulting in an overall
increase in pre-tax profits for the portfolio of 3%. The normalised ROE of
22% remains above the Group`s target despite the investment in new
territories.
RMB
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 and GTS Six months ended % Year
31 December change ended
30 June
R million 2011 2010 2011
Normalised earnings 1 457 1 679 (13) 3 839
Profit before tax 1 980 2 297 (14) 5 367
Total assets 307 708 291 960 5 267 127
Total liabilities 301 512 288 214 5 260 810
ROE (%) 18.1 25.1 28.5
For the first time, RMB`s results include a contribution from GTS. GTS has
now been fully aligned with RMB`s existing activities (though it remains
FNB branded) as part of FirstRand`s strategy to create a full suite of
integrated Corporate and Investment Banking (CIB) products and services for
large corporates.
RMB`s pre-tax profits reduced 15% to R1 782 million for the six months to
December 2011, a very creditable performance given the significant base
created in previous periods and the current tough macro environment for
investment banks. The decline is largely attributable to disappointing
performances in the Resources and Equities businesses, where downward
pressures on key sectors impacted profitability.
Investment Banking continued to grow despite an already high base, and
Fixed Income, Currency and Commodities (FICC) produced a robust performance
showing particularly good growth in structured trading activities. The
Private Equity portfolio generated sustained earnings from the underlying
investments, and profits benefited from lower impairments. New investments
contributed to overall portfolio growth. Equities experienced significant
pressure in trading activities and positions have been reduced during the
period. The RMB Resources portfolios were negatively impacted by the
softening in commodity and resource equity markets resulting in losses.
GTS produced net income of R198 million, 5% higher than the comparative
period and achieved in an environment characterised by margin compression,
which drove financing revenue lower. The contribution from client fee
revenue grew strongly during the period on the back of higher volumes,
although pricing remains extremely competitive in this segment. Investment
in the operating platform continued during the period, placing pressure on
costs.
RMB made good progress at 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. FICC`s Africa business produced
excellent results with good growth achieved across the Africa portfolio and
a particularly strong performance from Botswana.
WesBank
WesBank continues to focus on its core strategy of partnering with key
industry players through representation at the point of sale and is
targeting domestic segments where it remains under-represented, such as
fleet management and full maintenance rentals (FMR), as well as with larger
corporate asset finance customers and the public sector.
WesBank Six months ended % Year
31 December change ended
30 June
R million 2011 2010 2011
Normalised earnings 1 193 750 59 1 862
Profit before tax* 1 688 1 069 58 2 548
Total assets 112 396 99 265 13 104 117
Total liabilities 109 682 97 461 13 101 171
Credit impairment charge (%) 1.07 1.63 1.33
ROE (%) 29.8 21.5 26.3
* Excluding profits on disposal of investments.
WesBank`s pre-tax profits increased 58% over the prior year, and 14% over
the six months ended June 2011, to R1 688 million. This strong performance
resulted from the continuation of the retail and corporate credit unwind;
strong new business origination across all portfolios; improved interest
margins resulting from repricing and growth in the unsecured lending
portfolio (Personal Loans).
Bad debts in the local lending business decreased 27% and NPLs decreased
from 5.1% to 3.7% (June 2011 4.3%).
Advances grew R15.4 billion (16%) as a consequence of the excellent new
business volumes driven by the buoyant vehicle market, improved consumer
affordability, the natural replacement cycle and improved consumer and
business confidence. Origination growth has not been at the expense of
price or change in risk appetite.
NIR increased 19%, benefiting from the higher new business volumes, growing
advance volumes and growth in the FMR income.
Cost management remains an important contributor to WesBank`s results.
Whilst total cost growth for the period was 22%, this is largely related to
increased new business volumes. Core operating costs in the local lending
operations increased only 8% over the prior year.
