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FSR - FirstRand Limited - Audited results and cash and special dividend

Release Date: 13/09/2011 08:00
Code(s): FSR
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FSR - FirstRand Limited - Audited results and cash and special dividend declaration for the year ended 30 June 2011 FirstRand Limited Registration No: 1966/010753/06 JSE code: FSR ISIN: ZAE0000066304 ("FSR") NSX share code: FST - Certain companies within the FirstRand Group are Authorised Financial Services Providers AUDITED RESULTS AND CASH AND SPECIAL DIVIDEND DECLARATION FOR THE YEAR ENDED 30 JUNE 2011 Key financials - Normalised earnings R10 117 million + 22% - Normalised ROE 19% - Dividend per share 81 cents + 27% - Special dividend per share 70 cents Introduction This report covers the audited financial results of FirstRand Limited ("FirstRand" or "the Group") from continuing and discontinued operations based on International Financial Reporting Standards ("IFRS") for the year ended 30 June 2011, as well as the results of the normalised continuing operations of the Group, which are based on the audited IFRS results 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, commercial and wholesale 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 audited IFRS results therefore include five months of contribution from Momentum (treated as discontinued operations). The audited IFRS results also include six months of contribution from OUTsurance which was disposed of effective 4 May 2011. The primary results are presented on a normalised continuing basis as the Group believes this most accurately reflects its economic performance. The normalised continuing operations specifically exclude the profit on unbundling of Momentum, the earnings contribution of Momentum for the current and comparative years, the profit on disposal of OUTsurance, as well as the earnings contribution of OUTsurance for the current and comparative years. A detailed description of the normalised results is provided on www.firstrand.co.za. Commentary is based on the continuing normalised results, unless indicated otherwise. Normalised results are unaudited. Normalised earnings 2011 2010 % change - Normalised (R million) 10 117 8 283 +22 - Diluted normalised earnings per share 179.4 146.9 +22 (cents) Net asset value per share 2011 2010 % change - Normalised 1 044.0 875.9 +19 Dividend per ordinary share 2011 2010 % change - Continuing operations 81.0 64.0 27 Special dividend per share 2011 2010 % change - Special dividend per share (cents) 70.0 - 100
Return on equity % 2011 2010 - Normalised 18.7 17.7 Cost-to-income ratio % 2011 2010 - Normalised 55.4 55.0 - Industry adjusted 53.3 53.1 Capital adequacy ratio (Tier I) 2011 2010 - IFRS and normalised (%) 15.0 13.5 Credit loss ratio % 2011 2010 -'Normalised 0.93 1.39 Introduction Although global economic activity picked up during the period under review, the absolute rate of expansion slowed due to a number of factors. The headwinds became particularly acute in the first half of 2011 and economic growth across the globe started to moderate, particularly in highly- indebted, developed economies. Concerns over a sovereign debt default in Greece continued to dampen economic sentiment as worries over the fiscal health of certain peripheral European nations increased. Several other factors also weighed on global activity. The devastating earthquake that hit Japan disrupted global supply chains and caused losses in manufacturing output in the first few months of 2011. Unrest in North Africa and the Middle East, adverse weather conditions and growing demand from emerging market economies pushed oil and grain prices upwards. This eroded disposable income and weighed on consumer spending. It also put upward pressure on core inflation in many emerging economies, prompting their central banks to start tightening monetary policy. Against this uncertain global economic backdrop, the South African economy held up well, registering quarterly growth rates above 2.5% during the financial year. The main drivers behind the expansion were South African consumers who benefited from low debt service costs and robust real income growth. In addition, the increase in global commodity prices provided support to the South African export sector. Inflation remained within the South African Reserve Bank`s ("SARB") target band, with employment growth, demand for credit and investment spending by the private sector staying sluggish. With regards to the African continent, sub-Saharan Africa`s economic recovery is well under way, although there is variation in the speed of the recovery across the region, and overall growth is almost back to pre-credit crisis levels. Rising food and fuel prices continue to fuel inflation pressures and present a challenge to macroeconomic management, however exports have continued to rise. Trade and investment flows from the large Asian economies of China and India continue to underpin growth in a number of jurisdictions. Overview of results Despite this challenging background, FirstRand built further on its strong first half performance to produce excellent results for the year ended 30 June 2011, achieving normalised earnings from continuing operations of R10 117 million, an increase of 22% on the previous period, and producing a normalised return on equity ("ROE") of 18.7% (2010: 17.7%). The ROE has continued to trend upwards, despite lower gearing resulting from higher capital levels (this issue is covered in more detail under Strategic issues below). Sources of normalised earnings R million 2011 % compo- 2010 % compo- % change sition sition Total FNB 5 562 51 4 731 47 18 FNB South Africa 5 022 46 4 276 43 17 FNB Africa 540 5 455 4 19 RMB 3 610 33 3 316 33 9 WesBank 1 862 17 953 10 95 Corporate Centre and (714) (5) (335) (3) (>100) consolidation adjustments FirstRand Limited 98 1 (38) - >100 (company) NCNR preference (301) (3) (344) (4) (13) dividend Normalised earnings 10 117 94 8 283 83 22 from continuing operations Momentum 508 5 1 394 14 (64) OUTsurance 180 1 286 3 (37) Normalised earnings 10 805 100 9 963 100 8 from continuing and discontinued operations With regards to the Group`s overall income statement, its operating franchises, FNB, RMB and WesBank, continued to show very strong operational performances. Earnings also continued to be positively impacted by the significant decrease in retail bad debts (impairment charge down 34% on the previous period) particularly in the large books of FNB and WesBank, although the absolute rate of reduction flattened in the second six months of the year and has now reached a normalised level. The National Credit Act`s debt review process and the resultant lengthened recovery periods mean that absolute levels of non-performing loans ("NPLs") remain high with a significant proportion in NPLs for longer than six months. Major components of the bad debt charge and NPLs are shown in the table below. Year ended 30 June
2011 2010 Impairment charge % % Residential mortgages 0.79 0.95 Credit card 1.39 6.92 Vehicle and asset finance 1.11 1.80 Other retail 6.12 10.00 Corporate/Wholesale 0.66 0.93 FNB Africa 0.30 0.37 FirstRand impairment charge ratio* 0.93 1.39 NPLs (R million) 19 790 22 205 * Total includes Corporate Centre and other. Overall non-interest revenue ("NIR") grew 7% as a result of ongoing customer acquisition and robust transactional volumes at FNB, particularly in electronic channels. WesBank generated strong fee and commission growth and RMB`s knowledge-based fee income benefited from good deal flow throughout the year. Fair value income was robust, underpinned by a strong performance from client activities, benefiting from refinancing opportunities and a strong investment banking deal pipeline during the year. Investment income also contributed strongly, driven by the private equity and resources portfolios of RMB, and profits from the disposal of VISA Inc shares. Asset margins benefited from new business repricing across the large lending books, although given the significant size of the in-force advances (particularly in residential mortgages) compared to current levels of new business, the benefits will take time to materialise. Margins also continued to be impacted by the negative endowment effect on capital and deposits as average interest rates for the financial year were 114 bps lower than the previous period. Overall group operating expenses reflect good ongoing cost control with costs increasing only 9%. The Group`s balance sheet showed reasonable overall growth in advances of 7% reflecting strong new business origination. The following portfolios showed particularly good new business volumes: - unsecured lending in FNB`s Mass and Consumer segments - R6 billion; - RMB`s structured lending book - R29 billion; - WesBank - R57 billion; and - residential mortgages - R21 billion. Overview of operating franchises FirstRand` s vision is 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 achieved through two parallel growth strategies: - Become a predominant South African player focusing on both existing segments and those segments where the business is currently under- represented. - Further grow the existing African franchise, 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. These strategies are executed through the operating franchises within a strategic framework set by the Group. During the year these franchises continued to make good progress against the strategic intent and below is a brief overview of each. FNB FNB`s strategy, aligned with the overall FirstRand strategy, is to grow its domestic franchise in market segments where it is currently under- represented and target selective African countries for investment. It enters these markets focusing on innovative products and delivery channels, especially favouring electronic platforms. FNB South Africa Year ended 30 June R million 2011 2010 % change Normalised earnings 5 022 4 276 17 Profit before tax 6 944 5 806 20 Total assets 223 174 204 309 9 Total liabilities 215 901 199 115 8 Bad debt ratio 1.20 1.70 ROE (%) 35.7 31.8 FNB South Africa produced a strong performance for the year, growing pre- tax profits 20%. This was underpinned by a 29% decline in bad debts emanating largely from HomeLoans and Card, and a 10% increase in NIR. The NIR performance reflects 3% growth in customers and increased transactional volumes (14%). Migration by customers to less expensive electronic channels continued, reflecting FNB`s strategy to encourage customers (particularly through pricing and convenience) to use these cheaper channels. Despite interest rates being at 36 year lows, advances growth was muted due to continued deleveraging by over-indebted