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Provisional audited results and cash dividend declaration for the year ended 30 June 2014
FirstRand Limited
(Incorporated in the Republic of South Africa)
Registration number: 1966/010753/06
JSE Ordinary Share Code: FSR
JSE Ordinary Share ISIN: ZAE000066304
JSE B Preference Share Code: FSRP
JSE B Preference Share ISIN: ZAE000060141
NSX Ordinary Share Code: FST
(FirstRand or the Group)
PROVISIONAL AUDITED RESULTS AND CASH DIVIDEND DECLARATION
For the year ended 30 June 2014
INTRODUCTION
This announcement covers the provisional audited summarised financial results of FirstRand Limited (FirstRand or the Group) based on International Financial Reporting
Standards (IFRS) for the year ended 30 June 2014.
The primary results and accompanying commentary are presented on a normalised basis as the Group believes this most accurately reflects its economic
performance. The normalised results have been derived from the IFRS financial results. Prior year numbers have been restated as a result of the adoption of new
and revised IFRS standards.
A detailed description of the difference between normalised and IFRS results is provided on www.firstrand.co.za. Commentary is based on normalised results,
unless indicated otherwise.
Jaco van Wyk, CA(SA), supervised the preparation of the summarised consolidated financial results.
FirstRand's annual integrated report will be published on the Group's website, www.firstrand.co.za, on or about 7 October 2014.
FINANCIAL HIGHLIGHTS
Year ended 30 June
2014 2013* % change
Normalised earnings (R million) 18 663 15 420 21
Diluted normalised earnings per share (cents) 331.0 273.5 21
Normalised net asset value per share (cents) 1 447.2 1 289.4 12
Dividend per ordinary share (cents) 174.0 136.0 28
Normalised ROE (%) 24.2 22.7
* Refer to restatement of prior year numbers below.
The Group consists of a portfolio of leading financial services franchises: First National Bank (FNB), the retail and commercial bank, Rand Merchant Bank (RMB),
the corporate and investment bank, WesBank, the instalment finance business and Ashburton Investments, the Group's recently-established investment
management business. The FCC franchise represents group-wide functions.
STATEMENT OF HEADLINE EARNINGS - IFRS (AUDITED)
for the year ended 30 June
R million 2014 2013* % change
Profit for the year 19 786 15 954 24
Non-controlling interests (1 058) (872) 21
NCNR preference shareholders (288) (297) (3)
Earnings attributable to ordinary equityholders 18 440 14 785 25
Adjusted for: 231 542 (57)
Loss on disposal of investment securities and other investments of a capital nature 27 13
Gain on disposal of available-for-sale assets (69) (33)
(Gain)/loss on disposal of investments in associates (61) 24
Gain on disposal of investments in joint ventures - (23)
Gain on disposal of investments in subsidiaries (18) (63)
Loss on the disposal of property and equipment 32 77
Fair value movement on investment properties - (7)
Impairment of goodwill 128 438
Impairment of assets in terms of IAS 36 151 283
Gain from a bargain purchase - (14)
Other - (138)
Tax effects of adjustments 26 (35)
Non-controlling interests adjustments 15 20
Headline earnings 18 671 15 327 22
* Refer to restatement of prior year numbers below.
RECONCILIATION FROM HEADLINE TO NORMALISED EARNINGS (AUDITED)
for the year ended 30 June
R million 2014 2013* % change
Headline earnings 18 671 15 327 22
Adjusted for: (8) 93 (>100)
IFRS 2 Share-based payment expense 182 43 >100
Treasury shares** 97 33 >100
Total return swap and IFRS 2 liability remeasurement (198) 85 (>100)
IAS 19 adjustment (104) (110) (5)
Private equity subsidiary realisations 15 42 (64)
Normalised earnings 18 663 15 420 21
* Refer to restatement of prior year numbers below.
** Includes FirstRand shares held for client trading activities.
OVERVIEW OF RESULTS
INTRODUCTION
The operating environment remained difficult throughout the financial year, largely the consequence of uncertainty in the global macroeconomic arena combined
with subdued domestic demand growth and protracted industrial action in the platinum sector.
South Africa is vulnerable to slowing capital flows due to its large current account deficit and this translated into rand weakness and higher domestic inflation,
together with similar issues in other emerging markets. This triggered the start of an interest rate hiking cycle.
Subdued domestic demand growth was evident across most of the economy: household consumption and government spending slowed as sluggish
employment growth, rising inflation, a 50 bps interest rate hike and a weaker rand exchange rate weighed on consumer and business confidence.
While some of these headwinds also affected the rest of the sub-Saharan region, most economies continued to expand at a brisk pace. Domestic demand
- fuelled by credit growth and investment in infrastructure development - remained the major catalyst.
OVERVIEW OF RESULTS
FirstRand produced good results for the year to 30 June 2014, achieving normalised earnings of R18 663 million, an increase of 21% year-on-year and a
normalised ROE of 24.2%, which in the Group's view remains at a cyclical high given the slower than expected emergence of the credit cycle.
The Group's banking franchises, FNB, RMB and WesBank, delivered strong operational performances and continued to outperform the market. The key drivers
of that outperformance are as follows.
FNB benefited from:
- its proactive workout strategy in residential mortgages, resulting in lower NPLs, together with good advances growth in line with property price increases and
repricing benefits;
- ongoing customer acquisition in targeted segments and increased cross-sell;
- migration of customers to electronic channels continued to drive growth in volumes;
- counter-cyclical origination actions taken in personal loans in 2011 has paid dividends in that bad debts have materially reduced; and
- strong growth across the African footprint with both established and new subsidiaries performing well.
RMB benefited from:
- its positioning as the leading advisory and origination franchise in South Africa;
- strong growth in corporate advances, both in South Africa and cross border, whilst further improving overall portfolio quality;
- very strong earnings from underlying investments in private equity and a significant investment realisation; and
- a growing contribution from activities in the rest of Africa.
WesBank benefited from:
- its consistent point of sale presence and partnership model, which ensured resilient new business volumes;
- an excellent performance from MotoNovo, which grew strongly in GBP terms; and
- discipline in origination which resulted in better than expected cost of credit.