MotoNovo (previously branded Carlyle Finance), the UK operation,
contributed a 44% increase in profits and the business continues to produce
excellent origination volumes, margins, risk profile and cost management in
a very tough cycle in the UK market. 20% of the growth in profit is a
direct result of the devaluation of the Rand against the Pound.
Specific growth strategies continue to be pursued in the large corporate
sector and in FMR. The large corporate sector reflected year-on-year growth
in new business of 29%, while the FMR business grew number of units under
management 58% off a moderate base.
Strategic issues
Progress on domestic and African expansion strategies
Given the Group`s size in its domestic market significant focus remains on
growing its franchises across all the available profit pools in financial
services within South Africa.
Many of these strategies are gaining traction. For example, FNB`s EasyPlan
strategy in the Mass segment is on track in that it is both protecting and
growing its well-established franchise in that segment. Through positioning
its low-cost network in the appropriate work and transport nodes,
delivering a strong transactional banking platform that includes cellphone
banking, eWallet and ATMs/ADTs, FNB has been successful in retaining
existing customers and capturing new customers from its competition. FNB is
also actively growing its lending books both in the unsecured space and in
affordable housing in the Mass segment. Unsecured advances total R5 billion
and the affordable housing book totals R9.5 billion.
As part of the Group`s overall strategy to grow CIB revenues, following a
change in its business model to service the large corporate segment, closer
alignment of GTS with RMB has now been completed. This structural
adjustment follows the creation of a Client Coverage team, and is already
resulting in growth in share of the corporate market. A strong
transactional banking platform is critical to servicing these customers
particularly across the FICC and GTS service offerings. Investment is
continuing in both systems and skills and the Group believes that
leveraging off the strength of the RMB franchise will create a strong CIB
presence in the short to medium term.
At WesBank, specific growth strategies in the large corporate sector, are
delivering new business growth and long-term prospects remain good. WesBank
believes there are additional incremental growth opportunities in the
medium corporate environment and specific strategies are being put in place
in that sector.
The Group also seeks to generate incremental growth outside of its domestic
market. It executes "on the ground" through its operating franchises, and
enters each market depending on the opportunities presented.
FNB continues to invest in the new territories of Mozambique, Zambia and
Tanzania to ultimately build strong retail and commercial banking
franchises over the medium term. To this end, it seeks to leverage its
South African developed products and solutions into the continent. FNB
continues to assess opportunities in identified priority countries such as
Nigeria and Ghana. FNB is also exploring some niche growth opportunities in
India, leveraging off the existing Group platform.
RMB recently established a Kenyan representative office, created RMB
Namibia and started operations in Tanzania, leveraging off the FNB
platform. The India branch continues to benefit from an increased focus on
the Africa/India corridor and the broader Asian corridor strategy continues
to develop. Deals such as the Gold One transaction, which represents the
largest investment by Chinese investors in the African gold sector, is
testament to RMB`s ability to deliver investment banking solutions to
clients in the China/Africa corridor.
WesBank is focusing on growing asset-based finance operations within the
existing African footprint of the Group, through the global product
services model. Several opportunities for growth exist in these operations,
which are expected to gain traction over the medium term.
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 macro environment, is
to operate at the higher end of its targeted capital levels to ensure
balance sheet resilience. Current targeted levels and ratios are summarised
in the table below.
FirstRand FirstRand Bank Regula-tory
(FRB)* minimum
% Actual Target Actual# Target
Capital adequacy 15.4 12.0 - 13.5 14.7 11.5 - 13.0 9.5#
ratio
Tier 1 ratio 14.0 11.0 13.0 10.5 7.0
Core Tier 1 ratio 12.9 9.5 - 11.0 12.0 9.0 - 10.5 5.25
* Reflects solo supervision, i.e. FirstRand Bank excluding branches
and subsidiaries.
# The regulatory minimum excludes the bank-specific (Pillar 2b) add-
on and capital floor.
The Group does not seek to hold excess capital for acquisitions, however,
it has previously indicated to shareholders that it is holding a "buffer"
for investments in certain growth opportunities already identified in its
domestic market and in certain African jurisdictions.