consumers. The low levels of advances growth in HomeLoans (reduction of 2%) and Card (flat) indicated that the credit market is still experiencing a slow recovery specifically in the consumer segment or middle market. FNB`s overall operating expenses grew 10%, due primarily to investment costs, however core costs were contained at 7.7% which includes a staff salary increase in excess of 8% and increased variable costs relating to growth in volumes. FNB has identified growth opportunities in certain of its segments and executed on a number of these and other operational initiatives during the period under review. Despite good growth in the Mass segment, which is now servicing over four million customers, FNB still remains relatively underweight in lending activities to these customers. To address this gap, FNB has continued to roll out its EasyPlan strategy which represents an appropriate low cost banking offering to this segment. In the current year, FNB opened 102 EasyPlan representation points. These representation points are well positioned in activity hubs, are open longer than the traditional branches, are supported by low cost channels and have Automatic Deposit Terminals ("ADTs") to satisfy customer cash transactional needs. FNB Africa Year ended 30 June R million 2011 2010 % change Normalised earnings 540 455 19 Profit before tax 1 350 1 146 18 Total assets 35 439 33 279 6 Total liabilities 31 493 29 313 7 Bad debt ratio 0.30 0.37 ROE (%) 21.4 20.0 Overall the African subsidiaries performed well growing profits before tax 18% and delivering an ROE of 21.4%. This performance 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 Mozambique in the period under review as well as in starting operations in Tanzania. 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 volumes and resultant NIR. Alongside other group franchises, FNB continues to assess opportunities in identified priority countries such as Nigeria and Ghana. RMB In line with Group objectives, RMB`s ongoing strategic imperatives remain anchored around strengthening the client franchise both locally and on the African continent with trading and investing activities being scaled appropriately. RMB`s risk appetite framework remains central to ensuring that its portfolio continues to reflect the appropriate mix of client, trading and investing activities in order to preserve and enhance the quality of earnings. RMB Year ended 30 June R million 2011 2010 % change Normalised earnings 3 610 3 316 9 Profit before tax 4 959 4 728 5 Total assets 264 499 269 133 (2) Total liabilities 258 821 263 366 (2) ROE (%)* 28.7 24.9 * Includes Africa. RMB reported pre-tax profits of R4 959 million, 5% higher than in the comparative year. This is a pleasing result given an environment of limited corporate recovery and continued weakness in market and investment flows. It was also achieved against the high base of the prior year due to the Life Healthcare realisation and despite conservative valuations on lending and private equity portfolios and prudent provisioning. Investment Banking again delivered a strong performance off a relatively high base, with good contributions from advisory, financing, structuring and principal investing activities. Reflecting RMB`s strategy to increase its exposure to investment grade corporate credit the structured lending book showed continued steady growth and whilst impairments increased slightly over the period, credit quality remains robust. The advisory business performed well with structuring activities in the property sector delivering excellent results. Overall client flows generally remained weak placing Fixed Income, Currency and Commodity ("FICC") revenues under pressure. Trading volumes showed a mixed picture for the year with the second six months struggling to keep pace with the momentum set in the early part of the year. Revenues generated by the FICC teams deployed into the African subsidiaries were up marginally on the comparative period. Private Equity produced a good result with Corvest realising a gain of R461 million (post tax and minorities) from the sale of Davita Trading. Revenues from portfolio investments grew strongly, particularly in Ventures and Corvest, reflecting the resilience of the underlying counters. Equities` performance was mixed, with modest growth in most client execution businesses, largely on the back of improving equity volumes. RMB made good progress in growing its African franchise with a focus on building investment banking and trading activities in jurisdictions where FNB currently operates as well as capturing trade and investment flows into Africa from key Asian markets such as India and China. A number of transactions in key sectors such as resources, commodities, energy and property were concluded in Africa. Representative offices in Angola and Kenya have been commissioned and the Nigerian representative office continues to function as a valuable hub for activities in West African markets. The integration of RMB`s investment banking and FNB`s corporate banking teams, and the creation of the Corporate Investment Banking ("CIB") Coverage unit is in line with expectations. WesBank WesBank continues to focus on its core strategy of partnering with key industry players through representation at the point of sale. In line with FirstRand`s strategy, it is also targeting