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FSR
FSR
FST - Firstrand - Unaudited interim results and cash dividend declaration for
the six months ended 31 December 2009
FIRSTRAND
FirstRand Limited * Registration No: 1966/010753/06 *
JSE code: FSR ISIN: ZAE000066304 ("FSR") * NSX share code: FST * Certain
companies within the FirstRand Group are Authorised Financial Services Providers
09/10
UNAUDITED INTERIM RESULTS AND CASH DIVIDEND DECLARATION FOR THE SIX MONTHS ENDED
31 DECEMBER 2009
KEY FINANCIALS
- Attributable earnings R4 520 million
- Normalised earnings R4 605 million
- Normalised ROE 17%
INTRODUCTION
This report covers the unaudited financial results of FirstRand Limited
("FirstRand" or "the Group") for the six months ended 31 December 2009 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, WesBank, the instalment finance business,
OUTsurance, the short term insurer and Momentum, the life insurance business.
FirstRand operates these franchises through various legal entities.
Comprehensive reports on the Banking and Momentum Groups, both of which are
wholly owned, are available at www.firstrand.co.za.
FINANCIAL HIGHLIGHTS
Six months ended Year ended
31 December 30 June
R million 2009 2008 % change 2009
Attributable earnings to 4 520 4 306 5 6 501
ordinary shareholders
Headline earnings 4 492 4 553 (1) 6 939
Normalised earnings 4 605 4 576 1 7 151
Diluted headline earnings per 85.3 87.3 (2) 133.1
share (cents)
Diluted normalised earnings 81.7 81.2 1 126.8
per share (cents)
Ordinary dividend per share 34.0 34.0 - 56.0
(cents)
Normalised return on equity 17 17 14
(%)
Assets under management or 965 419 1 034 880 (7) 965 484
administration
Normalised net asset value 1 004.5 949.8 6 938.4
per share (cents)
OPERATING ENVIRONMENT
The six month period to 31 December 2009 showed early signs of an improving
global and local economic environment. GDP in most of the world`s developed
markets is beginning to slowly recover, and some emerging markets, notably
China, are showing robust growth.
In South Africa, the challenging conditions in the operating environment started
to improve during the period with positive GDP growth shown during the third and
fourth quarters of 2009. This appeared to be mainly driven by the manufacturing
sector and government spending programmes. Otherwise, economic conditions
remained challenging with real disposable income declining and job losses of
870 000 year on year. Inflation remained above the South African Reserve Bank`s
targeted range at 6.3% at 31 December 2009.
The decline in economic activity and domestic demand prompted a further 50bps
repo rate decrease in August 2009 following the cumulative 450bps decrease
during the period from December 2008 to 30 June 2009. The impact of these
interest rate reductions, together with a stabilisation in house prices and a
recovery in equity prices, provided some relief to consumers. However, levels of
consumer indebtedness remain high and in addition some signs of stress remain
evident in certain commercial and corporate segments. Whilst the reduction in
interest rates has had an initial positive impact on retail bad debts it also
continues to negatively impact on the margins of the banks` deposits and income
on the capital endowment.
Balance sheet growth and transactional volumes in both the retail and corporate
segments remained subdued reflecting the reduced economic activity during the
period.
OVERVIEW OF RESULTS
FirstRand`s diverse portfolio of banking and insurance businesses produced a
satisfactory performance. Normalised earnings improved 1% to R4.61 billion with
a normalised return on equity ("ROE") of 17%.
The table below represents the contribution to normalised earnings from the
banking and insurance groups.
Six months ended Year ended
31 December 30 June
R million 2009 2008 % contri- 2009
bution
Banking Group 4 038 4 149 88 6 056
Momentum 850 740 18 1 649
FirstRand* (283) (313) (6) (554)
Normalised earnings 4 605 4 576 100 7 151
* Including dividend paid to non cumulative non redeemable preference
shareholders.
The Banking Group`s results for the period under review reflect a significant
recovery in profitability in comparison to the six month period ended 30 June
2009, although slightly below the level of December 2008. The total banking
portfolio produced R4.04 billion of normalised earnings, representing a 3%
decrease on the previous comparative period but more than double that of the
previous six months to June 2009. Its normalised ROE remained at 17%.
The improving earnings trend from the banking operations reflects the reversal
of the two most significant negative issues from the previous comparative
period, and the year to June 2009, namely bad debts emanating from the large
retail lending books and losses from certain offshore trading portfolios within
the investment bank. This performance was achieved despite a major reduction in
private equity realisations and overall reflects good organic growth from
operations, despite the tough operating environment.