However, given the current economic conditions in South Africa and the
subdued credit appetite amongst consumers and corporates, the Group`s
operating franchises continue to generate good returns at a time when there
is limited opportunity to grow risk-weighted assets. The Group therefore
continues to review the appropriate level of payout to shareholders on a
sustainable basis.
With regards to the impact of Basel 2.5 and 3, the Group`s level of Core
Tier 1 capital is sufficient as it has held buffers in anticipation of
these changes. These buffers will now be allocated to the operating
franchises as part of the capital allocation and performance management
processes. This will result in some adjustment to the franchise return
profiles, however, the Group return profile should not change.
Each franchise is undertaking detailed assessments of actions that will be
taken to optimise returns given their new allocations.
Prospects
The Group expects the domestic economic conditions to remain subdued for
the remainder of the current financial year.
Growth in retail advances is likely to remain at current levels with
mortgage lending expected to lag nominal GDP growth as levels of consumer
indebtedness remain high, and house prices are expected to reflect negative
real growth in the short term. In mitigation, the stabilisation of the
economy at modest growth rates and an ongoing low interest environment will
result in reasonable growth in unsecured, short-term advances.
Given that excess capacity remains in the corporate sector, with limited
expansionary opportunities, combined with very strong balance sheets across
the segment, corporate lending is also expected to remain slow.
FirstRand expects its domestic franchises to continue to produce good
organic growth driven by specific strategies in those markets and/or
segments that are showing above average growth, where the Group is under-
represented or the ROE is very attractive. However, achieving revenue
growth is likely to remain a challenge and, therefore, achieving a
sustainable ROE and cost-to-income ratio continues to be a balancing act
between investment and cost management.
GDP growth in sub-Saharan Africa is expected to further strengthen in 2012
and all of the Group`s franchises will continue to capitalise on growth
opportunities in those countries identified as priorities for expansion.
FNB will expand the African and Indian operating footprint supported by its
South African platform and RMB will mine the trade and investment flows
between Asia and Africa, leveraging off the existing FNB platforms and its
own operation in India.
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 returns.
Board changes
Mrs Mary Sina Bomela was appointed to the Board as a non-executive director
with effect from 24 September 2011. Mrs Bomela joined the Board as a
shareholder representative of Mineworkers Investment Company, replacing Mr
Paul Nkuna who resigned from the Board on 31 July 2011, following his
decision to retire in 2012.
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
FirstRand prepares its consolidated interim financial results in accordance
with:
- 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.
Alan Hedding, CA (SA), supervised the preparation of the consolidated
interim financial results.
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 six
month period ended 31 December 2011.
Six months ended
31 December
Cents per share 2011 2010
Interim (declared 28 February 2012) 44.00 35.00
* The last day to trade in FirstRand shares on a cum-dividend basis
in respect of the interim dividend will be Thursday, 15 March 2012,
and the first day to trade ex-dividend will be Friday, 16 March
2012. The record date will be Friday, 23 March 2012, and the payment
date Monday, 26 March 2012. No dematerialisation or rematerialisation
of shares may be done during the period Friday, 16 March 2012, to
Friday, 23 March 2012, both days inclusive.
PREFERENCE SHARES
Dividends on the "B" preference shares are calculated at a rate of 68% of
the prime lending rate of FirstRand Bank.