SOURCES OF NORMALISED EARNINGS
Year ended 30 June
R million 2014 % composition 2013 % composition % change
FNB 9 462 51 7 998 52 18
RMB 5 342 29 4 383* 28 22
WesBank 2 830 15 2 774 18 2
FCC (including Group Treasury) and other**,# 1 317 7 562 4 >100
NCNR preference dividend (288) (2) (297) (2) (3)
Normalised earnings 18 663 100 15 420 100 21
* Includes R155 million of IT enablement impairments relating to financial years prior to and including June 2012.
** The significant year-on-year improvement is primarily due to the unwind of certain accounting anomalies recorded by Group Treasury during the financial year ended
30 June 2013, e.g. mark-to-market losses on economic hedges partially unwinding or not recurring during the year ended 30 June 2014.
# Includes FirstRand Limited (company).
The Group's income statement benefited from an increase of 19% in net interest income (NII), driven by ongoing gains in new business, repricing in certain asset
classes and lower overall NPLs. There was also a marginal endowment benefit resulting from the 50 bps increase in interest rates in January 2014. Group
Treasury's strategies to hedge capital, investment risk and liquidity risk further positively impacted NII.
Total non-interest revenue (NIR) increased 14% year-on-year, with another strong contribution from FNB, which grew NIR 10%. This performance was driven by
both the retail and commercial segments and resulted from increases in fee and commission income. FNB's ongoing strategy to encourage customers to
migrate onto electronic platforms continued to produce good growth in electronic volumes of 15% year-on-year.
NIR growth was also driven by RMB's client franchises, particularly in the rest of Africa. In addition, RMB's investing activities produced an excellent
performance, with good growth from equity-accounted income generated by the private equity portfolio. Investment income was boosted by realisations,
including a significant investment realisation emanating from a debt restructure in prior periods.
WesBank's NIR (including share of profits from associates and joint ventures) increased 13%, in line with new business volumes and benefited from continued
growth in the full maintenance rental book.
Overall operating costs increased 15%, reflecting the continued investment in platforms and the Group's operating footprint in the rest of Africa. Core costs
increased 12%.
Whilst overall bad debts continued to trend down, NPLs showed a mixed picture. Residential mortgages, FNB commercial, FNB personal loans and RMB's
investment banking division saw NPLs reduced whilst NPLs in FNB card, vehicle and asset finance (VAF) and WesBank personal loans increased. Strong book
growth resulted in an increase in NPLs in FNB's business segment and the FNB Africa portfolio.
Portfolio overlays at a franchise level increased 40% year-on-year. This reflects the Group's view that the negative retail credit cycle will continue to emerge,
already reflected in the higher levels of arrears being experienced in the VAF, WesBank personal loans and card books. In addition, portfolio overlays increased
on the back of deteriorating macroeconomic indicators, resulting in the creation of an additional R450 million of central portfolio overlays. The total performing
book coverage ratio increased from 97 bps to 106 bps.
The overall credit picture remains in line with expectations and all of the Group's portfolios are tracking as anticipated, reflecting decisions taken as early as 2011
to exit origination in high-risk segments, particularly in personal loans.
The Group's balance sheet continued to show good growth in advances year-on-year, particularly from FNB's card and commercial books and certain of the
rest of Africa subsidiaries. RMB's core advances book also posted strong growth, particularly benefiting from activities in the rest of Africa and renewable energy
drawdowns in South Africa. On a rolling six-month basis, growth in certain retail portfolios, such as personal loans and VAF, continued to moderate.
OVERVIEW OF OPERATING FRANCHISES
The Group's vision is to be the African financial services group of choice, create long-term franchise value, deliver superior and sustainable economic returns to
shareholders within acceptable levels of volatility and maintain balance sheet strength. FirstRand seeks to achieve this with two parallel growth strategies, which
are executed through its portfolio of operating franchises, within a framework set by the Group. The growth strategies are:
- become a predominant player in all of the financial services profit pools in South Africa, growing in existing markets and those where it is under-represented;
and
- grow its franchise in the broader African continent, targeting those countries expected to show above average domestic growth and which are well positioned
to benefit from the trade and investment flows between Africa, India and China.
With regard to expansion into the rest of Africa, there are three pillars to its execution:
- utilise the capabilities of the South African franchise, particularly the domestic balance sheet, intellectual capital, international platforms and the existing
operating footprint in the rest of Africa;
- start an in-country franchise and grow organically; and
- small-to medium-sized acquisitions where it makes commercial sense.
Below is a brief overview of the financial and operational performance of each franchise.
FNB
FNB represents FirstRand's activities in the retail and commercial segments in South Africa and the broader African continent. It is growing its franchise strongly
in both existing and new markets on the back of innovative products and delivery channels, particularly focusing on electronic and digital platforms.
FNB FINANCIAL HIGHLIGHTS
Year ended 30 June
R million 2014 2013 % change
Normalised earnings 9 462 7 998 18
Normalised profit before tax 13 995 11 644 20
Total assets 328 110 297 035 10
Total liabilities 314 126 282 358 11
NPLs (%) 3.14 3.95
Credit loss ratio* (%) 0.85 1.18
ROE (%) 37.4 34.5
ROA (%) 3.12 2.91
Cost-to-income ratio (%) 54.9 54.7
Advances margin (%) 3.38 3.21
* 2013 figure includes special impairment relating to the merchant acquiring event of R215 million.
SEGMENT RESULTS
Year ended 30 June
Normalised PBT
R million 2014 2013 % change
Retail 7 942 6 568 21
FNB Africa 1 899 1 570 21
Commercial 4 154 3 506 18
Total FNB 13 995 11 644 20
FNB produced an excellent performance for the year, increasing pre-tax profits 20%, driven by strong growth in both NII and NIR, and a decrease in bad debts,
particularly in residential mortgages. This performance can continue to be attributed to FNB's primary strategy to grow and retain core transactional accounts
through offering a compelling value proposition to the customer (innovative products and channels at an acceptable cost) supported by rewards programmes.
This strategy resulted in ongoing growth in new customers within the targeted segments and increased cross-sell, particularly as customers migrate up FNB's
value chain.
FNB's NII increased 15% driven by growth in both advances (+10%) and deposits (+17%). The lending businesses, residential mortgages in particular, performed
extremely well with new business margin improving and bad debt levels continuing to decline. FNB's year-to-date bad debt charge dropped to 0.85% of
advances, while preserving overall provisioning levels. Deposit margins benefited slightly from the interest rate increase during the year. Deposit and advances
growth came from across all segments as indicated in the following table.
