FirstRand to decide on options for extra cash
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Financial Services Editor
FIRSTRAND says it will be in a better position to let shareholders know what it plans to do with the excess capital it will sit with after it has finalised its black economic empowerment deal.
A large portion of the money will be used to help finance the deal, announced earlier this month.
FirstRand plans to sell a 10% stake in its global operations to four empowerment groups and staff for R6,8bn, the largest empowerment deal yet in the financial services sector. The group is busy tying down third-party finance for the deal, but is expected to provide vendor finance for the staff component, valued at about R2,4bn.
When the deal was announced, FirstRand chairman GT Ferreira said he hoped to make a final announcement on the issue of funding early next month.
But at the group`s annual general meeting yesterday, he said it could take a little longer.
`We need to actually get approvals from some of the third-party funders, which could delay the process past midDecember,` Ferreira said.
The group had been speaking to domestic and international funders, but raising the money had also proved more difficult than expected.
Earlier this month, FirstRand raised R3bn through a preference share issue. It has an additional R1bn following the sale of Ansbacher in the UK to Qatar National Bank. Finance director Johan Burger said the money had already been received.
Even after funding part of the empowerment deal, the group said it expected to have excess capital. Burger said the group would reduce this through dividends, buying back shares or using it for growth opportunities.
`We cannot announce what we are doing with the surplus until we can announce the final capital requirement for our BEE deal,` Burger said.
FirstRand has started releasing excess cash to shareholders in the form of dividends. In September, the group announced a 31% increase in its dividend for its 2004 financial year, reducing its dividend cover from 2,85 to 2,5 times.
Burger said the benign environment for banks was continuing into the new financial year, with low interest rates feeding through to strong consumer demand.
On FirstRand Bank`s recent reorganisation, Burger said the bank`s brand focus had been sharpened, while overlaps between its corporate and retail banking had been erased.
First National Bank had been repositioned as the group`s relationship brand, while Rand Merchant Bank and vehicle finance unit WesBank had been identified as its specialised brands.
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