"B"
preference shares
Cents per share 2011 2010
Period
30 August 2011 - 27 February 2012 305.2
31 August 2010 - 28 February 2011 313.6
BW Unser
Company secretary
28 February 2012
Consolidated income statement - IFRS
Six months ended % change Year ended
31 December 30 June
R million 2011 2010 2011
Continuing operations
Interest and similar income 20 278 19 133 6 38 187
Interest expense and similar (9 748) (10 754) (9) (20 818)
charges
Net interest income before 10 530 8 379 26 17 369
impairment of advances
Impairment of advances (1 824) (2 084) (12) (3 778)
Net interest income after 8 706 6 295 38 13 591
impairment of advances
Non-interest income 13 431 13 250 1 29 565
Income from operations 22 137 19 545 13 43 156
Operating expenses (13 371) (12 278) 9 (24 584)
Net income from operations 8 766 7 267 21 18 572
Share of profit from associates 401 506 (21) 868
and joint ventures
Income before tax 9 167 7 773 18 19 440
Indirect tax (385) (385) - (614)
Profit before direct tax 8 782 7 388 19 18 826
Direct tax (2 192) (2 080) 5 (4 582)
Profit from continuing 6 590 5 308 24 14 244
operations
Discontinued operations
Profit attributable to - 415 (100) 415
discontinued operations
Profit after tax on - 6 868 (100) 6 868
disposal/unbundling of
discontinued operations
Profit for the period 6 590 12 591 (48) 21 527
Attributable to:
NCNR preference shareholders 137 160 (14) 301
Ordinary equity holders 6 067 12 070 (50) 20 065
Equity holders of the Group 6 204 12 230 (49) 20 366
Non-controlling interests 386 361 7 1 161
Profit for the period 6 590 12 591 (48) 21 527
Earnings per share (cents)
-?Basic 111.1 227.0 (51) 372.7
-?Diluted 109.2 223.2 (51) 365.3
Headline earnings per share
(cents)
-?Basic 103.3 94.8 9 183.1
-?Diluted 101.5 93.3 9 179.4
Earnings per share (cents) -
IFRS continuing
-?Basic 111.1 89.4 24 236.6
-?Diluted 109.2 87.9 24 231.9
Headline earnings per share
(cents) - IFRS continuing
-?Basic 103.3 86.4 20 174.7
-?Diluted 101.5 85.0 19 171.3
Earnings per share (cents) -
discontinued
-?Basic - 137.6 (100) 136.1
-?Diluted - 135.3 (100) 133.4
Headline earnings per share
(cents) - discontinued
-?Basic - 8.4 (100) 8.4
-?Diluted - 8.3 (100) 8.1
Consolidated statement of comprehensive income - IFRS
Six months ended % Year
31 December change ended
30
June
R million 2011 2010 2011
Profit for the period 6 590 12 591 (48) 21 527
Other comprehensive income
Cash flow hedges (275) (132) >100 21
Available-for-sale financial 274 387 (29) (41)
assets
Exchange differences on 634 (419) (>100) (266)
translating foreign operations
Share of other comprehensive (15) (5) >100 35
income of associates after tax
and non-controlling interests
Other comprehensive income for 618 (169) (>100) (251)
the period before tax
Income tax relating to (10) (43) (77) (44)
components of other
comprehensive income
Other comprehensive income for 608 (212) (>100) (295)
the period
Total comprehensive income for 7 198 12 379 (42) 21 232
the period
Total comprehensive income
attributable to:
Ordinary equityholders 6 648 11 950 (44) 19 837
NCNR preference shares 137 160 (14) 301
Equityholders of the Group 6 785 12 110 (44) 20 138
Non-controlling interests 413 269 54 1 094
Total comprehensive income for 7 198 12 379 (42) 21 232
the period
Consolidated statement of financial position - IFRS
As at As at
31 December 30 June
R million 2011 2010 2011
ASSETS
Cash and cash equivalents 38 545 31 511 34 240
Derivative financial instruments 57 721 51 052 37 206
Advances 498 258 453 290 464 593
Investment securities and other 126 237 127 884 124 756
investments
Commodities 5 880 4 164 4 388
Accounts receivable 7 894 5 598 7 289
Investments in associates and joint 6 663 5 819 6 029
ventures
Property and equipment 11 949 10 409 10 542
Deferred tax asset 470 451 560