domestic segments, such as fleet management and full maintenance rentals as well as larger corporate asset finance customers and the public sector. WesBank Year ended 30 June R million 2011 2010 % change Normalised earnings 1 862 953 95 Profit before tax 2 548 1 300 96 Total assets 104 117 97 357 7 Total liabilities 101 171 95 452 6 Bad debt ratio 1.33 2.21 ROE (%) 26.3 15.4 WesBank produced an excellent performance for the year increasing profits before tax 96% over the prior year to R2.55 billion. This performance was driven by the ongoing retail and corporate credit unwind, strong new business origination, improved interest margins across all portfolios and good cost management. Bad debts in the local lending business decreased 38% from R1.95 billion to R1.21 billion (from 2.2% to 1.3% of advances). Retail and corporate bad debts showed continued strong downward trends. New business increased 28% over the comparative period. The year-on-year growth comprised a 32% increase in retail new business and a 16% 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 with a higher component of fixed rate business written. Total NIR (including income from associates) decreased 14% reflecting the loss of revenues following the disposal of WorldMark Australia, WorldMark South Africa and Norman Bissett, which were included in the prior period`s results. However, NIR in the local lending operation increased 36%. Overall expenses decreased 8%, partly as a result of the disposal of the non-lending subsidiaries. Expenses in the local lending operation increased 14% (this increase was 3% excluding the increased profit share payments to alliance partners). Growth initiatives in the larger corporate sector are gaining good traction. Although the opportunities in full maintenance leasing and in the public sector remain meaningful, the lead times to significant revenue inflows are proving longer than anticipated and are only likely to realise over the medium term. WesBank is leveraging the FNB platform and presence in certain African jurisdictions, both established and developing, and has deployed resources where asset finance opportunities have been identified. Strategic issues Progress on African expansion strategy The case for investing in Africa is persuasive, economies are strong, political risks have improved, and the business climates continue to improve. However, FirstRand fundamentally believes that building a profitable African business does not require a presence in every African country. Africa is not a "single" continent. Sub-Saharan Africa itself comprises 46 countries (including South Sudan) with vastly different population sizes, income levels, growth rates and operating conditions. For FirstRand, when identifying priority countries for expansion outside of South Africa, domestic market size and market growth are early key considerations. According to recent research by RMB the top key countries in sub-Saharan Africa, based on these considerations, are Nigeria, Ghana, Tanzania, Botswana, Kenya, Uganda, Angola and Zambia. The Group believes that these priority countries offer different commercial opportunities and given that strategy is executed by the operating franchises, FNB, RMB and WesBank pursue appropriate entry strategies, albeit within the Group`s overall risk appetite and framework. RMB is exploring opportunities in Angola through a representative office that was established during the year. FNB continues to make significant progress building out its infrastructure in Zambia and established a full service banking operation in Tanzania towards the end of the financial year. FNB is also assessing opportunities in Nigeria and Ghana. RMB also opened a representative office in Kenya which is particularly well placed to benefit from investment and trade flows with India. RMB`s Indian operation is key to unlocking growth opportunities. FirstRand has a very compelling strategy to grow its franchises on the African continent, matched with a highly disciplined approach to protecting shareholder returns. The Group has undertaken to protect its ROE as it builds a presence outside of its core South African operations, it prefers "greenfields" operations or small rather than significant acquisitions and whilst this can mean expansion takes longer, potential dilution of returns can be contained. "Bolt-on" acquisitions to existing "greenfields" operations are also preferable, as these can bring additional scale more rapidly. Capital FirstRand`s capital management strategy is aligned to the Group`s overall objective to deliver sustainable returns to shareholders within appropriate levels of volatility. The Group`s current philosophy, given the uncertain regulatory environment, is to operate at the higher end of its targeted capital levels. The targeted levels have been increased in anticipation of Basel III and are summarised in the table below: FirstRand FirstRand Bank ("FRB")* Regu-