Overall impairments decreased 13% from R3.7 billion to R3.2 billion,
driven mainly by the retail franchises of FNB and WesBank and reflecting early
positive benefits of the lower interest rate environment. In addition, non
interest revenue increased 31% from R9.4 billion to R12.3 billion representing a
strong rebound in fair value income, driven mainly by a recovery in RMB`s
trading activities.
Despite these improvements, pressure remained on the net interest income
component of the earnings base, due mainly to declining asset growth and the
negative impact of rapidly reducing interest rates on capital and endowment
balances.
Impairments remained in line with expectations, with the credit loss ratio at
1.51% of advances (retail 2.12% and wholesale 0.34%). Major components of the
impairment charge are:
Six months ended
Credit loss ratio 31 December 30 June
% 2009 2008 2009 2008
Residential mortgages 1.17 1.48 1.77 1.21
Credit card 8.14 9.77 12.51 8.47
Vehicle and asset finance 2.26 2.22 2.61 2.18
-?Retail 2.20 2.99 2.70 2.80
-?Corporate 2.37 0.72 2.43 0.82
Other retail 4.25 4.76 5.77 4.85
Wholesale 0.34 0.66 0.58 0.34
Total credit loss ratio* 1.51 1.64 1.99 1.54
* Total includes Group Support and other.
The earnings of the insurance subsidiary Momentum were positively impacted by a
recovery in equity markets and reduced market volatility combined with a
continued good strong operational performance. Overall normalised earnings
increased 15% to R850 million with the ROE remaining ahead of the Group`s target
at 22% (2008: 23%).
Momentum`s investment businesses benefited from the equity market recovery with
retail investment flows improving with market sentiment. However, volumes of new
savings and retirement annuity business remain muted, reflecting the level of
strain consumers are still feeling. The ongoing robust operational performance
was evidenced in new business embedded value holding up well despite volume
pressure. FNB Insurance continued to perform well as did individual risk and
retail lump sum new business volumes.
OVERVIEW OF THE OPERATING FRANCHISES
Below is a brief overview of each operating franchise.
Six months ended Year ended
FNB South Africa 31 December 30 June
R million 2009 2008 % change 2009
Normalised earnings 2 142 2 111 1 3 756
Profit before tax 2 895 2 875 1 5 060
Total assets 200 848 207 324 (3) 206 799
Total liabilities 194 877 199 921 (3) 197 230
Credit loss ratio 1.91 2.05 2.39
ROE (%) 31 28 26
During the six months to December 2009 FNB produced a 1% increase in profit
before tax from R2 875 million to R2 895 million, and increased its ROE to 31%.
This satisfactory performance can be ascribed to the underlying resilience of
the franchise which showed reasonable growth in transactional volumes despite
external pressures on customers, the beginnings of a recovery in credit
impairments and steady growth in deposits.
In addition, FNB benefited from the execution of certain specific strategies
in response to the current macro environment. These included a strong focus on
efficiencies and sustainable containment of cost growth, and a better quality o
f new business written in the retail lending books due to revised credit
strategies, especially within the mortgage and credit card portfolios.
Within the retail portfolios the Mass segment experienced a slight reduction
in profitability due mainly to the substantial decline in deposit margins on
the endowment products which was partially offset by the income generated by
good advances growth. Impairments did increase but were in line with
expectations and considered satisfactory given the current environment. This
segment continued to benefit from the continuing growth in cellphone banking
services and products.
The Consumer segment delivered significantly improved profitability, largely
attributable to an improved performance from FNB HomeLoans, which, in turn,
was driven by a substantial decrease in impairments.
The Commercial segment`s deposit margins continued to feel the negative effects
of the endowment impact and impairments increased as expected, given the current
cycle.
FNB`s strong focus on efficiencies and sustainable containment of cost growth
resulted in overall operating expenses increasing only 2%, reflecting a 3%
decrease in total head count.
Six months ended Year ended
FNB Africa 31 December 30 June
R million 2009 2008 % change 2009
Normalised earnings 312 320 (3) 514
Profit before tax 643 658 (2) 1 222
Total assets 32 887 30 121 9 31 640
Total liabilities 29 079 26 707 9 28 180
Credit loss ratio 0.48 0.60 0.58
ROE (%) 25 30 24
FNB Africa`s results were negatively impacted by a challenging operating
environment in Botswana, as well as expansion and infrastructure expenses
incurred in various subsidiaries during the period under review. FNB Namibia
continued to perform strongly on the back of balance sheet growth and good
transaction volumes as well as a strong performance from the insurance
operations. FNB Swaziland also performed well, benefiting from strategies to
grow advances and focus on maintaining good credit quality. These positives
were however offset by a weaker performance from FNB Botswana, with profits
decreasing due to lower transaction volumes, higher impairment charges and
the negative impact of the Rand strengthening against the Pula during the
period.