Post-retirement benefit asset 3 - 2
Intangible assets 1 647 1 510 1 691
Investment properties 203 161 203
Policy loans on insurance contracts - 26 -
Reinsurance assets 855 527 484
Tax asset 163 798 139
Non-current assets held for sale 5 173 2 609 5 805
Total assets 761 661 695 809 697 927
EQUITY AND LIABILITIES
Liabilities
Deposits and current accounts 595 200 543 713 553 657
Short trading positions 11 944 15 801 12 413
Derivative financial instruments 58 329 50 027 36 361
Creditors and accruals 12 152 10 193 9 930
Provisions 2 965 3 254 3 621
Tax liability 409 319 288
Post-retirement liabilities 2 346 2 202 2 292
Deferred tax liability 2 226 2 474 2 223
Long-term liabilities 5 048 7 489 6 690
Policyholder liabilities under 1 373 2 007 1 047
insurance contracts
Policyholder liabilities under 90 163 94
investment contracts
Liabilities directly associated with 4 480 419 5 092
non-current assets classified as held
for sale
Total liabilities 696 562 638 061 633 708
Equity
Ordinary shares 55 54 53
Share premium 5 167 5 194 4 945
Reserves 52 284 45 112 51 633
Capital and reserves attributable to 57 506 50 360 56 631
ordinary equityholders
NCNR preference shares 4 519 4 519 4 519
Capital and reserves attributable to 62 025 54 879 61 150
equityholders of the Group
Non-controlling interests 3 074 2 869 3 069
Total equity 65 099 57 748 64 219
Total equity and liabilities 761 661 695 809 697 927
Consolidated statement of cash flows - IFRS
Six months ended Year
31 December ended
30
June
R million 2011 2010 2011
Net cash flows from operating 6 124 6 217 16 923
activities continuing operations
Net cash generated/(utilised) from 2 320 (1 397) (803)
operations
Tax paid (2 307) (1 344) (3 965)
Net cash inflow from operating 6 137 3 476 12 155
activities continuing operations
Net cash (outflow)/inflow from (2 364) (341) 1 777
investing activities from continuing
operations
Net cash inflow/(outflow) from 313 1 390 (6 725)
financing activities from continuing
operations
Net increase in cash and cash 4 086 4 525 7 207
equivalents from continuing and
discontinued operations
Cash and cash equivalents at the 34 240 27 067 27 067
beginning of the period
Cash and cash equivalents at the end of 38 326 31 592 34 274
the period
Cash and cash equivalents acquired* - - 200
Cash and cash equivalents disposed of* - - (83)
Effect of exchange rate changes on cash 219 (81) (151)
and cash equivalents
Cash and cash equivalents at the end of 38 545 31 511 34 240
the period
Mandatory reserve balances included 13 443 10 981 12 173
above**
* Cash and cash equivalents sold and bought relate to cash
balances held by subsidiaries acquired and sold during the year.
** 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 changes in equity - IFRS
Ordinary share capital and ordinary
equityholders` funds
R million Share Share Share General
capital premium capital risk
and reserve
share
premium
Balance as at 1 July 2010 52 1 491 1 543 12
Movement in other reserves - - - -
Ordinary dividends - - - -
Preference dividends - - - -
Transfer (to)/from reserves - - - -
Changes in ownership - - - -
interest in subsidiaries
Consolidation of treasury 2 3 703 3 705 -
shares
Total comprehensive income - - - -
for the period
Dividend in specie: - - - -
unbundling of Momentum
Balance as at 31 December 54 5 194 5 248 12
2010
Balance as at 1 July 2011 53 4 945 4 998 13
Movement in other reserves - - - -
Ordinary dividends - - - -
Preference dividends - - - -
Transfer (to)/from reserves - - - 14
Changes in ownership - - - -
interest in subsidiaries
Consolidation of treasury 2 222 224 -
shares
Total comprehensive income - - - -
for the period
Balance as at 31 December 55 5 167 5 222 27
2011
Ordinary share capital and ordinary
equityholders` funds
R million Cash Share- Avail- Currency Other