SEGMENT ANALYSIS OF ADVANCES AND DEPOSIT GROWTH
Year ended 30 June 2014
Deposit growth Advances growth
Segments % R billion % R billion
Retail 13 16.3 6 12.6
FNB Africa 21 8.5 23 7.5
Commercial 19 22.2 18 7.8
In terms of advances, residential mortgages grew 5% in line with property prices. Card increased 13% on the back of new customer acquisition. Personal loans
declined 3% year-on-year, reflecting adjustments in credit appetite in that segment, especially at the bottom end of the market.
FNB's overall NPLs decreased 12% due to ongoing proactive workout strategies (particularly in residential mortgages). The year-on-year decrease is mainly
attributable to residential mortgages (-19%), commercial (-8%) and personal loans (-23%).
FNB's NIR increased 10% year-on-year with continued strong growth of 12% in overall transactional volumes with electronic volumes up 15%. Customers
continue to migrate to electronic channels with year-on-year ADT deposits increasing 17%, whilst branch-based deposits decreased 15%. The rollout of FNB's
innovative customer proposition in the commercial and business segments resulted in strong NIR growth of 8% and 21%, respectively.
FNB's overall operating expenditure increased 13%, reflecting ongoing investment in its operating footprint, particularly in the rest of Africa (costs up 22%).
FNB's African subsidiaries performed well, growing pre-tax profits 21%. The Namibia, Swaziland, Lesotho and Mozambique businesses were able to generate
significantly higher profits on the back of balance sheet growth, improved margins and increased transactional volumes. Zambia, Mozambique and Tanzania
continued to invest in footprint and product rollout.
FNB produced an ROE of 37.4%, which remains well above hurdle rates, despite ongoing investment in platforms and new territories.
RMB
RMB represents the Group's activities in the corporate and investment banking segments in South Africa, the broader African continent and India. The business
continues to benefit from its strategy to generate more income from client-driven activities, which is anchored around a risk appetite designed to effectively
manage the trade-offs between earnings volatility, profit growth and returns. This strategy, coupled with steady investment returns and a growing focus on
originating asset management products, is delivering a high quality and sustainable earnings profile.
RMB FINANCIAL HIGHLIGHTS
Year ended 30 June
R million 2014 2013 % change
Normalised earnings 5 342 4 383* 22
Normalised profit before tax 7 459 6 150 21
Total assets 390 208 354 758 10
Total liabilities 380 107 346 133 10
ROE (%) 27.1 25.1
ROA (%) 1.46 1.30
Credit loss ratio (%) 0.21 0.55
Cost-to-income ratio (%) 43.5 42.4
* Includes R155 million of IT enablement impairments relating to financial years prior to and including June 2012.
DIVISIONAL PERFORMANCE
Year ended 30 June
Normalised PBT
R million 2014 2013 % change
Investment banking 6 934 5 613 24
- Global markets 1 991 1 757 13
- IBD 4 083 3 344 22
- Private equity 1 208 650 86
- Other RMB (348) (138) >100
Corporate banking 525 537* (2)
Operational performance 525 444 18
Normalisation adjustment (IT enablement for Dec 2012 period) - 93 (100)
Total RMB 7 459 6 150 21
* Includes normalisation adjustment of R248 million for December 2012 which carries through to June 2013 for IT
enablement spend of which R155 million relates to years prior to and including June 2012.
RMB corporate and investment banking produced strong results for the year. Pre-tax profits increased 21% to R7.5 billion and the ROE improved to 27.1%. This
performance was achieved against a very challenging backdrop for investment banking and can be attributed to the strength of the domestic franchise combined
with growing momentum from the African expansion strategy.
During the year, RMB continued to focus on building scale in the corporate banking franchise, generating growth from the rest of Africa, strengthening the
balance sheet and consolidating market share in the more established business lines.
The investment banking division (IBD) delivered strong results, increasing pre-tax profits 22% to R4 083 million. This performance was supported by good
balance sheet growth, with advances up 27% for the year under review and the core loan book's risk profile remains robust. IBD also benefited from strong
growth in bespoke investment grade lending on the back of client balance sheet restructures. In addition, there was a significant increase in knowledge-based
fee income, as the franchise continued to benefit from its market leadership position.
The global markets division delivered a solid performance for the year across all business lines. This was achieved in spite of challenging volatile market
conditions, a subdued macroeconomic environment and increased competitive pressures. Good growth was reported from activities in the rest of Africa whilst
the domestic performance was in line with the prior year, resulting in profit growth of 13% to R1 991 million.
Private equity produced excellent growth with pre-tax profits 86% higher at R1.2 billion. It continues to benefit from the diversity of its portfolio, reporting good
equity-accounted earnings despite the muted local economic climate. Earnings were also positively impacted by a significant investment realisation on the back
of a debt restructure in prior years.
Corporate banking had a solid year, with total revenue increasing due to gains in interest turn on both advances and deposits on the back of strong growth,
especially in liabilities. Deriving further value from the transactional banking platform remains a priority.
Included in other RMB, the resources business and legacy portfolio reported losses for the year of R31 million and R183 million respectively, which is an
improvement on the prior year. Overall results were down on provisions raised centrally and realisation profits in prior periods. Valuations remain subdued, market
liquidity continues to be a constraint and the ability of companies to raise equity is limited. Investing limits remain in place for the resources business until
conditions improve.
WESBANK
WesBank represents the Group's activities in asset-based finance in the retail, commercial and corporate segments of South Africa and asset-based motor
finance sector through MotoNovo Finance in the UK. Through the Direct Axis brand, WesBank also operates in the unsecured lending market in South Africa.
WesBank's leading position in its chosen markets is due to its long-standing alliances with leading motor manufacturers, suppliers and dealer groups, and strong
point-of-sale presence.
WESBANK FINANCIAL HIGHLIGHTS
Year ended 30 June
R million 2014 2013 % change
Normalised earnings 2 830 2 774 2
Normalised profit before tax 4 060 3 983 2
Total assets 170 194 145 179 17
Total liabilities 166 137 140 814 18
NPLs (%) 2.86 2.76
Credit loss ratio (%) 1.35 1.26
ROE (%) 26.6 31.5
ROA (%) 1.89 2.20
Cost-to-income ratio (%) 43.3 41.2
Net interest margin (%) 5.05 5.30
WesBank's performance remained resilient despite its sensitivity to the motor retail market and the credit cycle. Notwithstanding higher credit and operating
costs, new business volumes continued and pre-tax profits grew 2% to R4.1 billion. WesBank delivered an ROE of 26.6% and an ROA of 1.89%.