Expansion costs continued to be incurred relating to the ongoing investment
in FNB Lesotho, FNB Zambia and FNB Mo?ambique. In line with its stated strategy
FNB is expanding the footprints of these subsidiaries, which is expected to
provide a strong platform for future growth.
Six months ended Year ended
RMB 31 December 30 June
R million 2009 2008 % change 2009
Normalised earnings 1 039 1 399 (26) 1 536
Profit before tax 1 403 1 904 (26) 2 055
Total assets 255 129 317 959 (20) 275 097
Total liabilities 251 527 313 784 (20) 272 646
ROE (%) 17 20 12
RMB reported profits before tax of R1 403 million for the six months to 31
December 2009, 26% lower than the prior year but significantly up on the six
month period to June 2009.
Overall, RMB`s portfolio showed a mixed performance. As expected, given the
high base created in the previous period and the lower levels of corporate
activity experienced, the Investment Banking division ("IBD") reported lower
profits. However several significant transactions were completed in the period
and strong deal flow was maintained across all areas of business. Through
its agreement with China Construction Bank ("CCB"), and working closely with
FirstRand India, IBD is making progress in accessing the increasing
Asian-African trade and investment flows.
The Fixed Income, Currency and Commodities division ("FICC") reported profits
lower than the first six months of the prior year, due to decreased client
flows and reduced market volatility. However, profits increased significantly
on the previous six month period to June 2009 driven mainly by an improved
performance from trading activities. The Private Equity division was
substantially down on the comparative period, as a result of lower realisation
profits than those reported in the December 2008 results. The Equity Trading
division returned to profitability as a result of the de-risking of the
international portfolios as well as a strong performance from the local
agency and trading businesses.
Whilst, as expected, further losses were incurred on RMB`s remaining legacy
portfolios, these were significantly lower than the losses incurred in the
six months to December 2008 and were largely due to a write down against an
investment acquired following the default of Dealstream. Significantly reduced
losses were incurred on the remaining SPJ International portfolios.
As indicated previously these portfolios are illiquid, however, progress
has been made in reducing the remaining exposures.
Six months ended Year ended
WesBank 31 December 30 June
R million 2009 2008 % change 2009
Normalised earnings 337 159 >100 324
Profit before tax 405 (38) >100 130
Total assets 96 443 101 599 (5) 94 472
Total liabilities 95 459 101 351 (6) 94 363
Credit loss ratio 2.57 2.67 2.86
ROE (%) 14 7 7
Although credit losses remained at historically high levels and the advances
book showed little growth during the period under review, WesBank`s overall
profitability showed a marked improvement over the comparative period.
Excluding the R206 million loss relating to the disposal of the
MotorOne Finance advances book, which was recognised in the six months to
December 2008, overall profits before tax increased 141% to R405 million.
The improvement in earnings reflects a reduction in impairment levels,
improved interest margins and tight control over expenditure. The advances book
continued to contract during the period under review, however towards the end
of the calendar year some advances growth was evidenced. All indications
confirm that retail bad debts have peaked and, as expected, there has been a
migration of bad debts from the consumer sector to the commercial/corporate
sector, which impacted the overall mix of earnings.
The bad debt performance of the retail portfolio (which includes the personal
loan advances book) reflects the improving arrears position, as well as the
effects of the new business originated under a revised credit appetite. More
recently originated business continues to deliver better than historic average
arrears levels. The corporate portfolio is performing as expected given the
extent of the deterioration of the credit cycle. There have been improvements
in the level of dealer failures and the provisions related to these failures.
However, in certain sectors, and in respect of certain asset types (notably
light aircraft), the corporate portfolio continues to show strain and this is
expected to continue for the remainder of the financial year.
Six months ended Year ended
Momentum 31 December 30 June
R million 2009 2008 % change 2009
Normalised earnings 850 740 15 1 649
Embedded value ("EV") 17 835 15 121 18 16 086
Return on EV (%) 28 (5) 3
ROE (%) 22 23 23
Momentum`s normalised earnings increased 15% to R850 million for the six months
ended 31 December 2009. The ROE of 22% remained ahead of the Group`s targeted
return and capitalisation levels strengthened to 2.0 times the Capital Adequacy
Requirement ("CAR").
This performance reflects the positive impact of the recovery in equity markets
and a continued strong operational performance despite negative pressures in
many sectors of the market.
The employee benefits business experienced improved underwriting profits, whilst
the healthcare administration business benefited from the conversion to a single
administration platform. FNB Insurance continued to drive significant growth in
new business sales benefiting from further penetration of the FNB mass market
client base.
Initiatives to improve efficiencies are starting to bear fruit, with group
administration expenses increasing by only 1%.
