| Mon 18 Sep 2006, 10:37 | | FirstRand trumps analystsÆ estimates |
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FirstRand trumps analystsÆ estimates
Vernon Wessels
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Bloomberg
THE increase in FirstRandÆs full year beat analystsÆ estimates, as lower interest rates spurred consumersÆ borrowing and spending.
Earnings a share in the year to June were 20%-25% higher than in the previous year, the owner of SAÆs biggest provider of car loans said on Friday in a trading update ahead of the release of its results tomorrow. The company did not give reasons for the gain.
FirstRand ôhas been growing its retail business quite aggressively, and this probably would have boosted earningsö, said Fazail Moolla, bank analyst at Metropolitan Asset Managers in Cape Town.
ôThe statement seems positive but weÆll have to see the full reasons for what contributed to this when the company reports.ö
Lenders such as FirstRand, SAÆs second-biggest financial-services firm by market value, have boosted home and car loans as seven interest-rate cuts between June 2003 and April last year made it easier for customers to repay debt.
FirstRand gained 41c, or 2,4%, to R17,62, on the JSE, making it the best performer in the six-member FTSE/JSE Africa banks index, which rose 1,5%. The stock has advanced 6,5% since a year ago, giving the lender a market value of R99,3bn.
ôFirstRand remains a quality bank with good earnings prospects,ö Ross Jenvey, an analyst at Credit Suisse Standard Securities, said in a note to clients last Monday. ôWe expect another strong year from all businesses.ö
Profit before once-off items and goodwill amortisation rose 20%-25%, FirstRand said. This beat the median estimate of six analysts surveyed by Thomson Financial, which expected R1,60 a share, up 19% from a year ago.
FirstRandÆs life insurance business may also benefit from increased sales and a 50% surge in the FTSE/JSE Africa all share index over the financial year, MetropolitanÆs Moolla said.
FirstRandÆs banking unit, which accounts for nearly 80% of the group, owns First National Bank, SAÆs third-biggest consumer lender, investment bank Rand Merchant Bank and WesBank, which provides a third of South African car deals. It owns Momentum Group, SAÆs fourth-biggest life insurer, life-and health insurer Discovery Holdings and short-term insurers.
