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FST - Firstrand - Unaudited interim results and cash dividend declaration for

Release Date: 09/03/2010 08:00
Code(s): FSR
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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 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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