The reduction in new business inflows is due mainly to lower institutional
asset management and employee benefits lump sum inflows. Sales of retail
recurring premium business declined, mainly reflecting the pressure on household
disposable income. Retail lump sum inflows however generated good growth, driven
mainly by increased sales of discretionary linked investments and endowments.
The new business margin was maintained due to the positive impact of a change
in mix to more profitable products although this was partly offset by lower
new business volumes in the recurring savings business.
STRATEGIC ISSUES
International strategy
The Group is continuing to make good progress in terms of its international
strategy. As the African continent`s economic environment becomes increasingly
investor friendly, so opportunities for financial services are expected to
increase and FirstRand is positioning itself to benefit from these.
The Group is focusing on building its franchises in Africa, and has identified
countries that it believes are strategically important. Key markets that offer
good prospects are Nigeria, Zambia, Mo?ambique, Tanzania and Angola.
The Group is currently staffing up its representative office in Nigeria and is
investigating opportunities in the Nigerian financial services industry
emanating from the banking industry reform that is underway. In line with its
strategy the Group is interested in all key segments of financial services -
namely corporate, investment retail banking, and insurance.
Given that China is South Africa`s largest trading partner, positioning the
Group`s franchises to capture the trade and investment flows with China is an
important element for its African strategy.
The Group`s increased focus on China, including its relationship with CCB, is
beginning to bear fruit. Transactional flows with Chinese counterparts have
increased and several significant deals were concluded.
The Group has a number of opportunities to explore further and the deal pipeline
is strong. These opportunities span across many of the Group`s activities and
include a variety of prospects on the wider African continent.
Capital management
The Group seeks to maintain capitalisation ratios appropriate to safeguard its
operations, aligned to the interests of its stakeholders and sufficient to
provide for its growth initiatives. Current internal resources and forecast
capital generation is expected to be sufficient to provide for the Group`s
domestic growth needs as well as for strategic international expansion plans.
The targeted capital levels as well as the current ratios for the Group are
indicated in the table below:
FirstRand Bank Holdings
Actual Target Regulatory
minimum
Capital adequacy ratio (%) 14.34 12.0 - 13.5 9.50*
Tier 1 ratio 12.19 10.00 7.00
FirstRand Bank
Capital adequacy ratio (%) 12.83 11.5 - 13.0 9.50*
Tier 1 ratio 10.55 9.5 7.00
Momentum
Capital adequacy cover ratio 2.0 1.4 - 1.6
* The regulatory minimum excludes the bank specific (Pillar 2b) add on.
The global reform of banking regulations currently underway is focused on
improving the quality and quantity of the capital bases of the banking industry,
which could result in lower returns from the sector. For South African banks the
proposed changes to the capital regulations are less material than for
international peers as the quantity and quality of capital of the South African
banks has historically been good.
Liquidity and funding management
The international market turbulence, the recent developments in certain EU
countries and ambitious fund raising by state owned enterprises and the South
African government, led to an increase in the liquidity premium for term funding
in South Africa.
Group Treasury proactively undertook several measures, starting in 2008 and
continuing in 2009, to further strengthen and safeguard its liquidity position
and increase liquidity buffers, including the adjustment of short term funding
targets and an increased focus on balance sheet asset reduction. This ensures
that the Group has a robust and strong balance sheet to fund future growth
requirements. The broad diversity of its funding sources and its contingency
planning processes resulted in a robust asset and liability profile with the
funding profile similar to that of the year ended 30 June 2009. The Group`s
domestic retail, commercial, corporate and wealth businesses remain a valuable
source of funding. In addition the Group has established funding platforms in
Africa and London providing access to US and Asian markets to fund potential
growth, in excess of in-country funding requirements.
Global reforms relating to liquidity risk management include the proposed
introduction of a global minimum liquidity standard, which includes a 30-day
liquidity coverage ratio as well as a longer term structural liquidity ratio
("the Net Stable Funding Ratio"). This proposal has not been finalised and
remains open to comment and further quantitative impact studies. However, in
its current form it could have a significant impact on the South African
financial services industry given the specific structure of the domestic
funding and savings markets.
PROSPECTS
The anticipated modest growth in the South African economy will be driven mainly
by further investment by government and some improvement in consumption levels.
Whilst this will not drive significant growth in advances, as levels of consumer
indebtedness are still at historic highs, FirstRand does expect this increased
economic activity to benefit its banking franchises. Some risks remain in the
corporate sector, however balance sheets have proved to be extremely resilient
in this cycle. Whilst significant defaults are unlikely, business volumes
overall will remain subdued.
The recovery in equity markets is expected to continue to benefit Momentum.
However, given that the recovery appears to be gradual, pressure on disposable
income will remain.
The Group`s balance sheet remains robust from both a capital and funding
perspective which will allow the operating franchises to continue to take
advantage of an improving cycle.
