| Tue 1 Mar 2005, 9:48 | | Fsr - Unaudited Interim Results For The Six Months |
|
Fsr - Unaudited Interim Results For The Six Months Ended 31 December 2004
Release Date: 01/03/2005 07:58:05 Code(s): FSR
FSR - Unaudited interim results for the six months ended 31 December 2004
Firstrand Limited
FIRSTRAND - Integrated financial services
Registration No: 1966/010753/06
JSE code FSR
ISIN: ZAE000014973
NSX share code: FST
(`FSR`)
Unaudited interim results for the six months ended 31 December 2004
Highlights
- Headline earnings + 23%
- Diluted headline earnings per share + 21%
- Dividend per ordinary share + 38%
Financial performance
The FirstRand group of companies (`FirstRand` or `the Group`) produced excellent
results, showing 21% growth in fully diluted headline earnings per share for the
period under review.
These results were achieved in a favourable economic environment, which provided
strong organic growth opportunities, particularly for the Banking Group. This
was evident in the high levels of new business growth at Rand Merchant Bank
(`RMB`), WesBank and First National Bank (`FNB`) and resulted in headline
earnings growth for the Banking Group of 23% to R2.8 billion. The sustained
lower interest rate environment continued to result in a margin squeeze, however
increased new business and improved credit quality partially offset this impact.
Momentum Group`s (`Momentum`) headline earnings increased by a healthy 18% to
R592 million for the six months ended 31 December 2004, with earnings
attributable increasing by 23%. These results were driven by strong new business
inflows, significant growth in assets under management and a focus on expense
efficiencies.
Discovery Holdings Limited (`Discovery`) delivered an excellent performance over
the six months under review with FirstRand`s share of its headline earnings
growing by 43% to R126 million. This performance reflects strong growth in all
Discovery`s businesses, with new business Annual Premium Income (API) increasing
by 32% over the comparative period and continued expense efficiencies.
The Group`s performance in summary is:
Unaudited Audited
Six months ended Year ended
31 December 30 June
cents 2004 2003 % change 2004
Headline earnings: 3 355 2 736 22.6 5 727
Attributable to shareholders
- Ordinary shareholders 3 324 2 736 21.5 5 727
- Non-cumulative non-redeemable
preference shareholders 31 - >100.0 -
Unaudited Audited
Six months ended Year ended
31 December 30 June
cents 2004 2003 % change 2004
Earnings per share (`EPS`)
Basic 71.2 52.3 36.1 109.3
Diluted 69.6 51.3 35.7 107.7
Headline earnings
per share (`HEPS`)
Basic 63.9 52.7 21.3 110.3
Diluted 62.6 51.7 21.1 107.7
Dividend per share
Interim 26.60 19.25 38.4 19.25
The reconciliation between diluted EPS and diluted HEPS is reflected below:
Unaudited
Six months ended
31 December
cents 2004 2003 % change
Earning per share 71.2 52.3 36.1
Adjusted for:
- Dilution effect of share schemes 1.6 1.0
Diluted earnings per share 69.6 51.3 35.7
Adjusted for:
- Sale of subsidiary (Ansbacher) (7.4) -
- Other 0.4 0.4
Diluted headline earnings per share 62.6 51.7 21.1
The relative contributions to headline earnings by the various operating
companies were:
Contribution to headline earnings
Unaudited
Six months ended
31 December
% 2004 2003
FirstRand Banking Group 79.8 79.6
Momentum 16.7 17.3
Discovery 3.5 3.1
Total 100 100
Operating environment
The six month period ended 31 December 2004 was characterised by accelerated
growth in the South African economy, a further strengthening of the Rand, a
continued reduction in inflation, a slight decline in domestic interest rates,
strong growth in the demand for commodities, especially from China, and a
significant improvement in the equity markets.
The Rand strengthened by a further 9.1% to a level of R5.62:US$1 at 31 December
2004, primarily on the back of exogenous factors such as continued US Dollar
weakness and strong demand for commodities. This assisted in the continued
decline in CPIX inflation, from 5.0% at 30 June 2004 to 4.3% at 31 December
2004, well within the South African Reserve Bank`s targeted range of 3% - 6%.
