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FSR - FirstRand Limited - Unaudited interim results and cash dividend

Release Date: 07/03/2011 16:10
Code(s): FSR
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FSR - FirstRand Limited - Unaudited interim results and cash dividend declaration for the six months ended 31 December 2010 FirstRand Limited Registration No: 1966/010753/06 JSE code: FSR ISIN: ZAE000066304 NSX share code: FST Certain companies within the FirstRand Group are Authorised Financial Services Providers UNAUDITED INTERIM RESULTS AND CASH DIVIDEND DECLARATION FOR THE SIX MONTHS ENDED 31 DECEMBER 2010 financial highlights - Normalised earnings +20% - Normalised ROE 19% - Dividend from continuing operations +25% FirstRand shareholders are referred to the publication made by Reuters today regarding FirstRand`s results for the six months to 31 December 2010. Shareholders are advised that this information was not accessed from a source that could be considered in the public domain and it is unclear where this information was obtained or derived from. However, given that the results are now in the public domain the Group feels it is appropriate to publish. Introduction This report covers the unaudited financial results of FirstRand Limited ("FirstRand" or "the Group") for the six months ended 31 December 2010 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, and WesBank, the instalment finance business. Effective 30 November 2010 FirstRand unbundled its 100% shareholding in the Momentum Group. The results for the period under review therefore include five months of contribution from Momentum (treated as a discontinued operation). The unbundling resulted in a dividend-in-specie of R15 billion. The results have been prepared on a normalised basis as the Group believes this most accurately reflects the economic performance. A detailed description of the normalised adjustments has been provided on www.firstrand.co.za. Commentary is on a normalised basis, unless indicated otherwise and is focused on the continuing operations of the Group. Continuing operations - financial highlights Headline earnings - IFRS R4 625 million +19% - Diluted headline earnings per share of 85.0 cents (2009: 73.3 cents) +16% Normalised earnings - Normalised R4 752 million +20% - Diluted normalised earnings per share of 84.3 cents (2009: 70.0 cents)+20% Return on equity % - IFRS 19.8 (2009: 19.4) - Normalised 18.7 (2009: 17.3) Cost to income ratio % - IFRS 57.7 (2009: 55.5) - Normalised 56.8 (2009: 55.3) Net asset value per share - Normalised 924.4 cents (2009: 838.7 cents) per share +10% Dividend per ordinary share - 35 cents (2009: 28 cents)+25% Capital adequacy ratio (Tier I) % - 13.6 Impairment charge % - IFRS and normalised 0.92 (2009: 1.52) Key financial results and ratios Six months ended Year 31 December ended 30 June
R million 2010 2009 % 2010 change From continuing and discontinued operations Attributable earnings to 12 070 4 520 >100 9 444 ordinary shareholders Headline earnings 5 043 4 492 12 9 453 Normalised earnings 5 260 4 605 14 9 963 Normalised net asset value 52 115 55 189 (6) 57 509 Normalised net asset value 924.4 978.9 (6) 1 020.0 per share (cents) Normalised return on equity 19.2 17.3 18.3 (%) Normalised earnings per share (cents) - Basic 93.3 81.7 14 176.7 - Diluted 93.3 81.7 14 176.7 Earnings per share (cents) - Basic 227.0 86.1 >100 179.9 - Diluted 223.2 85.8 >100 178.1 Headline earnings per share (cents) - Basic 94.8 85.5 11 180.1 - Diluted 93.3 85.3 9 178.3 Ordinary dividend per share 35.0 34.0 3 77.0 (cents) Non-cumulative non-redeemable ("NCNR") preference dividend per share (cents) (paid) - B Class (68% of FNB prime 355.0 423.1 (16) 765.4 lending rate) - B1 Class (68% of FNB prime - 423.1 (100) 423.1 lending rate)* From continuing operations Attributable earnings to 4 784 3 915 22 8 249 ordinary shareholders Headline earnings 4 625 3 882 19 8 075 Normalised earnings 4 752 3 946 20 8 569 Normalised net asset value 52 115 47 283 10 49 282 Normalised net asset value 924.4 838.7 10 874.1 per share (cents) Normalised return on equity 18.7 17.3 18.3 (%) Normalised earnings per share (cents) - Basic 84.3 70.0 20 152.0 - Diluted 84.3 70.0 20 152.0 Earnings per share - Basic 89.4 74.1 21 156.1 - Diluted 87.9 73.9 19 154.5 Headline earnings per share - Basic 86.4 73.5 18 152.8 - Diluted 85.0 73.3 16 151.3 Ordinary dividend per share 35.0 28.0 25 64.6 (cents) Capital adequacy FirstRand** - Capital adequacy ratio 15.3 14.3 15.6 - Tier 1 ratio 13.6 12.2 13.5 * The `B1` preference shares were incorporated with the "B" preference shares effective 4 January 2010. * FirstRand became a Bank controlling company effective 1 July * 2010. The comparatives are those of FirstRand Bank Holdings Limited which was previously the Bank controlling company. Overview of results OPERATING ENVIRONMENT The global economic environment reflected a mixed picture during the six month period ended 31 December 2010. After the strong recovery in the first half of the 2010 calendar year as a result of