FirstRand declares H1 dividend despite lower overall earnings
Due to improved economic conditions, FirstRand is rewarding its shareholders. It has declared an interim dividend of 110 cents per share for the six months ended 31 December 2020.
Even as this is nearly 25% less than the payout declared in the same period in 2019, the financial services provider is the first amongst its peers to declare a dividend.
Basic and diluted headline earnings per share also came in lower, falling by 20% to 198.9 cents. The group’s normalised earnings decreased 21% whilst the normalised return on equity (ROE) came in at 21.2% from 15.6% previously. FirstRand is pinning this decline on an “elevated credit impairment charge, materially lower endowment given cuts in policy rates, and lower levels of transactional activity and credit origination”.
Nevertheless, when comparing the figures for the period under review to the preceding six months to June 2020, FirstRand said there are early indications of a positive rebound in performance. It has specifically highlighted non-interest revenue (NIR) and impairments.
FirstRand CEO, Alan Pullinger said “Albeit off a low base, to date, the timing and extent of the rebound have positively exceeded the group’s initial expectations. Net income after the cost of capital (NIACC) is the group’s key performance measure. Whilst on 30 June 2020 the group delivered negative NIACC, it generated R437 million of economic profit as of 31 December 2020. An ROE above the cost of equity is a pleasing performance given the current macro environment.”
RMB
From a perspective of FirstRand’s underlying businesses, its corporate and investment arm, RMB was the star performer posting a 9% improvement in pre-provision operating profit to R5.37 billion. This was mainly driven by excellent performances from its domestic markets business and the rest of Africa activities.
FNB
The retail and commercial bank division of FirstRand, FNB, showed a decrease of 4% in pre-provisional operating profit, as margins remained under pressure.
WesBank
There is bad news from WesBank as well, the group’s installment finance division. Its pre-provision operating profit was 5% lower due to weak production levels (new business declined 21%).
Aldermore and total MotoNovo
The unit delivered pre-provision profits which increased by 16% due to the MotoNovo book and deposit growth which benefited the cost of funding.
Going forward, FirstRand said the domestic operating environment remains challenging, particularly given the risk of a third wave heading into winter and the projected timing of vaccinating the targeted level of the population.
FirstRand’s share price debuted the day at R52.29c and later peaked at R54.71c at 10:35 am today.
BUSINESS REPORT