Following the aggressive interest rate cuts during the last six months of 2003,
with the prime rate reducing by 400 basis points during this period to 11.5% at
31 December 2003, interest rates remained stable until August 2004, when the
prime rate was reduced by a further 50 basis points. The South African economy
continued to gain momentum, achieving an annualised growth rate of 5.7% during
the third quarter of 2004 and 4% during the fourth quarter. This was to a large
extent as a result of strong growth in domestic household expenditure,
especially in the retail, motor and building sectors of the economy. All of
these factors were positive for banking, particularly the increase in credit
demand. On the negative side, the continued strong Rand hampered export-related
industries.
Local equity markets were buoyant which had a positive impact on the Group`s
equity related businesses. During the six months ended 31 December 2004, the JSE
ALSI 40 index increased by 24%.
Sales of linked investment products, unit trusts and living annuities benefited
from the improved equity markets. Conversely, the lower interest rates impacted
negatively on sales of guaranteed annuities and guaranteed endowment products,
and the stronger Rand resulted in very low demand for offshore products.
The long-term insurance industry continued to experience strong demand for
individual risk products during the period.
Strategic issues
Disposal of Ansbacher
In July 2004 FirstRand agreed to dispose of its interest in its subsidiary
Ansbacher (UK) Group Holdings Limited (`Ansbacher`) to Qatar National Bank
(`QNB`) at a premium to net asset value.
The proceeds of the sale consisted of two amounts. The initial consideration was
based on the net asset value of Ansbacher at the completion date plus a premium
of GBP7.5 million (R91.1 million). A deferred consideration (the residual
premium of GBP7.5 million) will be based on the performance of certain of
Ansbacher`s developing businesses during the 2005 and 2006 calendar years. The
transaction became effective on 1 November 2004 and the net proceeds received
were GBP91.1 million. FirstRand earned a total compound rate of return of 11.6%
(in Rand) over the period from its investment in Ansbacher in 1992 to the date
of disposal. FirstRand realised a profit of R396 million on the disposal of
Ansbacher as set out below:
GBP million R million
Proceeds on disposal 91.1 1 019
Net asset value of Ansbacher at date of sale (83.6) (936)
South African GAAP adjustment1 (2.2) (25)
Disposal expenses (6.7) (75)
(1.4) (17)
Release from Currency translation reserve2 - 413
Net (loss)/profit on disposal (1.4) 396
Notes:
The adjustment is required as Ansbacher had, in terms of existing Statements of
Generally Accepted Accounting Practice in the United Kingdom, not adopted AC
133/IAS 39 accounting statement on the recognition and measurement of financial
instruments. Ansbacher had certain general credit provisions which did not
qualify as a provision in terms of Statements of Generally Accepted Accounting
Practice in South Africa (`SA GAAP`).
On the disposal of an foreign subsidiary classified as an `Independent
operation` in terms of the requirements of AC 112 of SA GAAP, the accumulated
foreign currency translation reserve is released to income.
Brand alignment
In October 2004, the retail, corporate and wealth clusters were dismantled and
FNB Corporate and FNB Retail were merged under one FNB management team.
This resulted in the merger of the business and medium corporate segments, which
were previously separately housed in FNB Retail (business segment) and FNB
Corporate (medium corporate segment).
This adjustment to the structure reinforces and strengthens the Group`s segment
focus, and allows the Group to maximise growth opportunities in the mid-
corporate and business segments. In addition, any dilution of the FNB brand that
may have occurred by having two separate entities operating in the same markets,
has been eliminated.
Black Economic Empowerment (`BEE`) ownership transaction (`the BEE transaction`)
The Group announced its BEE transaction on 24 February 2005, in terms of which
an effective 10% interest in FirstRand will be acquired by four broad-based
empowerment groups and black South African FirstRand staff and non-executive
directors.
The BEE transaction comprises two components. Four broad-based BEE groups,
Kagiso Trust, Mineworkers Investment Trust (`MIT`), WDB Trust and the FirstRand
Empowerment Foundation (a newly created FirstRand BEE entity, with a mandate for
broad-based transformation), will hold a 6.5% interest in FirstRand. This will
be held through the FirstRand Empowerment Trust, a trust created for the
purposes of this transaction. FirstRand`s black South African staff and non-
executive directors will have a beneficial interest of 3.5% in FirstRand.