DIVIDEND POLICY
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 the dividend cover may vary from year to
year.
BASIS OF PRESENTATION
FirstRand prepares its consolidated financial statements in accordance with
International Financial Reporting Standards ("IFRS") including IAS 34: Interim
Financial Reporting. The accounting policies applied are consistent with those
applied in preparation of previous financial statements.
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 below.
A table reflecting the restatement of prior period numbers and reasons therefore
can be found below.
BOARD CHANGES
Dr Frederik van Zyl Slabbert retired from the board of directors with effect
from 25 November 2009.
Dr Slabbert has been a valued member of the FirstRand board since 2001 and the
directors wish him well in his retirement.
LL Dippenaar SE Nxasana
Chairman Chief executive
8 March 2010
INTERIM DIVIDEND DECLARATIONS
Ordinary shares
The following ordinary cash dividend was declared in respect of the period
ended 31 December 2009:
Six months ended 31 December
Cents per share 2009 2008
Interim (declared 8 March 2010) 34.00 34.00
* The last day to trade in FirstRand shares on a cum-dividend basis in
respect of the interim dividend will be Thursday 25 March 2010 and the first day
to trade ex-dividend will be Friday 26 March 2010. The record date will be
Thursday 1 April 2010 and the payment date Tuesday 6 April 2010. No
dematerialisation or rematerialisation of shares may be done during the period
Friday 26 March 2010 and Thursday 1 April 2010, both days inclusive.
Preference shares
Dividend on the "B" preference shares are calculated at a rate of 68% of the
prime lending rate of banks. The following dividend was declared on 27 January
2010 for payment on 22 February 2010:
"B" Preference
Cents per share 2009
Period 1 September 2009 - 22 February 2010 342.3
* The" B1" preference shares were incorporated with the "B"
preference shares effective 4 January 2010.
AH Arnott
Company secretary
8 March 2010
CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
31 December
30 June
R million 2009 2008 % 2009
(restated change
)
Interest and similar income 23 660 32 318 (27) 60 516
Interest expense and similar (11 179) (19 392) (42) (34 526)
charges
Net interest income before 12 481 12 926 (3) 25 990
impairment of advances
Impairment of advances (3 225) (3 693) (13) (8 024)
Net interest income after 9 256 9 233 0 17 966
impairment of advances
Non interest income 24 962 2 656 >100 10 649
Net insurance premium income 3 324 2 951 13 6 464
Net claims and benefits paid (3 353) (3 024) 11 (5 939)
(Increase)/decrease in value (12 849) 6 050 >(100) 6 525
of policyholder liabilities
Income from operations 21 340 17 866 19 35 665
Operating expenses (14 515) (13 080) 11 (27 933)
Net income from operations 6 825 4 786 43 7 732
Share of profit of associate 395 987 (60) 1 590
s and joint ventures
Profit before tax 7 220 5 773 25 9 322
Tax (2 202) (653) >100 (1 484)
Profit for the period 5 018 5 120 (2) 7 838
Attributable to:
Ordinary shareholders 4 520 4 306 5 6 501
Non cumulative non 190 230 (17) 464
redeemable preference shares
Equity holders of Group 4 710 4 536 4 6 965
Non controlling interest 308 584 (47) 873
Profit for the period 5 018 5 120 (2) 7 838
Earnings per share (cents)
- Basic 86.1 82.8 4 124.9
- Diluted 85.8 82.6 4 124.7
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
31 December 30 June
R million 2009 2008 2009
Profit for the period 5 018 5 120 7 838
Other comprehensive income
Cash flow hedges 65 (1 296) (1 228)
Available-for-sale financial assets 255 604 45
Exchange differences on translation (84) 242 (641)
foreign operations
Share of other comprehensive income of 28 88 73
associates
Other comprehensive income for the 264 (362) (1 751)
period before tax
Income tax relating to components of (28) 181 293
other comprehensive income
Other comprehensive income for the 236 (181) (1 458)
period
Total comprehensive income for the 5 254 4 939 6 380
period
Total comprehensive income
attributable to:
Ordinary shareholders 4 763 4 010 5 064
Non cumulative non redeemable 190 230 464
preference shares
Equity holders of the Group 4 953 4 240 5 528
Non controlling interests 301 699 852
Total comprehensive income for the 5 254 4 939 6 380