radical fiscal and monetary policy actions, positive sentiment tempered towards June 2010. It became evident that global activity would face severe headwinds over the next few years and the ongoing risks associated with the developed world`s high government debt levels and over-indebted consumers became clear. These risks were highlighted when the IMF and EU were forced to announce bailout and support packages of _110 billion in May 2010 to prevent a sovereign debt default in Greece, followed by the Irish bank debt crisis which resulted in a stimulus package of _85 billion in November 2010. These developments forced a number of developed economies to recognise the need for fiscal consolidation to reduce budget deficits and stabilise government debt to GDP ratios. Developed markets economic growth will remain subdued during 2011. While emerging market economies were not isolated from the impact of events in the developed world, balance sheets in these economies are generally healthier and seem to be in a better position to sustain growth at or above their long- term growth trends. Against this backdrop, the South African economy reflected a stable performance after emerging from the recession during the third quarter of 2009, achieving GDP growth during the third and fourth quarters of 2010 of 2.6% and 4.4% respectively (both annualised seasonally adjusted). As was the case for the rest of the world, growth was supported by further policy stimulus, growth in the mining, manufacturing and retail trade volumes, and improved external trade. Further easing in the inflation rate to 3.5% at 31 December 2010 allowed the South African Reserve Bank ("SARB") to cut interest rates by a further 100 bps during the period under review to 36 year lows. Real disposable income reflected strong growth during the latter part of 2010 and job losses showed a modest reversal with 17 000 non-agricultural jobs created during the third quarter of 2010. While the lower average interest rates weighed on the Bank`s endowment income, the cumulative benefit of the interest rate cuts, a modest recovery in house prices year-on-year, higher equity prices and real growth in disposable income eased pressure on consumers. This impacted positively on retail bad debt levels although there was an increase in commercial and corporate impairment levels in certain areas of the economy. Across the industry, balance sheets experienced low growth due to the limited recovery in economic activity and the ongoing process of consumers deleveraging their balance sheets. OVERVIEW OF RESULTS Against this economic backdrop FirstRand produced strong results for the period under review, building on the significant recovery in profitability during the 2010 financial year. The Group achieved normalised earnings from continuing operations of R4 752 million and produced a normalised return on equity ("ROE") of 18.7%. The Group`s dividend, on continuing operations, increased 25% from 28 cents to 35 cents. Sources of normalised earnings from continuing and discontinued operations The table below depicts the breakdown of normalised earnings from each operating franchise. Six months ended 31 December Year ended 30 June
R million 2010 % 2009 % % 2010 compo- compo- change sition sition Total FNB 2 779 53 2 430 53 14 4 773 FNB South Africa 2 463 47 2 142 47 15 4 303 FNB Africa 316 6 288 6 10 470 FNB Life 174 3 191 4 (9) 416 Total RMB 1 584 30 1 063 23 49 3 315 RMB 1 555 30 1 039 23 50 3 261 RMB Africa1 29 - 24 - 21 54 WesBank 750 14 337 7 >100 953 Corporate Centre (385) (7) 208 5 >100 (506) FirstRand Limited 10 - (93) (2) >(100) (38) (company) NCNR preference (160) (3) (190) (4) (16) (344) dividend Normalised 4 752 90 3 946 86 20 8 569 earnings from continuing operations Momentum 508 10 659 14 (23) 1 394 Normalised 5 260 100 4 605 100 14 9 963 earnings from continuing and discontinued operations 1 RMB Africa - FICC client activity within African subsidiaries. Earnings continued to be driven by significant decreases in retail bad debts (impairment charge 35% down on the previous comparative period and 15% down on the six months to June 2010). This positively impacted both WesBank and FNB`s performance. However, absolute levels of non-performing loans ("NPLs") remained high and a significant proportion have been in NPLs for longer than six months. This is due to the impact of National Credit Act`s debt review process and the lengthening recovery periods. Major components of the bad debt charge and NPLs are indicated in the table below: Six months ended Year