The FirstRand Empowerment Trust has secured third party funding to acquire its
6.5% interest in FirstRand. FirstRand will fund the 3.5% staff BEE component
through the available resources of its subsidiary FirstRand Bank.
The Group is committed to transformation in South Africa and specifically wishes
to ensure that the long-term benefits of the BEE transaction reach the widest
possible community of black South Africans, with a specific focus on the lower
income groups. The Group selected its BEE partners because they share
FirstRand`s objectives of enhancing broad-based BEE by addressing the needs of a
wide constituency. In addition, the BEE partners have excellent reputations,
successful track records and long standing relations with FirstRand and with
each other.
The Group expects to implement the transaction in May 2005.
Overview of results
Banking Group
The Banking Group produced excellent results during the six month period under
review, benefiting from strong performances from RMB, FNB and WesBank.
The Banking Group achieved growth in headline earnings of 23% (including
translation losses) and 21% (excluding translation losses) for the six month
period under review.
Non-interest revenue grew by a significant 37%, benefiting from strong growth in
transactional income from FNB and WesBank as well as strong performances from
all RMB`s business units.
Bad debts and non-performing loans have remained at historically low levels.
The lower interest rate environment reduced endowment income and continues to
place pressure on interest margins, especially on the liability side of the
book. The negative effect of lower rates was to some extent offset by the volume
impact of absolute year-on-year growth in advances and deposits together with
endowment hedges put in place by the Banking Group to mitigate against the
expected effects of the lower interest rates.
Home loans, instalment finance and card advances showed exceptional growth of
20%, 30% and 24% respectively. However, a significant 20% year-on-year decline
in corporate advances, together with a R13 billion decrease in trading advances
in RMB, limited absolute balance sheet growth.
Retail deposits continued to benefit from the continued high demand for shorter-
dated investment products in the lower rate environment. However, corporate
deposit growth remained relatively slow at 6%, mainly driven through growth in
the medium corporate market.
The sale of Ansbacher impacted negatively on advances and deposit growth during
the period under review.
RMB
RMB produced another set of excellent results with profit before tax increasing
to R813 million, 36% ahead of the comparative period.
RMB`s portfolio of businesses all performed well, particularly the businesses
leveraged to and operating in the improved equity markets. The trading, asset
management and broking businesses benefited directly from greater trading
volumes and increased values.
BEE activity, such as advisory mandates, underwriting, senior and mezzanine debt
financing and private equity, provided good deal flow to many of RMB`s
divisions, particularly Corporate Finance and Structured Finance. Private Equity
benefited from the realisation of an off-shore investment and despite this sale
the unrealised profits in the Private Equity division increased to in excess of
R1.01 billion.
The low inflation, low interest rate environment and related strong credit
markets benefited RMB`s debt origination, securitisation and structuring
activities.
WesBank
WesBank produced an excellent six month performance, achieving profit before tax
of R636 million, an increase of 33% over the comparative period.
Gross advances grew by R12.8 billion when compared to the prior period,
representing an increase of 29.6%. R1.5 billion of this growth related to the
acquisition of the Barloworld Equipment Finance book.
New business production totalled R18.7 billion, compared to R14.5 billion for
the comparative period representing an increase of 28.6%. Continued buoyancy in
the retail vehicle market, coupled with the existing low interest rate
environment, contributed to this high growth.
The charge for bad debts, as a percentage of advances, was 0.6% which is
consistent with the comparative period, and reflects the favourable current
economic conditions. Non-performing loans also remained consistent with the
prior year, at 0.8% of advances.
Non-interest revenue grew by 43%, reflecting the increased new business volumes
and higher penetration of WesBank`s insurance products. Non-interest expenditure
grew in line with the increased volumes, but the continued drive for
efficiencies and the improved benefits of scale resulted in a cost to income
ratio to 48% (December 2003 - 50%).
FNB
FNB produced excellent results, growing profit before tax by 22% to R2.2
billion.
FNB`s consumer banking activities performed particularly well, with strong asset
growth from card and home loans advances. Non-interest revenue grew 18%, due to
growth in new clients and increased economic activity. Retail deposits continued
to show satisfactory growth, in line with overall market growth.
Margin squeeze continued in the low interest rate environment, however this was
partly offset by continued contributions from the hedging strategies in place.