latory minimum % Actual Target Actual# Target Capital 16.5 12.0 - 13.5 14.2 11.5 - 13.0 9.5# adequacy ratio Tier 1 ratio 15.0 11.0 12.4 10.5 7.0 Core Tier 1 13.8 9.5 - 11.0 11.4 9.0 - 10.5 5.25 ratio * Reflects solo supervision, i.e. FirstRand Bank excluding branches, subsidiaries and associates. # The regulatory minimum excludes the bank specific (Pillar 2b) add on and capital floor. These targets are balanced against the requirements of shareholders through an efficient capital structure with limited excesses, but which supports the business strategy, maintains an appropriate credit rating and fulfils regulatory requirements. The Group does not seek to hold surplus capital for acquisitions and the need for raising additional capital is assessed on a transaction by transaction basis. However, it does currently hold buffers for its growth strategies in selected African countries. As indicated to shareholders in the Group`s interim results announcement, it has now been through a process of assessing current ratios against anticipated deployment, the implementation of Basel III regulatory changes and the Group`s ability to generate future capital through earnings and is of the view that it is currently operating above the appropriate target levels. This is as a direct result of the following: - the recent disposal of certain non-core assets, including the Group`s stakes in VISA Inc and OUTsurance, has resulted in an excess that is not required for the current expansion strategy and regulatory changes; and - the Group`s operating franchises are generating good returns at a time when there is limited opportunity to grow risk weighted assets due to the current economic climate. The Group believes that there are two appropriate mechanisms available for dealing with the current excess and any anticipated build up of excess capital going forward. The Group has declared a special dividend of 70 cents per share due to the disposal of the non-core assets. It is FirstRand`s view that as shareholders were invested in these assets through FirstRand, the opportunistic transactions led to the unlocking of shareholder value and this realised value should be returned to shareholders. The Group targets a sustainable pay-out ratio, which is a function of returns and risk weighted assets growth. The increase in this year`s dividend, over and above earnings growth, is a reflection of the Group`s view that given the current macoeconomic outlook and growth strategy, a higher sustainable pay-out ratio over the medium term is possible. Liquidity Management and Funding Strategy The Group funds its activities in a sustainable, efficient and flexible manner underpinned by a very strong deposit franchise. This is actively managed against certain structural characteristics of the South African market such as a low discretionary savings rate and a higher degree of contractual savings that are captured by institutions such as pension funds, provident funds and providers of asset management services. A portion of these contractual savings translate into institutional funding for banks which has a higher liquidity risk than retail deposits. The Basel III guidelines, published in December 2010, 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 Basel Committee of Banking Supervision ("BCBS") 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 above metrics to the Group`s balance sheet at 31 December 2010, FirstRand and most South African banks do not meet the minimum quantitative requirements. This is due to the specific structural characteristic described above . 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 will effectively deal with the proposed regulations. Prospects Prospects for the global economy continue to deteriorate and fears of another global recession have resurfaced. A growth collapse in highly indebted European nations, would severely hamper their ability to service their sovereign debt, and poses a risk of contagion. While the South African economy has held up well, the Group expects the economic conditions to remain subdued in the current financial year and for the level of uncertainty to remain high. Although inflation is expected to remain at the higher end of Government targets, interest rates are likely to remain flat, with an increased likelihood of cuts. Therefore the previously anticipated endowment margin uplift is not expected to materialise. In addition bad debts are not expected to provide any further significant benefit. Growth in retail advances will remain low and, given the current muted levels of business volumes and corporate activity, corporate advances will also continue to be subdued, with the exception of WesBank which anticipates a healthy lending landscape in both corporate and retail portfolios. Despite the slowdown in economic activity, NIR should remain healthy, particularly given FNB`s focus on innovation and customer service delivery and the strength of RMB`s investing, trading and advisory franchises. GDP growth in sub-Saharan Africa is expected to be maintained in 2011 and 2012, although the region will not be insulated from a slowdown in global activity or commodity prices. All of the Group`s franchises will continue to capitalise on growth opportunities in those countries identified as priorities for expansion. FNB will continue to grow its operating footprint supported by its South African platform. RMB will mine the trade and investment flows between Asia and Africa, leveraging off the existing FNB African platforms and its own platform in India. Investment in these growth opportunities will continue in the current year, however, given the revenue pressures resulting from the low growth macro environment, the Group continues to drive cost efficiencies. The quality of the Group`s operating franchises and their respective strategies domestically and in the rest of Africa should underpin FirstRand`s ability to provide shareholders with sustainable superior returns over the long term. The prospects have not been audited or reported on by the Group`s external auditors. Board changes Mr AP Nkuna resigned as non-executive director effective 31 July 2011. A representative of the Mineworkers Investment Company will replace Mr Nkuna once the necessary approval processes have been completed. 