31 December ended 30 June 2010 2009 2010 Impairment charge % % % Residential mortgages 0.84 1.17 0.94 Credit card 2.49 8.14 6.92 Vehicle and asset finance 1.54 2.26 1.94 - Retail 1.72 2.12 1.77 - Corporate 1.17 2.37 2.21 Other retail (includes Africa) 2.29 4.25 3.75 Wholesale 0.29 0.34 0.44 FirstRand impairment charge 0.92 1.52 1.31 ratio* NPLs (R million) 21 117 23 121 22 205 * Total includes Corporate Centre and other. All three of the Group`s franchises showed strong operational performances. Overall non-interest revenue ("NIR") grew 11%, reflecting good growth in customers and transactional volumes at FNB and robust growth of 28% in fair value income, driven by good performances across RMB`s fair value businesses. The Group also benefited from a significant increase 67% in profits from investment activities. An increase of 30% was also generated from associates and joint ventures, assisted by the non-recurrence of equity accounted losses from RMB`s private equity associates, strong growth from the WesBank JV associates and a good performance from OUTsurance. Asset margins improved slightly benefiting from the repricing strategies across all of the large lending books, although the low levels of new business mean that the full benefits are still to materialise. In addition, margins continued to be impacted by the negative endowment effect on capital and deposits due to lower average interest rates. The cost to income ratio has increased, but should be seen against sluggish topline growth and the impact of endowment and investment in growth initiatives. The increase of 10% in operating costs, when adjusted for expansion investments, share-based payments and JV profit shares, was actually limited to 6%, which reflects the Group`s ongoing focus on managing costs. Overview of the operating franchises FNB South Africa Six months ended Year 31 December ended 30 June R million 2010 2009 % 2010 change Normalised earnings 2 463 2 142 15 4 303 Profit before tax 3 362 2 895 16 5 833 Total assets 210 569 200 848 5 204 309 Total liabilities 209 847 194 877 8 199 115 Bad debt ratio 1.29 1.91 1.70 ROE (%) 35.4 31.5 31.8 FNB South Africa performed well during the six month period, growing pre-tax profits 16%, which were underpinned by a 32% decline in bad debts emanating largely from HomeLoans and Card and a good increase in NIR. Operating expenses grew 11%, due primarily to the EasyPlan expansion, Cellphone Banking development and other investment costs. Transactional volumes grew well overall but continued to show the effect of FNB`s strategy to migrate customers to less expensive electronic channels. This is expected to continue and as a result NIR will remain under pressure until the change in channel mix is fully offset by market share gains and a reduction in the cost of physical infrastructure. Advances growth was muted due to continued deleveraging by over-indebted consumers. The large lending books of FNB HomeLoans and FNB Card showed declines of 2% and 5% respectively, indicating that the credit market is still experiencing a slow recovery specifically in the middle market. However, in FNB`s Mass segment, in line with its strategy to grow in the lower end of the market, advances increased 25% driven mainly by growth in Housing Finance where sales increased 10%. FNB`s other initiatives in the Mass segment also proved successful in the period under review with excellent ongoing growth in prepaid airtime turnover and revenue from bancassurance strategies also contributing positively. FNB Life continued to perform well. The EasyPlan strategy continues to progress well with branch representation increasing to 65 (June 2010: 15) across Gauteng, KwaZulu- Natal, Eastern Cape, Western Cape and Mpumalanga. FNB Africa Six months ended % Year 31 December change ended
30 June R million 2010 2009 2010 Normalised earnings 316 288 10 470 Profit before tax 740 597 24 1 146 Total assets 33 705 32 401 4 33 279 Total liabilities 29 448 28 628 3 29 308 Bad debt ratio 0.18 0.48 0.37 ROE (%) 25.4 26.8 21.1 Overall the African subsidiaries performed well, with Namibia, Swaziland and Botswana all showing strong growth in earnings year-on-year. This was achieved despite significant investment activity across the portfolio resulting in increased operating expenses. As part of its strategy to further grow the existing franchise and operating footprint, FNB invested significantly in Zambia and Mo'ambique in the period under review. This investment phase is expected to continue in the medium term with a parallel focus on service and electronic delivery channels to increase the customer base and drive up volumes and resultant NIR. RMB Six months ended % Year 31 December change ended 30 June
R million 2010 2009 2010 Normalised earnings 1 584 1 063 49 3 315 Profit before tax 2 142 1 449 48 4 728 Total assets 288 932 255 615 13 269 133 Total liabilities 285 660 251 978 13 263 371 ROE (%) 25.2 17.8 24.8 Despite the slow recovery in corporate activity and weak Fixed Income, Currency and Commodities division ("FICC") client flows, RMB reported profits before tax of R2 142 million for the six months to 31 December 2010, 48% higher than the prior year comparative period. The strong performance can be attributed to an increase in client financing activities, strong advisory and structuring fees, an improved trading performance and the substantially reduced impact from legacy portfolios. All divisions, with the exception of Private Equity, exceeded prior year comparative period performances. Despite the high base created in previous