FNB HomeLoans performed exceptionally well, producing new business growth of
90%. Despite continued run-off from the acquired NBS and Saambou books, total
advances grew by 20%.
The FNB Card division also experienced a strong six months, with advances
increasing by 24%. Cardholder turnover increased by 25%, reflecting both
increased number of customers and increased spend per customer.
FNB`s commercial activities, consisting of the mid-corporate, business and
agricultural segments, produced strong results. Despite continuing margin
pressure, good asset and liability growth resulted in an 8% increase in net
interest income. Non-interest income showed excellent growth of 25%, driven by
an increase in new customers and increased transactional volumes through all of
the commercial sub-segments, and general growth in economic activity. It is
anticipated that the commercial segment will be a future growth engine for FNB.
FNB`s large corporate segment continues to be negatively affected by a further
reduction in advances as a result of the large corporates directly accessing the
capital markets and by increased margin pressure. This resulted in net interest
income being marginally down. Non-interest income showed a slight increase but
this should be viewed against once-off profits from the disposal of certain
retail exposures in the comparative period. Excluding the effect of these once-
off profits, non-interest income increased by 18%.
Overall FNB`s operating expenses increased by 14% over the prior year, however
excluding expenses relating to new business costs at HomeLoans and the Discovery
Card launch, the increase is limited to 12%. Expenses in the second half of the
financial year are expected to be lower than during the first half.
With regard to bad debts, FNB continues to benefit from the improved credit
environment, however not to the same extent as in the previous comparative
period.
African subsidiaries
The African subsidiaries achieved profit before tax of 13% (in local currency)
during the period under review. However, the continued strengthening of the Rand
limited growth to 6% in Rand terms.
FNB Namibia increased pre-tax profits by 11%. A significant portion of this
growth was due to an excellent performance from the insurance operations, driven
by strong growth in in-force policies of 17%. The growth in policies is a result
of exceptional cross-selling within the FNB Namibia group. Strong advances
growth of 20% was offset by continued margin squeeze.
Due to the strength of the Rand, FNB Botswana`s profit before tax grew only 6%
in Rand terms (15% in Pula terms). Non-interest revenue grew 23%, mainly due to
increased transaction volumes by new customer accounts growth and increased
turnover from card merchants. Advances grew marginally due to slow economic
conditions.
FNB Swaziland continued to experience a depressed economy and margins remained
under pressure. Non-interest revenue increased by a healthy 14%, mainly due to
growth in new customers.
Insurance
OUTsurance
OUTsurance achieved excellent results for the six months ended 31 December 2004.
Gross premium income amounted to R881 million, a 32% increase compared to the
previous period and driven by strong organic growth in both the personal and
business lines. Headline earnings increased by 44% to R131.5 million.
Expenses as a percentage of net premium income decreased from 18% to 16.6%,
which compares to an industry average of 26%.
OUTsurance continues to reap significant benefits from collaboration with
FirstRand and 27% of its premium income is generated from other businesses in
the Group.
First Link
First Link increased profit before tax by 48%, reflecting particularly good
growth in brokerage income and commercial lines which increased 21% and 28%
respectively. Operating income grew strongly, up 35%, reflecting continued
momentum in First Link`s new business drive.
Momentum
Momentum increased headline earnings by a healthy 18% to R592 million for the
six months ended 31 December 2004.
The embedded value of the Momentum Group increased by 16% between 30 June 2004
and December 2004. In addition, the embedded value profit for the period
represents an annualised return of 42% on the opening embedded value.
The annualised headline return on equity for the six months under review
amounted to 25%, up from 24% for the year ended 30 June 2004. The excellent
annualised return on embedded value was driven by strong growth in both the
shareholders` portfolio and value of the in-force insurance business.
Insurance operations
The insurance operations increased operating profit by 15%, with the operating
profit generated by the local insurance operations increasing by an excellent
26%. These results were driven by strong new business inflows and a focus on
expense efficiencies. The international operations showed a loss of R38 million
due to inefficiencies in the retail investment business and segregation costs
incurred in the disengagement of Ansbacher. This division will be integrated
into the administration operation of Momentum in South Africa.
Total insurance operations marketing and administration expenses reflected a 7%
increase over the comparative period. The local operations contained the expense
increase to 2%, and the Group is on track to achieve its stated objective of a
real reduction in unit costs of 15% by 2007.
