FirstRand braces for tough times
DURBAN – FirstRand is anticipating tougher trading conditions in South Africa as the country entered a technical recession, but the group remains confident that its diversified portfolio will pull it through as it continues to report top-line growth in its businesses.
South Africa’s gross domestic product (GDP) shrank by 0.7 percent in the second quarter of 2018 after recording 2.6 percent decline in the first quarter of the year.
Chief executive Alan Pullinger said the group expected the economic environment to remain challenging well into 2019 and 2020.
“However, this should be not an excuse for poor performance. As the group that it is operating in the financial services sector we will be affected, but we believe we have the right strategies in place and we must not take unnecessary risks,” Pullinger said.
In the year to end June, the group delivered 8 percent increase in normalised earnings to R26.55 billion, up from R24.47bn, mainly driven by FNB which reported 16 percent growth in normalised earnings. FNB contributes 56 percent to the group’s normalised earnings. The group declared a dividend a share of 275c, up by 8 percent compared to last year’s 255c.
The share price gained more than 5 percent yesterday morning to R68.21 a share, up from Wednesday’s closing price of R64.82. However, FirstRand closed 3.9 percent higher at R67.35.
Basic and diluted normalised earnings per share increased by 8 percent to 470.8 cents a share, up from 436.2c.
Income from operations increased by 9 percent to R84.6bn, up from R77.8bn while profit for the year was up by 8 percent to R28.14bn, up from R26.14bn compared to last year.
Pullinger said FirstRand’s portfolio of businesses once again produced quality top-line growth and a superior return on equity, despite a difficult first half of the financial year.
“While WesBank had a tough year in a sector experiencing increased competition and declining volumes, posting a decrease in earnings of 9 percent, FNB delivered excellent earnings’ growth of 16 percent. This was driven by good growth in customers, volumes, advances and deposits, and successful cross-sell strategies,” Pullinger said.
- BUSINESS REPORT