period
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 30 June
R million 2009 2008 2009
(restated (restated)
)
ASSETS
Cash and short term funds 57 663 60 793 57 266
Derivative financial instruments 45 057 86 602 68 608
Advances 412 561 427 014 416 488
Investment securities and other 239 193 228 410 209 249
investments
Commodities 1 825 1 259 1 323
Accounts receivable 7 680 8 719 11 068
Investments in associates and jo 16 053 16 324 15 294
int ventures
Property and equipment 10 370 9 582 10 220
Deferred tax asset 1 459 1 664 2 034
Intangible assets and deferred 5 632 5 284 5 698
acquisition costs
Investment properties 2 274 4 089 2 156
Policy loans 642 761 626
Reinsurance assets 997 943 8 430
Tax asset 922 1 620 883
Non current assets held for sale 61 - 508
Total assets 802 389 853 064 809 851
EQUITY AND LIABILITIES
Liabilities
Deposits 487 929 490 153 478 083
Short trading positions 21 813 39 312 25 002
Derivative financial instruments 33 779 74 213 55 556
Creditors and accruals 19 610 16 226 18 217
Provisions 3 045 1 956 2 961
Tax liability 240 572 331
Post retirement liabilities 2 138 1 829 2 089
Deferred tax liability 3 975 4 701 3 977
Long term liabilities 10 295 14 163 12 928
Policyholder liabilities under 42 748 42 903 40 725
insurance contracts
Policyholder 112 249 107 561 109 196
liabilities under investment
contracts
Liabilities arising to third 7 601 5 996 8 114
parties
Deferred revenue liability 345 298 322
Liabilities directly associated - - 253
with non current assets
classified
as held for sale
Total liabilities 745 767 799 883 757 754
Equity
Capital and reserves
attributable to equity holders
Ordinary shares 53 52 52
Share premium 2 204 1 296 1 300
Reserves 47 653 44 834 44 133
Capital and reserves 49 910 46 182 45 485
attributable to ordinary equity
holders
Non cumulative non 4 519 4 519 4 519
redeemable preference shares
Capital and reserves 54 429 50 701 50 004
attributable to equity holders
Non controlling interest 2 193 2 480 2 093
Total equity 56 622 53 181 52 097
Total equity and liabilities 802 389 853 064 809 851
CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Year
ended
31 December 30 June
R million 2009 2008 2009
(restated
)
Cash flows from operating
activities
Cash receipts from customers 43 063 47 343 86 572
Cash paid to customers, suppliers (24 021) (39 188) (58 029)
and employees
Dividends received 984 1 054 6 743
Dividends paid (1 345) (2 220) (4 228)
Dividends paid to non controlling (164) (565) (804)
interest
Net cash flows from operating 18 517 6 424 30 254
activities
(Decrease)/increase in income (21 912) (15 174) 12 721
earning assets
Increase/(decrease) in deposits 7 415 21 165 (29 537)
and other liabilities
Net cash flows from operating (14 497) 5 991 (16 816)
funds
Tax paid (1 576) (1 807) (3 677)
Net cash inflow from operating 2 444 10 608 9 761
activities
Cash flows from investment
activities
Acquisition of property and (1 013) (1 682) (3 038)
equipment
Proceeds from the disposal of 15 405 293
property and equipment
Acquisition of investment (168) (183) (457)
properties
Proceeds/(purchase) on disposal of 139 (43) 552
investments
Acquisition of subsidiaries - (102) (18)
Acquisition of associates and (877) (2 732) (2 799)
joint ventures
Proceeds on disposal of associates 161 309 508
and joint ventures
Proceeds on disposal of advances 22 1 719 1 768
book
Disposal/(acquisition) of 380 (679) (1 923)
intangible assets
Net cash outflow from investment (1 341) (2 988) (5 114)
activities
Cash flows from financing
activities
Repayment of long term borrowings (692) (931) (906)
Net cash outflow from financing (692) (931) (906)
activities
Net increase in cash and cash 411 6 689 3 741
equivalents
Cash and cash equivalents at the 57 266 53 555 53 555
beginning of the period
Cash and cash equivalents at the 57 677 60 244 57 296
end of the period
Cash and cash equivalents - - 35
acquired*
Effect of exchange rate changes on (14) 549 (65)
cash and cash equivalents
Cash and cash equivalents at the 57 663 60 793 57 266
end of the period
* Cash and cash equivalents
bought and sold relate to
subsidiaries acquired and sold
during the period.
Mandatory reserve balances 12 238 11 262 11 661
included above
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.