The table below shows the relative performance year-on-year of WesBank's activities.
BREAKDOWN OF PROFIT CONTRIBUTION BY ACTIVITY
Year ended 30 June
Normalised PBT
R million 2014 2013 % change
VAF
- Local retail 1 706 1 889 (10)
- International (MotoNovo) 651 444 47
- Corporate and commercial 550 528 4
Personal loans 1 153 1 122 3
Total WesBank 4 060 3 983 2
Profit growth continued in the corporate, MotoNovo and personal loans businesses, however, local retail VAF was down on the prior year, which is expected
given the current cycle. WesBank's operations in the rest of Africa grew strongly during the year, benefiting from increased new business volumes and improved
margins. These results are currently reported as part of FNB's results as the activities currently reside within FNB's subsidiaries in the rest of Africa.
New business reflects a good risk profile across all portfolios, with systemic tightening continuing in credit appetite for higher risk segments. Production was up
15% year-on-year with local retail VAF, corporate, personal loans and MotoNovo origination volumes up 6%, 10%, 21% and 58% (GBP), respectively.
Interest margins remained resilient despite increased competition across all portfolios with origination well within agreed risk thresholds. As corporate grows
faster relative to local retail VAF, the average margin is expected to contract.
Bad debts are trending up but remain below WesBank's through-the-cycle expectations. Given the macroeconomic outlook and the levels of indebtedness of
consumers, WesBank expects impairments to continue to move up, however, it remains conservatively provided at this point in the cycle.
NPLs are 22% up year-on-year with local retail VAF increasing 39%. However, this is inflated by an increasing proportion of restructured debt review accounts,
most of which are still paying according to arrangement. This conservative treatment is in line with Group practice. 33% of NPLs are currently under debt review
(compared to 23% in the prior year), a high percentage of which have never defaulted, or reflect balances lower than when they went into debt review.
Credit origination remains well within agreed risk appetite and vintage performance is very closely monitored. Systematic scorecard adjustments have been
effected where early warning signs of underlying stress have been evident, and/or where warranted by changes in the macro environment.
NIR, including income from associates and joint ventures, increased 13% year-on-year, reflecting the growth in the advances book and in rental assets.
Core operating costs increased 10%, however, total expenses grew 19% when including the impact of the increase in profit share payments to alliance partners
(which now total R510 million and are up 17% year-on-year), investment in platforms and strategic initiatives, and the increase in depreciation of full maintenance
rental assets.
Ashburton Investments
The Group's investment management franchise, Ashburton Investments, continues to execute on its organic strategy.
The focus in the year under review was to continue to build the required platforms, systems and skills to support growth going forward. To this end, Ashburton
Investments switched on the Linked Investment Service Provider (LISP) platform to the Group's internal channels, which has resulted in customer migration from
simple banking products to investment solutions. Relationships are also being developed with independent financial advisors and institutional clients such as
pension funds.
Ashburton Investments also undertook a full overview of its investment processes to deal with the underperformance of its international traditional offering and
the changes implemented have already started to show benefits. Its single manager offering in South Africa has continued to perform in the top quartile.
During the year under review, the business achieved significant traction on its core strategy in that 41% of its assets under management are now composed of
non-traditional assets such as inflation-linked bonds, private equity, unlisted corporate credit and longer dated loans. Ashburton Investments' unique positioning
within FirstRand has allowed it to channel non-traditional assets, originated within the Group, to investors who have not previously been in a position to access
such investments.
Since the launch in June 2013, assets under management have grown 14% to R115 billion and profitability is tracking in line with expectations given the current
level of investment in people and platforms.
STRATEGIES TO ENSURE SUSTAINABILITY OF GROWTH AND RETURNS
FirstRand's franchises have consistently executed on a set of operational strategies which are aligned to certain Group financial strategies and frameworks which
are designed to ensure earnings resilience and growth, balance sheet strength and an appropriate return profile.
Ultimately the Group seeks to create long-term sustainable franchise value and believes it is currently delivering this through the operating franchises, all of which
have strong market positioning, unique customer value propositions, efficient platforms, a relentless focus on innovation and a proven entrepreneurial culture.
These deliverables are underpinned by the application of critical financial discipline through frameworks set at the centre, such as;
Risk management framework
- assess the impact of the cycle on the portfolio;
- understand and price properly for risk; and
- originate within cycle appropriate risk appetite and volatility parameters.
Performance management framework
- allocate capital appropriately to capital-light or capital-intensive activities;
- ensure an efficient capital structure with appropriate/conservative gearing; and
- make certain earnings exceed cost of capital, i.e. positive net income after capital charge (NIACC).
Balance sheet framework
- execute sustainable funding and liquidity strategies;
- protect the credit rating; and
- preserve a "fortress" balance sheet that can sustain shocks through the cycle.
The consistent application of these financial strategies and frameworks has over time allowed FirstRand to deliver the financial metrics the Group targets on
behalf of its shareholders, namely earnings growth of nominal GDP plus 3% - 5% and a ROE of 18% - 22%.
FirstRand does not target a cost-to-income ratio as it believes this to be an outcome of its ability to utilise its business model effectively in order to deliver on its
growth strategies. The Group rigorously assesses cost structures at both a franchise and business unit level, but will always consider costs incurred to run the
business versus costs incurred to build the business.
The financial strategies are also focused on ensuring that the Group extracts the maximum quality of earnings from its operations. The improved quality of the
Group's earnings is manifested in the upward shift over the past five years in the Group's ROA, particularly as RMB has adapted its business model to focus on
client-centric activities and FNB has built a market leading transactional and deposit franchise. Further proof lies in the fact that 93% of revenues are derived
from client activities. The Group's commitment to pricing appropriately for risk has also had a meaningful impact on the quality of earnings generated from its
lending businesses.
Proactive funding and liquidity management is becoming increasingly critical and FirstRand's objective is to fund its activities in a sustainable, diversified, efficient
and flexible manner, underpinned by strong counterparty relationships within prudential limits and requirements.