periods, the Investment Banking division ("IBD") continued to perform extremely well delivering profits up 32% on the prior comparative period. This was driven mainly by advisory, debt and equity capital markets, resources, infrastructure, property and leveraged finance activities and balance sheet growth. RMB`s deal pipeline remained healthy, benefiting from the increased focus on Africa and the Asian corridors which have yielded a number of transactions predominantly in the resources and infrastructure sectors. FICC reported profits of R557 million, 8% up on the prior comparative period. This was achieved despite low volatility in fixed income and currency markets and depressed trade flows for most of the period, which led to lower levels of client activity. Private Equity reported profit before tax significantly lower than the prior period. This was primarily due to impairments raised against the portfolio in the current period, although strong operational earnings continued to be generated from the bulk of the portfolio`s material investments. Unrealised profits increased to R1.7 billion from R1.4 billion at year end and the prospects for the second half are expected to improve. Equity Trading continued its turnaround and reported profits 96% up on the comparative period with strong contributions from longer-term positions held, albeit from a lower base. WESBANK Six months ended % Year 31 December change ended 30 June R million 2010 2009 2010 Normalised earnings 750 337 >100 953 Profit before tax 1 069 405 >100 1 300 Total assets 99 265 96 443 3 97 357 Total liabilities 97 461 95 459 2 95 452 Bad debt ratio 1.63 2.57 2.21 ROE (%) 21.5 13.6 15.4 WesBank`s profits increased significantly from R405 million in the previous period to R1 069 million for the six months to December 2010. This was driven by an ongoing reduction in bad debts and better interest margins, in addition corporate impairments have similarly started to show an improvement. New business within the lending operations increased 27% over the comparative six months to December 2009 (and grew 19% compared to the six months to June 2010). The year-on-year increase comprised a 32% increase in retail new business and an 8% increase in corporate new business. Interest margins showed an improving trend as a result of the focus on written rates as well as the improvement in mix of fixed rate corporate and personal loans portfolios. WesBank`s UK operation, Carlyle, produced profits of R97 million compared with R38 million in the comparative period. This was achieved through a continued improvement in bad debts, significant widening of interest margins, excellent new business growth and ongoing cost management. Momentum Six months ended Year 31 December ended 30 June R million 2010 2009 % 2010 change Normalised earnings 682* 850 (20) 1 810 - FNB Life 174 191 416 - Discontinued operations 508 659 1 394 * Represents five months of earnings from Momentum. The Group`s results incorporate Momentum for the five months ended 30 November 2010 and normalised earnings for that period totalled R682 million. This performance was driven mainly by the positive impact of equity market gains, offset by a net outflow of funds in the asset management business and increased share-based payment costs and costs incurred related to the merger with Metropolitan. In addition, investment income on shareholders` assets was negatively impacted by a fair value loss on the interest rate swap related to Momentum`s subordinated debt. However, good growth was delivered by employee benefits and retail lump sum investments. STRATEGIC ISSUES Progress on Group strategy FirstRand continues to make good progress on its strategy to be the African financial services group of choice, creating long-term franchise value and delivering superior and sustainable economic returns to shareholders within acceptable levels of volatility. This is being driven through two clear growth strategies: - Become a predominant South African player focusing on both existing markets and those markets where the Group is currently under-represented. - Further grow the existing African franchises, targeting those markets that are expected to produce above average domestic growth and are strongly positioned to benefit from the trade and investment flows between Africa and Asia, particularly China and India. In line with the domestic growth strategy, FNB continued to invest in its domestic footprint, particularly electronic channels and cellphone banking. This was successful in the Mass segment where FNB built a strong franchise. This expansion is being driven through new strategies such as the roll-out of the EasyPlan branches and products. As part of the Group`s objective to increase its exposure to the corporate sector, RMB adjusted its wholesale credit portfolio strategy and increased prudential limits in key investment grade and defensive counters. Through a combination of an increased focus on client activities, product innovation and highly proactive origination teams, the corporate and