KEY FINANCIAL RESULTS AND RATIOS
Six months ended Year ended
31 December
30 June
R million 2009 2008 % 2009
change
Attributable earnings to 4 520 4 306 5 6 501
ordinary shareholders
Headline earnings 4 492 4 553 (1) 6 939
Normalised earnings 4 605 4 576 1 7 151
Normalised net asset value 56 633 53 547 6 52 905
Normalised return on equity 16.8 17.4 13.7
(%)
Normalised price to book 1.83 1.70 1.50
(times)
Normalised earnings per
share (cents)
- Basic 81.7 81.2 1 126.8
- Diluted 81.7 81.2 1 126.8
Earnings per share (cents)
- Basic 86.1 82.8 4 124.9
- Diluted 85.8 82.6 4 124.7
Headline earnings per share
(cents)
- Basic 85.5 87.6 (2) 133.3
- Diluted 85.3 87.3 (2) 133.1
Ordinary dividend per share 34.0 34.0 - 56.0
(cents)
Non cumulative non
redeemable preference
dividend per share (cents)
B Class (68% of FNB prime 423.1 511.3 (17) 1 030.3
lending rate)
B1 Class (68% of FNB prime 423.1 511.3 (17) 1 030.3
lending rate)*
Capital adequacy
FirstRand Bank Holdings
("FRBH")
- Capital adequacy ratio 14.3 13.0 14.6
- Tier 1 12.2 11.1 12.3
Momentum
- Capital adequacy cover 2.0 1.4 1.8
ratio
* The "B1" preference shares were incorporated with the "B " preference
shares effective 4 January 2010.
Amount as Amount Difference Explanation
Previously as
reported restated
30 June 2009
Statement of
financial
position
Assets
Accounts 11 355 11 068 (287) Reinsurance assets
receivable arising in the
Group`s Namibian
operations were
classified from
accounts receivable
to a separate line,
reinsurance assets,
on the face of the
statement of
financial position.
The re-
classification
enhanced disclosure
relating to the
insurance
operations in
Namibia and ensures
consistent
treatment with the
Group`s other
insurance
operations.
Reinsurance 8 143 8 430 287 Refer accounts
assets receivable.
31 December
2008
Income
statement
Interest and 32 311 32 318 7 Consolidation of
similar income funds previously
fair valued.
Non interest 8 640 8 633 (7) Refer above
income
Statement of
financial
position
Assets
Cash and short 60 297 60 793 496 Consolidation of
term funds funds previously
fair valued.
Derivative 91 604 86 602 (5 002) Offset criteria in
financial IAS 32 were met.
instruments
Investment 221 189 228 410 7 221 Off set criteria in
securities and IAS 32 were not
other met.
investments
Accounts 9 121 8 719 (402) Reinsurance assets
receivable arising in the
Group`s Namibian
operations were
classified from
accounts receivable
to a separate line,
reinsurance assets,
on the face of the
statement of
financial position.
The re-
classification
enhanced disclosure
relating to the
insurance
operations in
Namibia and ensures
consistent
treatment with the
Group`s other
insurance
operations.
(R332 million)
Consolidation of
funds previously
fair valued.
(R70 million)
Policy loans 211 761 550 Offset criteria in
IAS 32 were not
met.
Reinsurance 611 943 332 Refer accounts
assets receivable.
Liabilities
Derivative 78 626 74 213 (4 413) Offset criteria in
financial IAS 32 were met.
instruments
Creditors and 13 136 16 226 3 090 Net adjustment
accruals relating to offset
criteria not being
met and
consolidation of
certain funds
previously fair
valued.
Policyholder 107 011 107 561 550 Offset criteria in
liabilities IAS 32 were not
under met.
investment
contracts
Liabilities 2 028 5 996 3 968 Consolidation of
arising to funds previously
third parties fair valued.
Cash flow
statement
As a consequence of the above reclassifications, the cash flow
statement was accordingly restated.
STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31
DECEMBER
Share
capital General Cash
and flow
Share Share share risk hedge
R million capital premium reserve reserve
premium
Balance as at 01 July 52 1 036 1 088 8 602
2008
Movement in other - - - - -
reserves
Ordinary dividends - - - - -
Preference dividends - - - - -
Changes in ownership - - - - -
interest in
subsidiaries
Consolidation of - 260 260 - -
treasury shares
Total comprehensive - - - - (943)
income for the period
Balance as at 52 1 296 1 348 8 (341)
31 December 2008
Balance as at 01 July 52 1 300 1 352 9 (292)
2009
Issue of share capital - - - - -
Movement in other - - - - -
reserves
Ordinary dividends - - - - -
Preference dividends - - - - -
Transfer to/(from) - - - - -
reserves
Changes in ownership - - - - -
interest in
subsidiaries
Consolidation of 1 904 905 - -
treasury shares
Total comprehensive - - - - 46
income for the period
Balance as at 53 2 204 2 257 9 (246)
31 December 2009
Share Currenc Other
based y non
Payment Avail- Trans- Dis- Retained
able lation tribu-
for-sale table
R million Re- reserve reserve reserves earnings
serve
Balance as at 01 July 2 248 1 107 1 365 (185) 37 937
2008
Movement in other 60 - - (96) -
reserves
Ordinary dividends - - - - (1 990)
Preference dividends - - - - -
Changes in ownership - - - - -
interest