flow based able- Trans- reserves
hedge payment for-sale lation
reserve reserve reserve reserve
Balance as at 1 July (466) 2 487 969 698 (617)
2010
Movement in other - 352 - - (12)
reserves
Ordinary dividends - - - - -
Preference dividends - - - - -
Transfer (to)/from - (47) - - -
reserves
Changes in ownership - - - - 7
interest in
subsidiaries
Consolidation of - - - - -
treasury shares
Total comprehensive (95) - 307 (332) -
income for the
period
Dividend in specie: - (89) (664) (18) 583
unbundling of
Momentum
Balance as at (561) 2 703 612 348 (39)
31 December 2010
Balance as at (451) 2 739 225 474 13
1 July 2011
Movement in other - 315 - - (142)
reserves
Ordinary dividends - - - - -
Preference dividends - - - - -
Transfer (to)/from - - - - -
reserves
Changes in ownership - - - - -
interest in
subsidiaries
Consolidation of - - - - -
treasury shares
Total comprehensive (198) - 187 606 (14)
income for the
period
Balance as at (649) 3 054 412 1 080 (143)
31 December 2011
Ordinary share capital and ordinary
equityholders` funds
R million Retained Reserves Non- Non- Total
earnings attri- cumu- con- equity
butable lative trolling
to non- interest
ordinary redeema
equity ble
holders prefere
nce
shares
Balance as at 1 July 46 806 49 889 4 519 3 012 58 963
2010
Movement in other 79 419 - (101) 318
reserves
Ordinary dividends (2 287) (2 287) - (339) (2 626)
Preference dividends - - (160) - (160)
Transfer (to)/from 47 - - - -
reserves
Changes in ownership (32) (25) - 31 6
interest in subsidiaries
Consolidation of 513 513 - - 4 218
treasury shares
Total comprehensive 12 070 11 950 160 269 12 379
income for the period
Dividend in specie: (15 159) (15 347) - (3) (15 350)
unbundling of Momentum
Balance as at 42 037 45 112 4 519 2 869 57 748
31 December 2010
Balance as at 1 July 48 620 51 633 4 519 3 069 64 219
2011
Movement in other 166 339 - (31) 308
reserves
Ordinary dividends (6 341) (6 341) - (369) (6 710)
Preference dividends - - (137) - (137)
Transfer (to)/from (14) - - - -
reserves
Changes in ownership (35) (35) - (8) (43)
interest in subsidiaries
Consolidation of 40 40 - - 264
treasury shares
Total comprehensive 6 067 6 648 137 413 7 198
income for the period
Balance as at 48 503 52 284 4 519 3 074 65 099
31 December 2011
Statement of headline earnings from continuing and discontinued operations
- IFRS
Six months ended % change Year
31 December ended
30 June
R million 2011 2010 2011
Continuing operations
Profit from continuing 6 590 5 308 24 14 244
operations
Non-controlling interest (386) (364) 6 (1 164)
NCNR preference shares (137) (160) (14) (301)
Attributable earnings to 6 067 4 784 27 12 779
ordinary equityholders
Adjusted for: (428) (159) >100 (3 341)
Loss/(gain) on disposal of 2 - (12)
investment securities and
other investments
Gain on disposal of available- (36) (179) (341)
for-sale assets
Gain on disposal of associates (463) - (2 792)
Gain on disposal of (17) (3) (571)
subsidiaries
Loss/(gain) on the disposal of 24 2 (9)
property
and equipment 18 24 96
Impairment of goodwill 15 7 37
Impairment of assets in terms - - (9)
of IAS 36
Gain from a bargain purchase (1) 2 -
Other 23 (12) 16
Tax effects of adjustments 7 - 244
Non-controlling interest 7 - 244
adjustments
Headline earnings from 5 639 4 625 22 9 438
continuing operations
Discontinued operations
Profit from discontinued - 7 283 (100) 7 283
operations
Non-controlling interests - 3 (100) 3
Attributable earnings to - 7 286 (100) 7 286
ordinary shareholders
Adjusted for: - (6 868) (100) (6 868)
Profit on dividend in specie - (6 868) (6 868)
Headline earnings from - 418 (100) 418
discontinued operations
Headline earnings from 5 639 5 043 12 9 856
continuing and discontinued
operations
Reconciliation from headline earnings to normalised earnings from
continuing and discontinued operations