investment banking lending book showed growth of 10% in the period under review compared to low overall growth in the SA corporate market. The integration of RMB and FNB`s corporate and investment banking client interfaces to form the Corporate and Investment Banking ("CIB") Coverage team has substantially improved cooperation between the corporate and investment banking arms of FirstRand, and the increased range and breadth of solutions for clients has generated new opportunities in line with expectations. With regards to the Group`s strategy to grow outside South Africa, international expansion is gaining traction. A representative office was established in Angola and FNB received South African regulatory approval for a licence in Tanzania. FNB also continues to invest in its franchises in Zambia and Mo'ambique. WesBank continued to support the asset finance offering in those African jurisdictions where FNB is represented and is working with FNB to create asset finance capabilities in the new territories where FNB is currently building a presence. Initiatives aimed at growing RMB`s franchise in those African jurisdictions where FNB currently operates, as well as other key African markets, have also begun to gain traction. Resources have been deployed into the existing key African franchises to build out FICC and Investment Banking activities. The India branch and the China/Africa corridor strategy are both resulting in a number of transactions completed in the broader Africa region, particularly in resources and infrastructure, with a very healthy deal pipeline going into the future. The disposal of OUTsurance During the period under review FirstRand agreed to sell its 45% stake in OUTsurance, South Africa`s leading direct short-term insurer, to RMB Holdings ("RMBH") for R3.75 billion. OUTsurance was a joint creation between FirstRand and management in 1998 and is a good example of FirstRand`s long-term strategy to create shareholder value through the start-up of completely new businesses. However, given the structure of the shareholding FirstRand had limited liquidity options, therefore the approach by RMBH, (which already held 45% of OUTsurance), represented the ideal opportunity to realise the significant value that has been created over the past 12 years for FirstRand shareholders. OUTsurance was a non-strategic asset in that it did not sell directly to FirstRand`s banking clients, but did provide homeowners insurance referred through FNB. As part of the sale transaction, FirstRand will earn a significantly higher percentage of the profit from the homeowner insurance business in the future. Previously OUTsurance and FNB shared profits 50/50. In terms of the new arrangement FNB will receive a 90% profit share. The unbundling of Momentum Group The unbundling of Momentum following its merger with Metropolitan was completed during the period under review. FNB will continue to pursue opportunities to sell Momentum products to its customer base. However, this will now be structured on a preferred strategic arrangement, on a fully commercial basis. Capital management strategy Capital management has been aligned to the Group`s strategy to target a particular earnings profile that will allow it to generate shareholder returns within appropriate levels of volatility. The targeted capital levels as well as the current ratios at 31 December 2010 are summarised in the table below. FirstRand FirstRand Bank Regulatory ("FRB")* minimum Actual Target Actual Target
# Tier 1 ratio (%) 13.6 10.00 12.3 9.50 7.00 Core Tier 1 ratio 12.4 8.25 11.3 7.75 5.25 (%) * Reflects solo supervision, i.e. FRB excluding branches, subsidiaries and associates. # Includes unappropriated profits. The Group is currently operating above its targeted Tier 1 ratio as a result of the following: - in response to the global financial crisis, FirstRand took the decision to operate at the higher end of its targeted capital levels to ensure balance sheet resilience; - given the macro environment in South Africa, credit appetite has been very subdued, resulting in low growth in risk weighted assets ("RWA"); - The Group`s ROE is returning to its targeted band; and - the anticipated disposal of OUTsurance. However, when assessing capital, the Group does not believe it is practical to consider point in time capital ratios. Its view is that the ratios need to be considered in the context of growth strategy, expansion plans, uncertainty regarding implementation of Basel III regulatory changes and the Group`s ability to generate future capital through earnings. Taking cognisance of the above, should the Group believe it has surplus capital, it will look at the most optimal mechanism to return that capital to its shareholders. Liquidity management strategy The Basel III guidelines, published in December, propose two new liquidity metrics: The Liquidity Coverage Ratio ("LCR"), effective 1 January 2015, which measures short-term liquidity stress and the Net Stable Funding Ratio ("NSFR"), effective 1 January 2018, which measures the stability of