On the back of a deliberate strategy to grow retail deposits, FirstRand now generates a larger proportion of its funding from the deposit franchise in comparison
to the SA aggregate, and emphasis is placed on lengthening the term profile of institutional funding.
The Group has maintained its very strong capital position.
Current targeted ranges and actual ratios are summarised below.
CAPITAL RATIOS AND TARGETS
% CET1 Tier 1 Total
Regulatory minimum* 5.5 7.0 10.0
Targets 10.0 - 11.0 >12.0 >14.0
FirstRand actual 13.9 14.8 16.7
* Excludes the bank-specific individual capital requirement.
The Group's internal target levels have been revised in order to meet the 2019 end-state regulatory minimum requirements including the capital conservation
buffer, and also after considering various stakeholder constraints.
In addition to these financial strategies, the Group also constantly evaluates the inherent value within its business model and portfolio as a whole and there are
specific filters through which it makes these assessments. A key consideration is the level of diversification that exists in the portfolio and the Group considers
this in the context of its strategy, performance targets and against the macroeconomic environment. Key diversification measures relate to the relative
contribution to earnings from each franchise, market segment, product and geographic footprint.
Currently the Group believes that the relative contribution from each franchise is appropriate, given the cycle, however, there are still segments where the Group
is under-represented, such as corporate transactional banking, insurance and investment management, and there are strategies in place to address these gaps.
From a geographical diversification perspective on a relative basis the South African franchise still dominates earnings (87%). As the domestic franchise is still
outperforming the market, the relative contribution has not changed materially even though the rest of Africa is growing strongly.
The Group remains comfortable that its approach to growing outside of South Africa is appropriate, given its stated intention to protect its return profile. There
has been material success in the deployment of the balance sheet in the rest of Africa, by both RMB and FNB. In addition, the established subsidiaries continue
to generate good growth in earnings and strong ROEs whilst the newer subsidiaries are also gaining momentum in terms of customer acquisition, product and
platform rollout (particularly digital) and deposit gathering.
Dividend strategy
When assessing the appropriate level of payout to shareholders, the Group considers the following:
To ensure it meets its long-term ROE target of 18% - 22%, FirstRand assesses the robustness of the ongoing capital generation of its business. The Group
remains of the view that its ROE is at a cyclical high and, therefore, the dividend cover needs to be sustainable on a risk view as well as a core view.
The anticipated growth in risk weighted assets (RWA) given the operating environment and the overall growth plans of the operating franchises.
The Group has previously stated that it has set aside a R10 billion capital buffer currently allocated to its expansion strategy. Given the strong capital generation
from the business in the year under review and the cautious approach to deployment outside South Africa to protect the return profile, this buffer has remained
in place. However, given the momentum achieved in growing outside of South Africa over the past two years, the Group is now more comfortable to accelerate
the deployment of capital to these activities. Any increased deployment will remain disciplined to ensure the Group maintains its targeted return profile.
It is still the Group's philosophy to return excess capital to shareholders should it not find the appropriate opportunities, however, it believes that the next 12 to
18 months will determine whether an acceleration of deployment in the rest of Africa can deliver the level of return the Group seeks.
The Group will continue to seek to protect shareholders from any unnecessary volatility in dividend.
It will, going forward, consider the level of payout within a range of 1.8 x to 2.2 x cover. The Group will annually assess the appropriate level and in the process
take into account the following factors:
- actual performance;
- forward macros;
- demand for capital; and
- potential changes in regulation.
For the year to June 2014 the Group believes 1.9 x is the appropriate dividend cover.
PROSPECTS
South Africa is currently in an interest rate hiking cycle which will place further pressure on the South African consumer. The Group believes that its strategy to
grow customers, drive NIR and exercise discipline in its credit origination strategies in the retail market places it in a strong position to weather the difficult credit
cycle as it continues to emerge over the next 12 to 18 months.
Economic headwinds are increasing and growth in the system continues to slow. The Group believes its franchises have the appropriate strategies in place to
deliver good operational performances. The strength of its balance sheet and the resilience of its diverse income streams should allow FirstRand to deliver
sustainable and superior returns to shareholders.
BASIS OF PRESENTATION
The summarised consolidated financial statements are considered provisional based on the JSE Listing Requirements and are summarised from a complete set
of the Group annual financial statements.
FirstRand prepares its summarised consolidated financial results in accordance with:
- IFRS, including IAS 34 Interim Financial Reporting;
- SAICA Financial Reporting Guide as issued by the Accounting Practices Committee;
- Financial Reporting Pronouncements as issued by Financial Reporting Standards Council;
- JSE Listing Requirements for provisional reports; and
- the requirements by the Companies Act 71 of 2008 applicable to summary financial statements.
The accounting policies applied in the preparation of the consolidated financial statements from which the summarised financial statements were derived, are in
terms of IFRS. The Group applied a number of new or revised IFRS standards for the first time this year. Comparatives have been restated. Details of changes in
accounting policies and the impact of these on the comparatives can be found below.
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.
The summarised consolidated financial statements for the year ended 30 June 2014 have been audited by PricewaterhouseCoopers Inc. and Deloitte & Touche,
who expressed an unmodified opinion thereon. Unless the financial information is specifically stated as audited, it should be assumed it is unaudited. The forward
looking information has not been commented or reported on by the Group's auditors.
The auditors' report does not necessarily report on all the information contained in this announcement. Shareholders are therefore, advised that in order to obtain
a full understanding of the nature of the auditors' engagement, they should obtain a copy of the auditors' report together with the accompanying financial
statements.
FirstRand's board of directors take full responsibility for the preparation of this announcement.
The auditors expressed an unmodified opinion dated 8 September 2014 on the financial statements from which these summarised consolidated financial
statements were derived. A copy of the auditors' report on the summarised consolidated financial statements and of the auditors' report on the
consolidated financial statements are available for inspection at FirstRand's registered office, 4 Merchant Place, corner Fredman Drive and Rivonia Road,
Sandton, together with the financial statements identified in the respective auditors' reports.
EVENTS AFTER THE REPORTING PERIOD
The directors are not aware of any material events, as defined in IAS 10 Events After the Reporting Period, occurring between 30 June 2014 and the date of
authorisation of the results announcement.