Asset management operations
The asset management operations generated an increase in headline earnings of
19%. The local asset management operations produced excellent results with
headline earnings increasing by 36%. This performance resulted from an inflow of
funds, improved local equity markets and RMB Asset Management`s continued
excellent investment performance. The international asset management operations
showed a decrease in profits in Rand terms, due to the strengthening of the
Rand. However, these results remained virtually unchanged in foreign currency
terms.
Discovery
Discovery produced an excellent performance, reflecting a combination of strong
organic growth and increased efficiencies across all its businesses. This
performance translated into a 26% increase in operating profits to R330 million
(2003: R262 million).
Discovery Health produced a good performance, with operating profits increasing
by 15%, as a result of improved efficiencies and new business growth. Discovery
Health`s strong performance is reflected in 9% growth in membership numbers to
1.640 million lives as at 31 December 2004.
Discovery Life exceeded expectations, further consolidating its leadership
position within the pure risk assurance market and increasing operating profits
by 82% to R191 million (2003: R105 million). This exceptional performance
resulted from significant new business growth, with the number of policyholders
increasing by 53% to 206 675.
Vitality`s decrease in profit to R9 million was largely driven by marketing and
set-up costs relating to the Discovery Credit Card.
Destiny Health`s operating losses reduced by 51% to R31 million and the business
turned profitable on a monthly basis. This is attributable to the strengthening
of the Rand against the US Dollar, achievement of efficiencies in cost control
as well as growth in lives covered to 44 618 (2003: 24 698). Destiny benefited
from a 66% increase in membership numbers during the period under review,
primarily as a result of a 70% increase in new business to US$73 million (2003:
US$43 million).
Prudential Health incurred start-up losses of R80 million for the six month
period under review. At 31 December 2004 PruHealth insured 1 360 lives.
Capital management
The Group actively manages its capital base to enhance shareholder value through
its capital management framework. Capital is allocated to FirstRand Group
business units on an economic risk assumed basis, founded on Basel II
principles. The investment strategy and targeted capital adequacy ratios of the
operating subsidiaries are dealt with in the sections of this circular that deal
with their results.
During the period under review the Group issued R3.0 billion listed non-
redeemable, non-cumulative preference shares at a coupon of 68% of FNB Prime
Prevailing rate. This resulted in a further reduction of the weighted average
cost of capital. The resultant surplus of approximately R4.4 billion, combined
with the release of GBP91.1 million following the sale of Ansbacher, will be
applied in the following manner;
* Funding the vendor financing portion of the Group`s
BEE ownership transaction R2.3 billion
* To reduce existing gearing in FirstRand and/or
return to shareholders R2.1 billion
The Group currently generates capital in excess of its organic growth
requirements, hence the decision to reduce the dividend cover at the June 2004
year end from 2.85 times to 2.5 times. The dividend cover for the current period
is dealt with below.
Banking Group
The Banking Group invests its capital in interest bearing instruments to achieve
a desired interest return and risk profile. The lower interest rate environment
resulted in reduced returns, however this was partially offset by higher capital
levels and benefits derived from hedging strategies.
Momentum
The investment income earned on shareholders` assets increased by 23% to R186
million. The main reason for this strong performance was the increase in equity
accounted earnings of African Life from R32 million to R60 million.
FirstRand
In terms of Statements of Generally Accepted Accounting Practice in South
Africa, the Group is precluded from accruing for R31 million relating to the
R3.0 billion non-cumulative non-redeemable preference shares, which had the
effect of overstating headline earnings by R31 million, for the period under
review.
Dividends
Non-cumulative non-redeemable preference shares
The first non-redeemable non-cumulative FirstRand `B` preference share
(`preference shares`) dividend, in the amount of 228 cents per preference share
was paid on 28 February 2005.
Ordinary shareholder dividend
The proposed interim dividend amounts to 26.60 cents representing an increase of
38%. The dividend cover was reduced to 2.5 times at the year end to June 2004
and this level of cover has been maintained for the period under review. The
Group continues to generate capital in excess of organic growth requirements and
will continue to review, on an annual basis, the level of dividend cover.
The dividend policy is based on sustainable earnings growth. The Group`s
headline earnings includes certain volatile items such as translation gains and
AC 133 adjustments. These are excluded from the dividend calculation.