long-term structural funding. The Bank of International Settlements ("BIS") Committee has put processes in place to ensure the rigorous and consistent global implementation of the Basel III Framework. The standards will be phased in gradually so that the banking sector can move to the higher liquidity standards while supporting lending to the economy. Both the LCR and the NSFR will be subject to an observation period and will include a review clause to address any unintended consequences. When applying the metrics to the Group`s balance sheet at 31 December, both FirstRand Limited and most of the South African banking industry do not meet the minimum quantitative requirements. This is due to the specific structure of funding in the domestic financial services industry, particularly the issue of low discretionary savings, the closed rand domestic market and the fact that South Africa is an emerging economy. These structural issues have been recognised by the South African Regulators, banking industry and National Treasury. In response, and under the guidance of National Treasury, a Structural Funding and Liquidity task team has been established and mandated to assess the impact and subsequently make recommendations to the Finance Ministry on how the banking industry effectively deals with the proposed regulations. Remuneration strategy The Group believes that its remuneration structures have always been designed to align employee reward with shareholder returns. However, to ensure that its remuneration structures continue to be appropriate, in 2010 it benchmarked its strategy against international best practice. In response to the results of the benchmarking exercise, the Group refined its remuneration strategy and introduced the deferral of a component of variable pay for a period longer than 12 months. In addition, this deferral component was converted into equity. The Group believes this ensures senior and executive management focus on creating medium- to long-term value for stakeholders. The Group`s remuneration strategy and policy is discussed comprehensively in its annual report for the year ended 30 June 2010 on pages 79 to 83. PROSPECTS Given that the current South African economic environment is recovering at a very subdued rate, achieving material revenue growth in the medium term will remain challenging. However, although some potential regulatory risk exists with regards to the debt counselling process, the retail credit markets are expected to continue to improve and in the second half of the year this will provide support to the earnings of FNB and WesBank. Growth in retail advances will remain low as levels of consumer indebtedness are still at historic highs. Corporate balance sheets remain strong and have weathered the cycle well. However, given current levels of corporate capacity, investment opportunities will be limited and growth in corporate advances is expected to remain subdued. In line with its strategy the Group will continue to invest in its infrastructure in South Africa and grow its footprint and client franchise in other selected African markets. Given these investment strategies and the expected ongoing pressures on revenue growth, the Group`s operating franchises continue to focus on efficiencies. The Group believes its franchises are well positioned to benefit from the improving cycle and deliver on the overall growth strategy. DIVIDEND STRATEGY 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 dividend cover may vary from year to year. BASIS OF PRESENTATION FirstRand prepares its consolidated financial statements in accordance with International Financial Accounting 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 on www.firstrand.co.za. Due to the unbundling of Momentum Group Limited, results for the current and comparative periods have been prepared to account for Momentum as a discontinued operation in terms of IFRS 5: Non-current Assets Held for Sale and Discontinued Operations. The dividend in specie was accounted for in terms of IFRIC 17: Distributions of Non-cash Assets to Owners The determination of the dividend in specie resulting from the unbundling of Momentum which was outlined in the SENS announcement of 2 March 2010 has been subsequently revised. The amount and its impact on basic earnings per share have been updated and included in this announcement. INTERIM DIVIDEND DECLARATIONS Ordinary shares The following ordinary cash dividend was declared in respect of the period ended 31 December 2010: Six months ended 31 December
Cents per share 2010 2009 Interim (declared 7 March 2011)* 35.00 34.00 * The last day to trade in FirstRand shares on a cum-dividend basis in respect of the interim dividend will be Friday 25 March 2011 and the first day to trade ex-dividend will be Monday 28 March 2011. The record date will be Friday 1 April 2011 and the payment date Monday 4 April 2011. No dematerialisation or rematerialisation of shares may be done during the period Monday 28 March 2011 and Friday 1 April 2011, both days inclusive. Preference shares Dividends on the "B" preference shares are calculated at a rate of 68% of the prime lending rate of banks. The following dividends have been declared for payment: "B" Preference Cents per share 2010 2009 Period 1 September 2009 - 22 February 2010 - 342.3 Period 31 August 2010 - 28 February 2011 313.6 - BW Unser Company secretary 7 March 2011 Consolidated income statement - IFRS Six months ended Year 31 December ended