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 The directors are responsible for the preparation of the consolidated financial statements in accordance with: - the framework concepts and the measurement and recognition requirements of IFRS including IAS 34 Interim Financial Reporting - the AC 500 standards issued by the Accounting Practices Board; JSE Listing requirements; and - the information as required by the Companies Act of South Africa. The accounting policies applied are consistent with those applied in preparation of previous financial statements. The IFRS annual financial statements have been audited by PwC Inc and Deloitte & Touche from which this announcement has been derived, and they have expressed an unmodified opinion, which is available at the company`s registered office. 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. Cash dividend declarations Ordinary shares The following ordinary cash dividend was declared in respect of the year ended 30 June 2011: Year ended 30 June Cents per share 2011 2010 Interim (declared 7 March 2011) 35.00 34.00 Final (declared 12 September 2011*) 46.00 43.00 81.00 77.00 * The last day to trade in FirstRand shares on a cum-dividend basis in respect of the final dividend will be Friday 7 October 2011, the first day to trade ex-dividend will be Monday 10 October 2011. The record date will be Friday 14 October 2011 and the payment date Monday 17 October 2011. No dematerialisation or rematerialisation of shares may be done during the period Monday 10 October 2011 to Friday 14 October 2011, both days inclusive. Ordinary shares: special dividend Year ended 30 June
Cents per share 2011 2010 Special (declared 12 September 2011*) 70.00 - 70.00 - * The last day to trade in FirstRand shares on a cum-dividend basis in respect of the special dividend will be Friday 7 October 2011, the first day to trade ex-dividend will be Monday 10 October 2011. The record date will be Friday 14 October 2011 and the payment date Monday 17 October 2011. No dematerialisation or rematerialisation of shares may be done during the period Monday 10 October 2011 to Friday 14 October 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 and paid: Year ended 30 June Cents per share 2011 2010 Period 1 September 2009 - 22 February 342.3 2010 Period 23 February 2010 - 30 August 2010 355.0 Period 31 August 2010 - 28 February 2011 313.6 Period 1 March 2011 - 29 August 2011 305.2 618.8 697.3 BW Unser Company secretary 12 September 2011 Consolidated statement of comprehensive income - IFRS for the year ended 30 June R million 2011 2010 Profit for the year 21 527 10 674 Other comprehensive income Cash flow hedges 21 (226) Available-for-sale financial assets (41) (69) Exchange differences on translating (266) (74) foreign operations Share of other comprehensive income of 35 39 associates after tax and non-controlling interests Other comprehensive income for the year (251) (330) before tax Income tax relating to components of other (44) (17) comprehensive income Other comprehensive income for the year (295) (347) Total comprehensive income for the year 21 232 10 327 Total comprehensive income attributable to: Ordinary equity holders 19 837 9 097 NCNR preference shares 301 344 Equity holders of the Group 20 138 9 441 Non-controlling interests 1 094 886 Total comprehensive income for the year 21 232 10 327 Consolidated statement of changes in equity - IFRS for the year 30 June Ordinary share capital and ordinary equity holder`s funds R million Share Share Share General capital premium capital risk and reserve
share premium Balance as at 1 July 2009 52 1 300 1 352 9 Issue of share capital - - - - Movement in other reserves - - - - Ordinary dividends - - - - Preference dividends - - - - Transfer to/(from) reserves - - - 3 Changes in ownership interest - - - - in subsidiaries Consolidation of treasury - 191 191 - shares Total comprehensive income for - - - - the period Balance as at 30 June 2010 52 1 491 1 543 12 Issue of share capital - - - - Movement in other reserves - - - - Ordinary dividends - - - - Preference dividends - - - - Transfer to/(from) reserves - - - 1 Changes in ownership interest - - - - in subsidiaries Consolidation of treasury 1 3 454 3 455 - shares Total comprehensive income for - - - - the period Momentum unbundling - - - - Balance as at 30 June 2011 53 4 945 4 998 13 R million Cash Share- Avail- Currency flow based able- Trans- hedge payment for-sale lation reserve reserve reserve reserve