Corporate Governance
FirstRand has embraced the recommendation of King II on Corporate Governance and
strives to provide reports to shareholders that are timely, accurate, consistent
and informative.
Accounting policies
FirstRand prepares its consolidated unaudited interim financial statements on a
going concern basis using the historical cost basis, except for certain
financial assets and liabilities where it adopts the fair value basis of
accounting.
These financial assets and liabilities include:
* financial assets and liabilities held for trading;
* financial assets classified as available for sale;
* derivative assets and liabilities;
* financial assets and liabilities at elected fair value; and
* short trading positions.
The consolidated financial statements conform to Statements and Interpretations
of Generally Accepted Accounting Practice in South Africa. The principal
accounting policies are consistent in all material respects with those adopted
in the previous period.
Prospects
Interest rates are expected to remain at current levels for the remainder of the
financial year and whilst this will result in continued margin pressure for the
Banking Group during the second half, it is also expected to positively impact
on credit demand and consumer spending.
Significant management time and effort has been focused on the Banking Group`s
African strategy which has included assessing the existing operations and
increased synergies with FNB`s South African activities. The Group is also
actively evaluating a number of other medium-term growth opportunities in
Africa.
The disposal of Ansbacher was completed during the first half of the current
financial year. As previously indicated, this has freed up significant capital
for deployment in more profitable operations.
Although the equity market performance over the six months ended 31 December
2004 is unlikely to be repeated in the second half of the financial year,
Momentum remains positive regarding the impact of its innovative new investment
product on new business volumes and on continued efficiency improvements, both
locally and internationally. The real benefit of the off-shore efficiency
improvements will only be reaped in the following financial year.
FirstRand is confident that, barring any unforeseen external shocks and in the
context of the current strong economic growth, the existing strategies of the
business units and divisions of the Group, and the diversified income streams
generated from a premium portfolio of businesses, the Group is well positioned
to achieve its stated objective of 10% real growth.
For and on behalf of the board
GT Ferreira LL Dippenaar
Chairman Chief Executive
Sandton
1 March 2005
Interim dividend declaration
Notice is hereby given that an interim dividend of 26.60 cents per ordinary
share has been declared on 1 March 2005 in respect of the six months ended 31
December 2004. The last day to trade in these shares will be Wednesday, 16 March
2005 and the first day to trade ex-dividend will be Thursday, 17 March 2005. The
record date will be Thursday, 24 March 2005 and the payment date Tuesday 29
March 2005.
Please note that no FirstRand share certificates may be dematerialised or
rematerialised between Thursday, 17 March 2005 and Thursday, 24 March 2005, both
days inclusive.
AH Arnott / Company Secretary
1 March 2005
Directors GT Ferreira (Chairman), LL Dippenaar (CEO), VW Bartlett, DJA Craig
(British), DM Falck, PM Goss, NN Gwagwa, PK Harris, MW King, G Moloi, KC
Shubane, BJ van der Ross, Dr F van Zyl Slabbert, RA Williams
Secretary and registered office AH Arnott, BCom, CA (SA), 17th floor, 1
Merchant Place, Corner of Fredman Drive and Rivonia Rd, Sandton, 2196
Postal address PO Box 786273, Sandton, 2146. Telephone: +27 11 282 1808
Telefax: +27 11 282 8088
Web address: www.firstrand.co.za
Sponsor (in terms of JSE requirements) Rand Merchant Bank (a division of