30 June R million 2010 2009 % 2010 change Continuing operations Interest and similar income 19 133 19 198 <1 38 817 Interest expense and (10 (10 (1) (22 similar charges 754) 873) 467) Net interest income before 8 379 8 325 1 16 350 impairment of advances Impairment of advances (2 084) (3 225) (35) (5 686) Net interest income after 6 295 5 100 23 10 664 impairment of advances Non-interest income 14 396 12 771 13 26 954 Income from operations 20 691 17 871 16 37 618 Operating expenses (13 (11 13 (24 424) 929) 865)
Net income from operations 7 267 5 942 22 12 753 Share of profit from 506 390 30 700 associates and joint ventures Profit before tax 7 773 6 332 23 13 453 Indirect tax (385) (236) 63 (446) Profit before direct tax 7 388 6 096 21 13 007 Tax (2 080) (1 681) 24 (3 527) Profit for the period from 5 308 4 415 20 9 480 continuing operations Discontinued operations Profit attributable to 415 603 (31) 1 194 discontinued operations Profit after tax on 6 868 - 100 - unbundling of discontinued operations Profit for the period 12 591 5 018 >100 10 674 Attributable to: Ordinary shareholders 12 070 4 520 >100 9 444 Non-cumulative non- 160 190 (16) 344 redeemable preference shareholders Equity holders of the Group 12 230 4 710 >100 9 788 Non-controlling interest 361 308 17 886 Profit for the period 12 591 5 018 >100 10 674 Earnings per share (cents) Basic 227.0 86.1 179.9 Diluted 223.2 85.8 178.1 Consolidated statement of comprehensive income - IFRS Six months ended Year 31 December ended
30 June R million 2010 2009 2010 Profit for the period 12 591 5 018 10 674 Other comprehensive income Cash flow hedges (132) 65 (226) Available-for-sale financial 387 255 (69) assets Exchange differences on (419) (84) (74) translating foreign operations Share of other comprehensive (5) 28 39 income of associates after tax and non-controlling interest Other comprehensive income for (169) 264 (330) the period before tax Income tax relating to (43) (28) (17) components of other comprehensive income Other comprehensive income for (212) 236 (347) the period Total comprehensive income for 12 379 5 254 10 327 the period Total comprehensive income attributable to: Ordinary shareholders 11 950 4 763 9 097 Non-cumulative non-redeemable 160 190 344 preference shares Equity holders of the Group 12 110 4 953 9 441 Non-controlling interest 269 301 886 Total comprehensive income for 12 379 5 254 10 327 the period Consolidated statement of financial position - IFRS Six months ended Year
31 December ended 30 June R million 2010 2009 2010 ASSETS Cash and short-term funds 31 511 57 663 27 067 Derivative financial instruments 51 052 45 057 39 764 Advances 453 290 412 561 434 793 Investment securities and other 127 884 239 193 117 171 investments Commodities 4 164 1 825 2 365 Accounts receivable 5 598 7 680 5 743 Investments in associates and 5 819 16 053 6 901 joint ventures Property and equipment 10 409 10 370 10 018 Deferred tax asset 451 1 459 443 Intangible assets and deferred 1 510 5 632 2 104 acquisition costs Investment properties 161 2 274 138 Policy loans on insurance 26 642 27 contracts Reinsurance assets 527 997 524 Tax asset 798 922 935 Non-current assets and disposal 2 609 61 197 247 groups held for sale Total assets 695 809 802 389 845 240 EQUITY AND LIABILITIES Liabilities Deposits and current accounts 543 713 487 929 512 469 Short trading positions 15 801 21 813 16 735 Derivative financial instruments 50 027 33 779 36 035 Creditors and accruals 10 193 19 610 12 115 Provisions 3 254 3 045 3 359 Tax liability 319 240 157 Post retirement liabilities 2 202 2 138 2 162 Deferred tax liability 2 474 3 975 2 132 Long-term liabilities 7 489 10 295 9 183 Policyholder liabilities under 2 007 42 748 1 868 insurance contracts Policyholder liabilities under 163 112 249 101 investment contracts Liabilities arising to third - 7 601 - parties Deferred revenue liability - 345 - Liabilities directly associated 419 - 189 961 with non-current assets classified as held for sale Total liabilities 638 061 745 767 786 277 Equity Capital and reserves attributable to equity holders Ordinary shares 54 53 52 Share premium 5 194 2 204 1 491 Reserves 45 112 47 653 49 889 Capital and reserves 50 360 49 910 51 432 attributable to ordinary equity holders Non-cumulative non-redeemable 4 519 4 519 4 519 preference shares Capital and reserves 54 879 54 429 55 951 attributable to equity holders Non-controlling interest 2 869 2 193 3 012 Total equity 57 748 56 622 58 963 Total equity and liabilities 695 809 802 389 845 240 Consolidated statement of cash flows - IFRS Six months ended Year 31 December ended 30 June R million 2010 2009 2010 Net