Balance as at 1 July 2009 (292) 2 306 1 107 750 Issue of share capital - - - - Movement in other reserves - 181 - - Ordinary dividends - - - - Preference dividends - - - - Transfer to/(from) reserves - - - - Changes in ownership interest 2 - - - in subsidiaries Consolidation of treasury - - - - shares Total comprehensive income for (176) - (138) (52) the period Balance as at 30 June 2010 (466) 2 487 969 698 Issue of share capital - - - - Movement in other reserves - 341 - - Ordinary dividends - - - - Preference dividends - - - - Transfer to/(from) reserves - - - - Changes in ownership interest - - - - in subsidiaries Consolidation of treasury - - - - shares Total comprehensive income for 15 - (80) (206) the period Momentum unbundling - (89) (664) (18) Balance as at 30 June 2011 (451) 2 739 225 474 R million Other Retained Reserves Non- reserves earnings Attri- Cumu-
butable lative to non- ordinary equity redeemabl
holders e preferenc e
shares Balance as at 1 July 2009 (198) 40 451 44 133 4 519 Issue of share capital - - - - Movement in other reserves (440) 150 (109) - Ordinary dividends - (2 955) (2 955) - Preference dividends - - - (344) Transfer to/(from) reserves - (3) - - Changes in ownership interest 2 (27) (23) - in subsidiaries Consolidation of treasury - (254) (254) - shares Total comprehensive income for 19 9 444 9 097 344 the period Balance as at 30 June 2010 (617) 46 806 49 889 4 519 Issue of share capital - - - - Movement in other reserves (8) 48 381 - Ordinary dividends - (4 179) (4 179) - Preference dividends - - - (301) Transfer to/(from) reserves - (1) - - Changes in ownership interest 12 (34) (22) - in subsidiaries Consolidation of treasury - 1 074 1 074 - shares Total comprehensive income for 43 20 065 19 837 301 the period Momentum unbundling 583 (15 159) (15 347) - Balance as at 30 June 2011 13 48 620 51 633 4 519 R million Non- Total Con- equity trolling interest Balance as at 1 July 2009 2 093 52 097 Issue of share capital 7 7 Movement in other reserves (62) (171) Ordinary dividends (420) (3 375) Preference dividends - (344) Transfer to/(from) reserves - - Changes in ownership interest in subsidiaries 508 485 Consolidation of treasury shares - (63) Total comprehensive income for the period 886 10 327 Balance as at 30 June 2010 3 012 58 963 Issue of share capital 7 7 Movement in other reserves (342) 39 Ordinary dividends (583) (4 762) Preference dividends - (301) Transfer to/(from) reserves - - Changes in ownership interest in subsidiaries 46 24 Consolidation of treasury shares - 4 529 Total comprehensive income for the period 1 094 21 232 Momentum unbundling (165) (15 512) Balance as at 30 June 2011 3 069 64 219 Consolidated income statement - IFRS for the year ended 30 June R million 2011 2010 % change Continuing operations Interest and similar income 38 187 38 817 (2) Interest expense and similar charges (20 818) (22 467) (7) Net interest income before impairment of 17 369 16 350 6 advances Impairment of advances (3 778) (5 686) (34) Net interest income after impairment of 13 591 10 664 27 advances Non-interest income 31 882 26 954 18 Income from operations 45 473 37 618 21 Operating expenses (26 901) (24 865) 8 Net income from operations 18 572 12 753 46 Share of profit from associates and 868 700 24 joint ventures Income before tax 19 440 13 453 45 Indirect tax (614) (446) 38 Profit before direct tax 18 826 13 007 45 Direct tax (4 582) (3 527) 30 Profit from continuing operations 14 244 9 480 50 Discontinued operations -'Profit attributable to discontinued 415 1 194 (65) operations -'Profit after tax on unbundling of 6 868 - >100 discontinued operations Profit for the year 21 527 10 674 >100 Attributable to: NCNR preference shareholders 301 344 (13) Ordinary equity holders 20 065 9 444 >100 Equity holders of the Group 20 366 9 788 >100 Non-controlling interests 1 161 886 31 Profit for the year 21 527 10 674 >100 Earnings per share (cents) -'Basic 372.7 179.9 >100 -'Diluted 365.3 178.1 >100 Headline earnings per share cents -'Basic 183.1 180.1 2 -'Diluted 179.4 178.3 <1 Earnings per share (cents) - IFRS continuing -'Basic 236.6 156.1 52 -'Diluted 231.9 154.5 50 Headline earnings per share cents - IFRS continuing -'Basic 174.7 152.8 14 -'Diluted 171.3 151.3 13 Earnings per share (cents) - discontinued -'Basic 136.1 23.8 >100 -'Diluted 133.4 23.6 >100 Headline earnings per share cents - discontinued -'Basic 8.4 27.3 (69) -'Diluted 8.1 27.0 (70) Consolidated statement of cash flows - IFRS for the year ended 30 June R million 2011 2010 Net cash flows from operating activities 16 923 15 795 continuing operations Net cash flows from operating funds (803) (3 000) Tax paid (3 965) (3 143) Net cash inflow from operating activities 12 155 9 652 continuing operations Net cash outflow from operating activities from - (9 709) discontinued operations Net cash inflow from investing activities from 1 777 162 continuing operations Net cash inflow from investing activities from - 33 discontinued operations Net cash (outflow)/inflow from financing (6 725) 1 085 activities from continuing operations Net cash inflow from financing activities from - 2 117 discontinued operations Net increase in cash and cash equivalents from 7 207 3 340 continuing and discontinued operations Cash and cash equivalents at the beginning of the 27 067 57 266 year Cash and cash equivalents at the end of the year 34 274 60 606 Cash and cash equivalents acquired* 200 - Cash and cash equivalents disposed of* (83) (36) Effect of exchange rate changes on cash and cash (151) (95) equivalents Transfer to non-current assets held for sale - (33 408) Cash and cash equivalents at the end of the year 34 240 27 067 * Cash and cash equivalents sold and bought relate to cash balances held by subsidiaries acquired and sold during