Johannesburg - Banking group FirstRand said on Wednesday that it had R7.5 billion in excess capital to pursue acquisitions in priority countries. The group further said it had committed another R5 billion to growing its South African and rest of Africa operations.
FirstRand’s share price was down 0.96 percent to R50.75 at the close of the JSE.
FirstRand chief executive Johan Burger said the group would be disciplined in how it allocated the capital and would not chase growth at the expense of returns.
“We believe these results demonstrate the quality of our underlying businesses and strike the right balance between growth, prudent risk management and investment for growth, whilst ensuring premium returns to shareholders,” Burger said.
The group, which owns First National Bank (FNB), Rand Merchant Bank (RMB) and WesBank, said it had achieved normalised earnings growth of 7 percent and return on equity (ROE) of 22 percent in the six months to December.
The group said its fee and income for the period increased by 8 percent; it attributed this to solid growth in customer numbers in the period. The group said it achieved basic headline earnings per share of 211.5 cents compared with 185.4c per share in the corresponding period. Its interim dividend grew by 10 percent to R1.19.
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Burger said FirstRand’s had set aside R2.7 billion to bolster its existing organic growth strategy in Africa.
“The traction in the rest of Africa has been good despite some macro headwinds. However, we caution that it would take time for this portfolio to be a significant contributor to the group’s earnings,” Burger said. He added that R2.2 billion was set aside to capture a larger share of profits from its broader financial services markers domestically, primarily on FirstRand Insurance and Ashburton Investments.
FirstRand’s flagship subsidiary FNB reported a 3 percent jump in pre-tax profits of R9.4 billion, despite its profits from the rest of Africa declining by 22 percent in the period under review. FNB’s non-performing loans increased by 7percent in the period.
FNB’s chief executive, Jacques Celliers, said profits from the operations in the rest of Africa fell on the back of credit issues, especially in Zambia and Mozambique.
FNB’s ROE for the period was 38.5 percent, while it grew its overall customer numbers by 6percent in the six months under review.
RMB grew its pre-tax profits by 3 percent to R4.1 billon, and its ROE came in at 21.3 percent in the period. The group’s WesBank business reported a 9 percent increase in profits to R2.7 billion in the period, while it had a ROE of 19.9 percent.