BOARD CHANGES
Mr Johan Petrus Burger was appointed deputy chief executive officer on 1 October 2013. He relinquished his position as financial director on 1 January 2014.
Mr Hetash (Harry) Surendrakumar Kellan was appointed to the board as financial director on 1 January 2014.
Mr Deepak Premnarayen became a non-executive director on 3 December 2013 due to him no longer participating in FirstRand's share scheme and other
executive remuneration arrangements.
Mr Russell Mark Loubser was appointed to the board as an independent non-executive director on 5 September 2014.
Mr Bruce William Unser, having reached retirement age, retired as company secretary on 5 January 2014.
Mrs Carnita Low was appointed as company secretary on 6 January 2014.
CASH DIVIDEND DECLARATIONS
Ordinary shares
The directors have declared a gross cash dividend totalling 174 cents per ordinary share out of income reserves for the year ended 30 June 2014.
ORDINARY DIVIDENDS
Year ended 30 June
Cents per share 2014 2013
Interim (declared 3 March 2014) 77.0 55.0
Final (declared 8 September 2014) 97.0 81.0
Total 174.0 136.0
The salient dates for the final dividend are as follows:
Last day to trade cum-dividend Friday 3 October 2014
Shares commence trading ex-dividend Monday 6 October 2014
Record date Friday 10 October 2014
Payment date Monday 13 October 2014
Share certificates may not be dematerialised or rematerialised between Monday 6 October 2014 and Friday 10 October 2014, both days inclusive.
The final dividend of 97 cents per share carries a STC credit of 4.35849 cents per share. Shareholders who are exempt from Dividend Withholding Tax (DWT) will
receive the full 97 cents per share. For shareholders who are subject to DWT, tax will be calculated at 15% (or such lower rate if a double taxation agreement
applies for foreign shareholders), after taking into account the STC credit.
For South African shareholders who are subject to DWT, the net final dividend after deducting 15% tax will be 83.10377 cents per share.
The issued share capital on the declaration date was 5 637 941 689 ordinary shares and 45 000 000 variable rate NCNR B preference shares.
FirstRand's income tax reference number is 9150/201/71/4.
B preference shares
Dividends on the B preference shares are calculated at a rate of 75.56% of the prime lending rate of FNB, a division of FirstRand Bank Limited.
DIVIDENDS DECLARED AND PAID
B preference shares
Cents per share 2014 2013
Period:
28 August 2012 - 25 February 2013 320.3
26 February 2013 - 26 August 2013 320.3
27 August 2013 - 24 February 2014 320.3
25 February 2014 - 25 August 2014 341.1
LL Dippenaar SE Nxasana C Low
Chairman CEO Company secretary
8 September 2014
SUMMARISED CONSOLIDATED INCOME STATEMENT - IFRS (AUDITED)
for the year ended 30 June
R million 2014 2013* % change
Net interest income before impairment of advances 29 878 24 769 21
Impairment of advances (5 252) (4 807) 9
Net interest income after impairment of advances 24 626 19 962 23
Non-interest revenue 36 150 30 734 18
Income from operations 60 776 50 696 20
Operating expenses (35 448) (30 804) 15
Net income from operations 25 328 19 892 27
Share of profit of associates after tax 670 523 28
Share of profit of joint ventures after tax 257 301 (15)
Income before tax 26 255 20 716 27
Indirect tax (878) (645) 36
Profit before tax 25 377 20 071 26
Income tax expense (5 591) (4 117) 36
Profit for the year 19 786 15 954 24
Attributable to:
Ordinary equityholders 18 440 14 785 25
NCNR preference shareholders 288 297 (3)
Equityholders of the Group 18 728 15 082 24
Non-controlling interests 1 058 872 21
Profit for the year 19 786 15 954 24
Earnings per share (cents)
- Basic 336.2 269.7 25
- Diluted 332.7 266.4 25
Headline earnings per share (cents)
- Basic 340.4 279.6 22
- Diluted 336.8 276.2 22
* Refer to restatement of prior year numbers below.
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - IFRS (AUDITED)
for the year ended 30 June
R million 2014 2013* % change
Profit for the year 19 786 15 954 24
Items that may subsequently be reclassified to profit or loss
Cash flow hedges 363 853 (57)
(Losses)/gains arising during the year (109) 417 (>100)
Reclassification adjustments for amounts included in profit or loss 613 768 (20)
Deferred income tax (141) (332) (58)
Available-for-sale financial assets (82) (104) (21)
Losses arising during the year (82) (117) (30)
Reclassification adjustments for amounts included in profit or loss (69) (33) >100
Deferred income tax 69 46 50
Exchange differences on translating foreign operations 346 998 (65)
Gains arising during the year 346 998 (65)
Share of other comprehensive income of associates and joint ventures after tax and
non-controlling interests 131 129 2
Items that may not subsequently be reclassified to profit or loss
Remeasurements on defined benefit post-employment plans (82) 22 (>100)
(Losses)/gains arising during the year (157) 30 (>100)
Deferred income tax 75 (8) (>100)
Other comprehensive income for the year 676 1 898 (64)
Total comprehensive income for the year 20 462 17 852 15
Attributable to:
Ordinary equityholders 19 086 16 625 15
NCNR preference shareholders 288 297 (3)
Equityholders of the Group 19 374 16 922 14
Non-controlling interests 1 088 930 17
Total comprehensive income for the year 20 462 17 852 15
* Refer to restatement of prior year numbers below.