the year. Mandatory reserve balances included above 12 173 11 370 Consolidated statement of financial position - IFRS as at 30 June R million 2011 2010 ASSETS Cash and short-term funds 34 240 27 067 Derivative financial instruments 37 206 39 764 Advances 464 593 434 793 Investment securities and other investments 124 756 117 171 Commodities 4 388 2 365 Accounts receivable 7 289 5 743 Investments in associates and joint ventures 6 029 6 901 Property and equipment 10 542 10 018 Deferred tax asset 560 443 Post-retirement benefit asset 2 - Intangible assets and deferred acquisition costs 1 691 2 104 Investment properties 203 138 Policy loans on insurance contracts - 27 Reinsurance assets 484 524 Tax asset 139 935 Non-current assets held for sale 5 805 197 247 Total assets 697 927 845 240 EQUITY AND LIABILITIES Liabilities Deposits 553 657 512 469 Short trading positions 12 413 16 735 Derivative financial instruments 36 361 36 035 Creditors and accruals 9 930 12 115 Provisions 3 621 3 359 Tax liability 288 157 Post-retirement liabilities 2 292 2 162 Deferred tax liability 2 223 2 132 Long-term liabilities 6 690 9 183 Policyholder liabilities under insurance contracts 1 047 1 868 Policyholder liabilities under investment 94 101 contracts Liabilities directly associated with non-current 5 092 189 961 assets classified as held for sale Total liabilities 633 708 786 277 Equity Ordinary shares 53 52 Share premium 4 945 1 491 Reserves 51 633 49 889 Capital and reserves attributable to ordinary 56 631 51 432 equity holders NCNR preference shares 4 519 4 519 Capital and reserves attributable to equity 61 150 55 951 holders of the Group Non-controlling interests 3 069 3 012 Total equity 64 219 58 963 Total equity and liabilities 697 927 845 240 Statement of headline earnings from continuing and discontinued operations - IFRS for the year ended 30 June R million 2011 2010 % change Continuing operations Profit from continuing operations 14 244 9 480 50 Non-controlling interest (1 164) (887) 31 NCNR preference shares (301) (344) (13) Attributable earnings to ordinary equity 12 779 8 249 55 holders* Adjusted for: (3 341) (174) >100 (Gains)/loss on disposal of investment (12) - securities and other investments Gain on disposal/impairment of available- (341) (177) for-sale assets Gain on disposal of associates or joint (2 792) - ventures Gain on the disposal of subsidiaries (571) (115) (Gain)/loss on the disposal of property (9) 2 and equipment Impairment of goodwill 96 82 Impairment of assets in terms of IAS 36 37 175 Gain from a bargain purchase (9) (203) Other - 4 Tax effects of adjustments 16 55 Non-controlling interest adjustments 244 3
Headline earnings from continuing 9 438 8 075 17 operations Discontinued operations Profit from discontinued operations 7 283 1 194 >100 Non-controlling interest 3 1 >100 Attributable earnings to ordinary 7 286 1 195 >100 shareholders Adjusted for: (6 868) 183 (>100) Profit on dividend in specie (6 868) - Loss due to the fair value adjustment of 100 a non current asset held for sale Impairment of goodwill - 71 Impairment of intangible assets - 12 Headline earnings from discontinued 418 1 378 (70) operations Headline earnings from continuing and 9 856 9 453 4 discontinued operations Reconciliation from headline earnings to normalised earnings for continuing and discontinued R million 2011 2010 % change Headline earnings from continuing 9 438 8 075 17 operations Adjusted for: 859 494 74 IFRS 2 Share-based payment expense (20) 235 Treasury shares 418 259 -'Consolidation of share trust 210 313 -'FirstRand shares held by policyholders 208 (54) Private equity subsidiary realisations 461 - Normalised earnings from continuing 10 297 8 569 20 operations Headline earnings from discontinued 418 1 378 (70) operations Adjusted for: 90 16 >100 -'IFRS 2 Share-based payment expense - 6 -'FirstRand shares held by policyholders 90 10 Normalised earnings from continuing and 10 805 9 963 8 discontinued operations Reconciliation of IFRS continuing operations to normalised continuing operations R million 2011 2010 % change
Attributable earnings to ordinary equity 12 779 8 249 55 holders (see above*) OUTsurance equity-accounted income for (180) (286) (37) the year ended 30 June Profit on sale of OUTsurance (2 710) - (100) Attributable earnings from continuing 9 889 7 963 24 normalised operations Headline earnings 9 438 8 075 17 OUTsurance equity-accounted income for (180) (286) (37) the year ended 30 June Headline earnings from continuing 9 258 7 789 19 normalised operations Normalised earnings 10 297 8 569 20 OUTsurance equity-accounted income for (180) (286) (37) the year ended 30 June Normalised earnings from continuing 10 117 8 283 22 normalised operations Directors: LL Dippenaar (Chairman), SE Nxasana (Chief executive officer), VW Bartlett, JJH Bester, JP Burger (Financial director and chief operating officer), L Crouse, PM Goss, Dr NN Gwagwa, PK Harris, WR Jardine, EG Matenge-Sebesho, AT Nzimande, D Premnarayen (Indian), KB Schoeman, RK Store, BJ van der Ross, Dr JH van Greuning, MH Visser Company secretary: BW Unser Registered office: 4 Merchant Place, Corner Fredman Drive and Rivonia Road, 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 FNB Rand Merchant Bank WesBank Date: 13/09/2011 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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