FirstRand Bank) Corporate Finance, 1 Merchant Place, Corner of Fredman Drive and
Rivonia Rd, Sandton, 2196
Transfer secretaries - South Africa Computershare Investor Services 2004 (Pty)
Limited, 70 Marshall Street, Johannesburg, 2001
Postal address PO Box 61051, Marshalltown, 2107. Telephone: +27 11 370 5000
Telefax: +27 11 688 5221
Transfer secretaries - Namibia Transfer Secretaries (Pty) Limited, Shop No 12,
Kaiserkrone Centre, Post Street Mall, Windhoek
Postal address PO Box 2401, Windhoek, Namibia Telephone: +264 612 2647 Telefax:
+264 612 48531
Income statement
Unaudited Audited
Six months ended Year end
31 December 31 December 30 June
R million 2004 2003 % change 2004
Banking operations
Interest income 11 835 11 860 (0) 22 412
Interest expenditure (7 237) (7 192) (1) (13 505)
Net interest income before
impairment of advances 4 598 4 668 (1) 8 907
Impairment of advances (409) (455) (10) (833)
Net interest income after
impairment of advances 4 189 4 213 (1) 8 074
Non-interest income 5 334 3 904 37 8 970
Transactional income 3 644 2 927 24 6 583
Trading income 1 155 878 32 2 121
Investment income 600 200 >100.0 430
Other non-interest income 150 115 30 206
Translation losses (215) (216) (0) (370)
Net income from operations 9 523 8 117 17 17 044
Operating expenditure (5 738) (4 992) 15 (10 503)
Income from operations 3 785 3 125 21 6 541
Share of earnings of
associate companies 385 214 80 585
Income before
discontinuing operations 4 170 3 339 25 7 126
Discontinuing operations 396 - >100 -
Income before taxation 4 566 3 339 37 7 126
Indirect taxation (276) (129) >100 (436)
Income before
direct taxation 4 290 3 210 34 6 690
Direct taxation (916) (768) 19 (1 701)
Income after taxation 3 374 2 442 38 4 989
Earnings attributable to
outside shareholders (173) (139) 24 (277)
Earnings from
banking operations 3 201 2 303 39 4 712
Momentum Group
Income from operations 696 600 16 1 258
Share of income from
associated companies 66 30 >100 77
Income before
direct taxation 762 630 21 1 335
Direct taxation (165) (141) (17) (261)
Income after taxation 597 489 22 1 074
Earnings attributable to
outside shareholders (4) (5) 20 (9)
Earnings from
insurance operations 593 484 23 1 065
Discovery Holdings
Income before taxation 350 258 36 720
Direct taxation (144) (123) 17 (299)
Income after taxation 206 135 53 421
Earnings attributable to
outside shareholders (70) (47) 43 (147)
Earnings from
insurance operations 135 88 58 274
FirstRand Limited (116) (108) 7 (275)
Operating profit/(losses) 2 (11) >100 (50)
STC and taxation (67) (27) >100 (115)
Redeemable
preference dividends (51) (70) (27) (110)
Goodwill
amortised - intergroup - 3 (>100) 5
Consolidation of
share trusts (78) (54) 44 (105)
Earnings attributable to
ordinary shareholders 3 735 2 716 38 5 676
Statement of changes in equity
Non-cumulative
Non-redeemable
Prefe- Prefe- Non- Total
rence rence distrib- share-
Share share Share Share Retained utable holders`
R million capital premium capital premium earnings reserves funds
Balance at
1 July 2004 - - 52 6 715 15 105 2 040 23 912
Issue of
share capital 30 2 970 - - - - 3 000
Share issue
Expenses - (25) - - - - (25)
Reduction in
share capital - - -+ (1) - - (1)
Movement in
revaluation
reserves - - - - - 699 699
Currency
translation
Differences - - - - - (393) (393)
Movement in
other reserves - - - - - (5) (5)
Earnings
attributable
to shareholders - - - - 3 735 - 3 735
Dividends - - - - (1 387) - (1 387)
Reserves arising
from acquisition
of subsidiaries - - - - - 19 19
Transfer (to)/
from reserves - - - - (101) 101 -
Acquisition of
share trust
shares - - - (498) - 6 (492)
Balance at
31 December
2004 30 2 945 52 6 216 17 352 2 467 29 062
Balance as at
31 December
2003 - - 55 8 432 13 431 2 498 24 416
Consolidation of
share trusts - - (3) (1 883) (54)* 71 (1 869)
Restated balance
as at
31 December 2003 - - 52 6 549 13 377 2 569 22 547
+ Less than R500 000.