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION - IFRS (AUDITED)
as at 30 June
R million 2014 2013* 2012*
ASSETS
Cash and cash equivalents 60 756 48 565 37 317
Derivative financial instruments 39 038 52 277 52 711
Commodities 7 904 6 016 5 108
Accounts receivable 8 159 7 804 6 222
Current tax asset 131 266 327
Advances 685 926 601 065 527 279
Investment securities and other investments 119 107 128 388 116 776
Investments in associates 5 847 4 486 4 025
Investments in joint ventures 1 205 910 737
Property and equipment 14 495 13 453 11 228
Intangible assets 1 047 1 169 1 743
Reinsurance assets 408 394 898
Post-employment benefit asset 5 - -
Investment properties 419 459 215
Deferred income tax asset 862 460 343
Non-current assets and disposal groups held for sale 226 20 599
Total assets 945 535 865 732 765 528
EQUITY AND LIABILITIES
Liabilities
Short trading positions 5 442 2 991 5 343
Derivative financial instruments 41 659 53 008 53 760
Creditors and accruals 13 437 11 079 9 004
Current tax liability 369 513 334
Deposits 768 234 697 035 606 299
Provisions 797 600 592
Employee liabilities 7 441 5 857 4 983
Other liabilities 6 586 6 101 5 794
Policyholder liabilities under insurance contracts 540 646 1 089
Deferred income tax liability 796 753 1 412
Tier 2 liabilities 11 983 8 116 7 886
Liabilities directly associated with disposal groups held for sale 34 - 113
Total liabilities 857 318 786 699 696 609
Equity
Ordinary shares 55 55 55
Share premium 5 531 5 609 5 432
Reserves 74 928 65 954 56 212
Capital and reserves attributable to ordinary equityholders 80 514 71 618 61 699
NCNR preference shares 4 519 4 519 4 519
Capital and reserves attributable to equityholders of the Group 85 033 76 137 66 218
Non-controlling interests 3 184 2 896 2 701
Total equity 88 217 79 033 68 919
Total equity and liabilities 945 535 865 732 765 528
* Refer to restatement of prior year numbers below.
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS - IFRS (AUDITED)
for the year ended 30 June
R million 2014 2013
Cash generated from operating activities 24 422 24 298
Net cash utilised from operations (5 833) (4 241)
Taxation paid (6 711) (5 642)
Net cash generated from operating activities 11 878 14 415
Net cash outflow from investing activities (4 190) (3 803)
Net cash outflow from financing activities 4 343 325
Net increase in cash and cash equivalents 12 031 10 937
Cash and cash equivalents at the beginning of the year 48 565 37 317
Cash and cash equivalents acquired* - 2
Cash and cash equivalents disposed of* (11) -
Effect of exchange rate changes on cash and cash equivalents 179 309
Transfer to non-current assets held for sale (8) -
Cash and cash equivalents at the end of the year 60 756 48 565
Mandatory reserve balances included above** 17 322 16 160
* Cash and cash equivalents acquired and disposed of relate to cash balances held by subsidiaries acquired and disposed of
during the year.
** 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.
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - IFRS (AUDITED)
for the year ended 30 June
Ordinary share capital and ordinary equityholders' funds Ordinary share capital and ordinary equityholders' funds
Defined Reserves
Share benefit Share- Foreign attributable
capital post- Cash flow based Available- currency to ordinary NCNR Non-
Share Share and share employment hedge payment for-sale translation Other Retained equity- preference controlling Total
R million capital premium premium reserve reserve reserve reserve reserve reserves earnings holders shares interests equity
Balance as reported at 30 June 2012 55 5 216 5 271 - (753) 3 247 626 1 052 (61) 53 139 57 250 4 519 2 767 69 807
Prior period restatements - 216 216 (591) - - (6) (10) (20) (411) (1 038) - (66) (888)
Restated balance as at 1 July 2012 55 5 432 5 487 (591) (753) 3 247 620 1 042 (81) 52 728 56 212 4 519 2 701 68 919
Issue of share capital - - - - - - - - - - - - (11) (11)
Movement in other reserves - - - - - (46) - - 76 (79) (49) - (53) (102)
Ordinary dividends - - - - - - - - - (6 198) (6 198) - (650) (6 848)
Preference dividends - - - - - - - - - - - (297) - (297)
Transfer from/(to) general risk reserves - - - - - - - - 21 (21) - - - -
Changes in ownership interest of subsidiaries - - - - - (2) - - - 15 13 - (21) (8)
Consolidation of treasury shares - 177 177 - - - - - - 53 53 - - 230
Total comprehensive income for the year - - - 22 853 - (102) 957 110 14 785 16 625 297 930 17 852
Vesting of share-based payments - - - - - (26) - - - (676) (702) - - (702)
Balance as at 30 June 2013 55 5 609 5 664 (569) 100 3 173 518 1 999 126 60 607 65 954 4 519 2 896 79 033
Issue of share capital - - - - - - - - - - - - - -
Disposal of subsidiaries - - - - - - - - - - - - - -
Movement in other reserves - - - - - (387) - - 14 (24) (397) - (86) (483)
Ordinary dividends - - - - - - - - - (8 669) (8 669) - (630) (9 299)
Preference dividends - - - - - - - - - - - (288) - (288)
Transfer from/(to) general risk reserves - - - - - - - - 34 (34) - - - -
Changes in ownership interest of subsidiaries - - - - - - - - - (180) (180) - (84) (264)
Consolidation of treasury shares - (78) (78) - - - - - - 14 14 - - (64)
Total comprehensive income for the year - - - (82) 361 - (82) 353 96 18 440 19 086 288 1 088 20 462
Vesting of share-based payments - - - - - (3) - - - (877) (880) - - (880)
Balance as at 30 June 2014 55 5 531 5 586 (651) 461 2 783 436 2 352 270 69 277 74 928 4 519 3 184 88 217
FAIR VALUE MEASUREMENTS (AUDITED)
VALUATION METHODOLOGY
In terms of IFRS, the Group is required to or elects to measure certain assets and liabilities at fair value. The Group has established control frameworks and
processes at a franchise level to independently validate its valuation techniques and inputs used to determine its fair value measurements. At a franchise level
technical teams are responsible for the selection, implementation and any changes to the valuation techniques used to determine fair value measurements.
Valuation committees comprising representatives from key management have been established within each franchise and at an overall Group level and are
responsible for overseeing the valuation control process at a franchise and Group level and considering the appropriateness of the valuation techniques applied in
fair value measurement. The valuation models and methodologies are subject to independent review and approval at a franchise level by the required technical
teams, valuation committees, relevant risk committees and external auditors annually or more frequently if considered appropriate.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date, i.e. an exit price. Fair value is therefore a market based measurement and when measuring fair value the Group uses the assumptions that
market participants would use when pricing an asset or liability under current market conditions, including assumptions about risk. When determining fair value it
is presumed that the entity is a going concern and the fair value is therefore not an amount that represents a forced transaction, involuntary liquidation or a
distressed sale.
Fair value measurements are determined by the Group on both a recurring and non-recurring basis.