cash inflow from operating 3 476 2 055 9 652 activities from continuing operations Net cash inflow/(outflow) from - 389 (9 709) operating activities from discontinued operations Net cash (outflow)/inflow from (341) (744) 162 investing activities from continuing operations Net cash (outflow)/inflow from - (597) 33 investing activities from discontinued operations Net cash inflow/(outflow) from 1 390 (965) 1 085 financing activities from continuing operations Net cash inflow from financing - 273 2 117 activities from discontinued operations Net increase in cash and cash 4 525 411 3 340 equivalents from continuing and discontinued operations Cash and cash equivalents at the 27 067 53 252 57 266 beginning of the period Cash and cash equivalents at the 31 592 53 663 60 606 end of the period Cash and cash equivalents - - (36) disposed of* Effect of exchange rate changes (81) (14) (95) on cash and cash equivalents Transfer to non-current assets - 4 014 (33 held for sale 408) Cash and cash equivalents at the 31 511 57 663 27 067 end of the period *Cash and cash equivalents sold and bought relate to cash balances held by subsidiaries acquired and sold during the year. Mandatory reserve balances 10 981 12 238 11 370 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. These deposits bear little or no interest. Money at short notice constitutes amounts withdrawable in 32 days or less. Consolidated statement of changes in equity - IFRS for the six months ended 31 December Ordinary share capital and ordinary equity holders` funds
R million Share Share Share Genera Cash Share- capita premiu capita l risk flow based l m l and reserv hedge paymen share e reserv t
premiu e reserv m e Balance as at 52 1 300 1 352 9 (292) 2 306 1 July 2009 Issue of share - - - - - - capital Movement in - - - - - 88 other reserves Ordinary - - - - - - dividends Preference - - - - - - dividends Transfer - - - - - (72) (to)/from reserves Changes in - - - - - - ownership interest in subsidiaries Consolidation 1 904 905 - - - of treasury shares Total - - - - 46 - comprehensive income for the period Balance as at 53 2 204 2 257 9 (246) 2 322 31 December 2009 Balance as at 52 1 491 1 543 12 (466) 2 487 1 July 2010 Movement in - - - - - 352 other reserves Ordinary - - - - - - dividends Preference - - - - - - dividends Transfer - - - - - (47) (to)/from reserves Changes in - - - - - - ownership interest in subsidiaries Consolidation 2 3 703 3 705 - - - of treasury shares* Total - - - - (95) - comprehensive income for the period Dividend in - - - - - (89) specie: unbundling of Momentum Balance as at 54 5 194 5 248 12 (561) 2 703 31 December 2010 * The large movement in the consolidation of treasury shares is due to a sell-off of FirstRand shares in the various staff trusts and FirstRand shares held on behalf of Momentum`s policyholders no longer qualifying as treasury shares as a result of the unbundling of Momentum. Consolidated statement of changes in equity - IFRS for the six months ended 31 December Ordinary share capital and ordinary equity holders` funds R million Avail- Curr- Other Re- Reserve Non- Non- Total able- ency re- tained s attri-cumu- con- equity
for- trans- serves earn- butable lative trol- sale latio ings to non- ling reserv n re- ordin- re- inter- e serve ary deem- est
equity able holders pref- erence shares
Balance as 1 107 750 (198) 40 451 44 133 4 519 2 093 52 097 at 1 July 2009 Issue of - - - - - - (186) (186) share capital Movement in - - (15) - 73 - 212 285 other reserves Ordinary - - - (1 155) (1 155) - (164) (1 319) dividends Preference - - - - - (190) - (190) dividends Transfer - - - 72 - - - - (to)/from reserves Changes in - - - - - - (63) (63) ownership interest in subsidiaries Consolidatio - - - (161) (161) - - 744 n of treasury shares Total 244 (58) 11 4 520 4 763 190 301 5 254 comprehensiv e income for the period Balance as 1 351 692 (202) 43 727 47 653 4 519 2 193 56 622 at 31 December 2009 Balance as 969 698 (617) 46 806 49 889 4 519 3 012 58 963 at 1 July 2010 Movement in - - (12) 79 419 - (101) 318 other reserves Ordinary - - - (2 287) (2 287) - (339) (2 626) dividends Preference - - - - - (160) - (160) dividends Transfer - - - 47 - - - - (to)/from reserves Changes in - - 7 (32) (25) - 31 6 ownership interest in subsidiaries Consolidatio - - - 513 513 - - 4 218 n of treasury shares* Total 307 (332) - 12 070 11 950 160 269 12 379 comprehensiv e income for the period Dividend in (664) (18) 583 (15 (15 - (3) (15 specie: 159) 347) 350) unbundling of Momentum Balance as 612 348 (39) 42 037 45 112 4 519 2 869 57 748 at 31 December 2010 *The large movement in the consolidation of treasury shares is due to a sell-off of FirstRand shares in the various staff trusts and FirstRand shares held on behalf of Momentum`s policyholders no longer qualifying as treasury shares as a result of the unbundling of Momentum. Sponsor RAND MERCHANT BANK (A division of FirstRand Bank Limited) Date: 07/03/2011 16:10:23 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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