Balance sheet
Unaudited Audited
At 31 December At 30 June
R million 2004 2003 2004
Assets
FirstRand Banking Group 284 313 270 673 277 326
Cash and short-term funds 24 195 23 249 25 104
Investment securities and
other investments 46 871 42 546 36 131
Financial instruments held
for trading 22 438 16 260 9 660
Investment securities 24 433 26 286 26 471
- originated 784 300 -
- held to maturity 419 2 004 957
- available for sale 16 211 23 982 16 867
- at elected fair value 7 019 - 8 647
Advances 206 194 202 109 208 874
- originated 155 688 139 226 141 627
- held to maturity 9 174 7 760 8 971
- available for sale 1 733 9 085 4 499
- trading 39 599 46 038 53 777
Commodities 1 164 374 702
Non-recourse investments 5 889 2 395 6 515
Momentum and Discovery 91 168 82 659 82 654
Funds on deposit 14 613 13 749 15 149
Government and public
authority stocks 13 859 12 170 13 123
- available for sale 129 50 627
- at elected fair value 13 730 12 120 12 496
Debentures and other loans 7 643 10 760 8 110
- available for sale 99 96 75
- at elected fair value 7 544 10 664 8 035
Policy loans originated 577 629 554
Equity investments 50 976 42 244 42 070
- held to maturity 786 714 749
- available for sale 1 879 2 433 1 665
- at elected fair value 48 311 39 097 39 656
Investment properties 3 500 3 107 3 648
Loans and receivables 8 355 9 128 8 865
Investments in associated companies 2 981 2 493 2 815
Derivative instruments 56 349 42 938 45 485
- qualifying for hedging 884 9 772 4 798
- trading 55 465 33 166 40 687
Prepayment 248 - 174
Deferred taxation asset 829 1 124 983
Assets arising from
insurance contracts 1 780 1 054 1 403
Intangible assets 805 552 660
Property and equipment 3 868 4 376 4 456
Total assets 450 696 414 997 424 821
Liabilities and shareholders` equity
Deposits and current accounts 230 077 231 652 219 061
Non-recourse deposits 5 889 2 395 6 515
Current liabilities 14 434 17 052 14 052
Provisions 1 290 1 079 1 345
Taxation 976 985 1 414
Derivative instruments 46 505 41 275 40 783
- qualifying for hedging 523 11 251 4 606
- trading 45 982 30 024 36 177
Short trading positions 16 786 6 136 23 286
Deferred taxation liability 2 269 1 877 2 155
Post-retirement medical liability 1 435 1 315 1 402
Debentures and long-term liabilities 7 321 5 961 7 104
Policyholder liabilities 92 608 80 912 81 969
Policyholder liabilities
under insurance contracts 47 708 42 496 42 337
Policyholder liabilities under
investment contracts 44 900 38 416 39 632
Total liabilities 419 590 390 639 399 086
Outside shareholders` interests 2 044 1 811 1 823
Shareholder`s equity 29 062 22 547 23 912
Ordinary share capital and reserves 26 087 22 547 23 912
Ordinary share capital and
share premium 6 268 6 601 6 767
Reserves 19 819 15 946 17 145
Non-redeemable non-cumulative preference
share capital and premium 2 975 - -
Total liabilities and
shareholders` equity 450 696 414 997 424 821
Summarised cash flow statement
Unaudited Audited
Six months ended Year ended
31 December 30 June
R million 2004 2003 2004
Cash (outflow)/inflow
to operations (1 214) 6 999 16 312
Working capital changes 891 (5 782) (11 844)
Cash (outflow)/inflow
from operations (323) 1 217 4 468
Taxation paid (1 527) (1 882) (2 482)
Dividends paid (1 387) (1 010) (1 956)
Net cash (outflow)/inflow from
operating activities (3 237) (1 675) 30
Net cash outflow from
investment activities (7 658) (8 248) (7 966)
Net cash inflow from
financing activities 9 450 1 833 3 101
Net decrease in cash and
cash equivalents (1 445) (8 090) (4 835)
Cash and cash equivalents at
beginning of year 40 253 45 088 45 088
Cash and cash equivalents
at end of year 38 808 36 998 40 253
Assets under management
Actual Actual
Unaudited Unaudited
At At Audited
31 December 31 December At 30 June
R million 2004 2003 % change 2004
On balance sheet 450 696 414 997 8.6 424 821
Off balance sheet 127 142 101 466 25.3 104 218
Total assets under
management or
administration 577 838 516 463 11.9 529 039
Logos
First National Bank - A division of FirstRand Bank Limited
Momentum
Wesbank - A division of FirstRand Bank Limited
EBucks.com
Discovery
OUTsurance
Rand Merchant Bank - A division of FirstRand Bank Limited