in subsidiaries
Consolidation of - - - - (232)
treasury shares
Total comprehensive - 432 138 77 4 306
income for
the period
Balance as at 31 2 308 1 539 1 503 (204) 40 021
December 2008
Balance as at 01 July 2 306 1 107 750 (198) 40 451
2009
Issue of share capital - - - - -
Movement in other 88 - - (15) -
reserves
Ordinary dividends - - - - (1 155)
Preference dividends - - - - -
Transfer to/(from) (72) - - - 72
reserves
Changes in ownership - - - - -
interest in
subsidiaries
Consolidation of - - - - (161)
treasury shares
Total comprehensive - 244 (58) 11 4 520
income for the period
Balance as at 31 2 322 1 351 692 (202) 43 727
December 2009
statement of changes in equity for the six months ended
31 December
Reserves Total
Attri- Pre- Non
butable ference
to share- Con- Total
equity holders` trolling
R million holders funds interest equity
Balance as at 01 July 2008 43 082 4 519 2 377 51 066
Movement in other reserves (36) - 13 (23)
Ordinary dividends (1 990) - (565) (2 555)
Preference dividends - (230) - (230)
Changes in ownership interest - - (44) (44)
in subsidiaries
Consolidation of treasury (232) - - 28
shares
Total comprehensive income for 4 010 230 699 4 939
the period
Balance as at 31 December 2008 44 834 4 519 2 480 53 181
Balance as at 01 July 2009 44 133 4 519 2 093 52 097
Issue of share capital - - (186) (186)
Movement in other reserves 73 - 212 285
Ordinary dividends (1 155) - (164) (1 319)
Preference dividends - (190) - (190)
Transfer to/(from) reserves - - - -
Changes in ownership interest - - (63) (63)
in subsidiaries
Consolidation of treasury (161) - - 744
shares
Total comprehensive income for 4 763 190 301 5 254
the period
Balance as at 31 December 2009 47 653 4 519 2 193 56 622
DESCRIPTION OF NORMALISED EARNINGS
The Group believes that normalised earnings more accurately reflects operational
performance. Headline earnings are adjusted to take into account non operational
and accounting anomalies.
These unaudited adjustments are consistent with those reported at 30 June 2009.
SHARE BASED PAYMENTS AND TREASURY SHARES: CONSOLIDATION OF STAFF SHARE SCHEMES
IFRS 2 - share based payments requires that all share based payments
transactions for goods or services received must be expensed with effect for
financial periods commencing on or after 1 January 2005. FirstRand hedges itself
against the price risk of the FirstRand share price in the various staff share
schemes. The staff schemes purchase FirstRand shares in the open market to
ensure the company is not exposed to the increase in the FirstRand share price.
Consequently, the cost to FirstRand is the funding cost of the purchases of
FirstRand`s shares by the staff share trust. These trusts are consolidated and
FirstRand shares held by the staff share schemes are treated as treasury shares.
For purposes of calculating the normalised earnings, the consolidation entries
are reversed and the Group shares held by the staff share schemes are treated as
issued to parties external to the Group.
The normalised adjustments:
* add back the IFRS 2 charge; and
* add back the treasury shares to equity.
TREASURY SHARES: FIRSTRAND SHARES HELD BY POLICYHOLDERS
FirstRand shares held by Momentum Group are invested for the risk and reward of
its policyholders, not its shareholders, and consequently the Group`s
shareholders are not exposed to the fair value changes on these shares. In terms
of IAS 32, FirstRand Limited shares held by Momentum Group on behalf of
policyholders are deemed to be treasury shares for accounting purposes. The
corresponding movement in the policyholder liabilities is, however, not
eliminated, resulting in a mismatch in the overall equity and income statement
of the Group.
Increases in the fair value of Group shares and dividends declared on these
shares increases the liability to policyholders. The increase in the liability
to policyholders is accounted for in the income statement. The increase in
assets held to match the liability position is eliminated. For purposes of
calculating the normalised earnings, the adjustments described above are
reversed and the Group shares held on behalf of policyholders are treated as
issued to parties external to the Group.
Directors: LL Dippenaar (Chairman), SE Nxasana (Chief executive officer), JP
Burger (Chief operating officer/Chief financial officer), VW?Bartlett, DJA Craig
(British), L Crouse, PM Goss, Dr NN Gwagwa, PK?Harris, G Moloi, AP Nkuna,
AT Nzimande, D Premnarayen (Indian), KB Schoeman, KC Shubane, RK Store,
BJ van der Ross, Dr JH van Greuning, MH Visser.
Secretary: AH Arnott
Registered office: 4th Floor, 4 Merchant Place, 1 Fredman Drive, 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
Date: 09/03/2010 08:00:02 Produced by the JSE SENS Department.
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