Six months ended % change Year
31 December ended
30 June
R million 2011 2010* 2011*
Headline earnings from 5 639 4 625 22 9 438
continuing operations
Adjusted for: 132 127 4 859
IFRS 2 Share-based payment 29 (45) (>100) (20)
expense
Treasury shares 103 172 (40) 418
-?Consolidation of share 94 141 210
trust
-?FirstRand shares held by 9 31 208
policyholders
Private equity subsidiary - - - 461
realisations
Normalised earnings from 5 771 4 752 21 10 297
continuing operations
Headline earnings from - 418 (100) 418
discontinued operations
Adjusted for: - 90 (100) 90
-?FirstRand shares held by - 90 90
policyholders
Normalised earnings from 5 771 5 260 10 10 805
continuing and discontinued
operations
* December 2010 and June 2011 figures includes six months of
OUTsurance income amounting to R180 million in earnings from
continuing operations, which is excluded from normalised earnings.
Reconciliation of IFRS continuing operations to normalised continuing
operations
Six months ended % change Year
31 December ended
30 June
R million 2011 2010 2011
Earnings attributable to 6 067 4 784 27 12 779
ordinary equityholders
OUTsurance equity-accounted - (180) (100) (180)
income
Profit on sale of OUTsurance - - n/a (2 710)
Profit on disposal of WesBank (470) - n/a -
investments
Attributable earnings from 5 597 4 604 22 9 889
continuing normalised
operations
Headline earnings from IFRS 5 639 4 625 22 9 438
continuing operations
OUTsurance equity-accounted - (180) (100) (180)
income
Headline earnings from 5 639 4 445 27 9 258
continuing normalised
operations
Normalised earnings from IFRS 5 771 4 752 21 10 297
continuing operations
OUTsurance equity-accounted - (180) (100) (180)
income
Normalised earnings from 5 771 4 572 26 10 117
continuing normalised
operations
Reclassifications of prior year numbers
During the financial year the following income statement reclassifications
were made:
30 June 2011 Amount as Amount Difference Explanation
Income previously as
statement reported restated
R million
Non-interest 31 882 29 565 2 317 Fee and commission
income expenses that are
incremental or
directly attributable
to the generation of
fee and commission
income have been
reclassified out of
various operating
expense lines into
the fee and
commission expense
line. In addition,
the presentation of
fee and commission
expenses has been
updated by presenting
it as part of non-
interest income and
not as part of
operating expenses.
Operating (26 901) (24 584) (2 317) As per above.
expenses
Profit for 21 527 21 527 - No effect on profit
the year for the year.
31 December Amount as Amount Difference Explanation
2010 previously as
Income reported restated
statement
R million
Non-interest 14 396 13 250 1 146 Fee and commission
income expenses that are
incremental or
directly attributable
to the generation of
fee and commission
income have been
reclassified out of
various operating
expense lines into
the fee and
commission expense
line. In addition,
the presentation of
fee and commission
expenses has been
updated by presenting
it as part of non-
interest income and
not as part of
operating expenses.
Operating (13 424) (12 278) (1 146) As per above.
expenses
Profit for 12 591 12 591 - No effect on profit
the year for the year.
The unaudited interim results announcement is a summary of the interim
financial results. A copy of the "unaudited interim results and cash
dividend declaration for the six months ended 31 December 2011" will be
available from 28 February 2012, either on www.firstrand.co.za, or, on
request, at the Group`s registered office.
Sandton
28 February 2012
Sponsor: RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Date: 28/02/2012 08:00:11 Produced by the JSE SENS Department.
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