Recurring fair value measurements
Recurring fair value measurements are those for assets and liabilities that IFRS requires or permits to be recognised at fair value and are recognised in the
statement of financial position at reporting date. This includes financial assets, financial liabilities and non-financial assets, including investment properties and
commodities, that the Group measures at fair value at the end of each reporting period.
Financial instruments
When determining the fair value of a financial instrument, where the financial instrument has a bid or ask price (for example, in a dealer market), the Group uses
the price within the bid-ask spread that is most representative of fair value in the circumstances. Although not a requirement, the Group uses the bid price for
financial assets or the ask/offer price for financial liabilities where this best represents fair value.
When determining the fair value of a financial liability or the Group's own equity instruments the quoted price for the transfer of an identical or similar liability or
own equity instrument is used. Where this is not available and an identical item is held by another party as an asset, the fair value of the liability or own equity
instrument is measured using the quoted price in an active market of the identical item, if that price is available, or using observable inputs (such as the quoted
price in an inactive market for the identical item) or using another valuation technique.
Where the Group has any financial liability with a demand feature, such as demand deposits, the fair value is not less than the amount payable on demand,
discounted from the first date that the amount could be required to be paid where the time value of money is significant.
Non-financial assets
When determining the fair value of a non-financial asset, a market participant's ability to generate economic benefits by using the assets in its highest and best
use or by selling it to another market participant that would use the asset in its highest and best use, is taken into account. This includes the use of the asset
that is physically possible, legally permissible and financially feasible. In determining the fair value of the Group's investment properties and commodities, the
highest and best use of the assets is their current use.
Non-recurring fair value measurements
Non-recurring fair value measurements are those triggered by particular circumstances and include the classification of assets and liabilities as non-current assets
or disposal groups held for sale under IFRS 5, where fair value less costs to sell is the recoverable amount; IFRS 3 business combinations where assets and
liabilities are measured at fair value at acquisition date; and IAS 36 impairments of assets where fair value less costs to sell is the recoverable amount. These fair
value measurements are determined on a case by case basis as they occur within each reporting period.
Other fair value measurements
Other fair value measurements include assets and liabilities not measured at fair value but for which fair value disclosures are required under another IFRS, e.g.
financial instruments at amortised cost. The fair value for these items is determined by using observable quoted market prices where these are available, such as
market prices quoted on BESA, or in accordance with generally acceptable pricing models such as a discounted cash flow analysis. Except for the amounts
included below, for all other financial instruments at amortised cost the carrying value is equal to or a reasonable approximation of the fair value.
FAIR VALUE HIERARCHY AND MEASUREMENTS
The Group classifies assets and liabilities measured at fair value using a fair value hierarchy that reflects whether observable or unobservable inputs are used in
determining the fair value of the item. If this information is not available, fair value is measured using another valuation technique that maximises the use of
relevant observable inputs and minimises the use of unobservable inputs. The valuation techniques employed by the Group include, inter alia, quoted prices for
similar assets or liabilities in an active market, quoted prices for the same asset or liability in an inactive market, adjusted prices from recent arm's length
transactions, option-pricing models, and discounted cash flow techniques.
Where a valuation model is applied and the Group cannot mark-to-market, it applies a mark-to-model approach, subject to valuation adjustments. Mark-to-
model is defined as any valuation which has to be benchmarked, extrapolated or otherwise calculated from a market input. The Group will consider the following
in assessing whether a mark-to-model valuation is appropriate:
- as far as possible, market inputs are sourced in line with market prices;
- generally accepted valuation methodologies are consistently used for particular products unless deemed inappropriate by the relevant governance forums;
- where a model has been developed in-house, it is based on appropriate assumptions, which have been assessed and challenged by suitably qualified parties
independent of the development process;
- formal change control procedures are in place;
- awareness of the weaknesses of the models used and appropriate reflection in the valuation output where relevant;
- the model is subject to periodic review to determine the accuracy of its performance; and
- valuation adjustments are only made when appropriate, for example, to cover the uncertainty of the model valuation.
VALUATIONS BASED ON OBSERVABLE INPUTS INCLUDE:
LEVEL 1
Fair value is determined using unadjusted quoted prices in active markets for identical assets or liabilities where this is readily available and the price represents
actual and regularly occurring market transactions. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing
information on an ongoing basis. This category includes listed bonds and equity, exchange-traded derivatives, exchange-traded commodities and short trading
positions.
LEVEL 2
Fair value is determined using inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly such as quoted prices for
similar items in an active market or for an identical item in an inactive market, or valuation models using observable inputs or inputs derived from observable
market data. This category includes loans and advances to customers, equities listed in an inactive market, certain debt instruments, over the counter
derivatives, deposits, other liabilities, Tier 2 liabilities, commodities which are not exchange-traded and investment properties.
LEVEL 3
Fair value is determined using a valuation technique and significant inputs that are not based on observable market data (i.e. unobservable inputs) such as an
entity's own assumptions about what market participants would assume in pricing assets and liabilities. The assumptions applied by the Group are set out in the
table below. This category includes certain loans and advances to customers, certain over the counter derivatives such as equity options on exchange traded
derivatives where a market price is not available, investments in debt instruments, and certain deposits such as credit linked notes.
The table below sets out the valuation techniques applied by the Group for fair value measurements of financial assets and financial liabilities categorised as level
2 and level 3.
Significant
Fair value unobservable
hierarchy Valuation Description of valuation technique and main Observable inputs of level 3
Instrument level technique assumptions inputs items
Derivative financial instruments
Option Level 2 and Option pricing The Black Scholes model is used. Strike price of the Volatilities
contracts level 3 model option;
market-related
discount rate;
forward rate, and
cap and floor
volatility
Futures Level 2 Discounted Future cash flows are discounted using a market- Market interest Not applicable
contracts cash flows related interest rate. Projected cash flows are obtained rates and curves
by subtracting the strike price of the forward contract
from the market projected forward value.
Swaps Level 2 Discounted The future cash flows are projected using a forward Market interest Not applicable
cash flows curve and then discounted using a market-related rates and curves
discount curve over the contractual period. The reset
date of each swaplet is determined in terms of legal
documents pertaining to the swap.
Forward rate Level 2 Discounted The future cash flows are projected using a forward Market interest Not applicable
agreements cash flows curve and then discounted using a market-related rates and curves
discount curve over the contractual period. The reset
date is determined in terms of legal documents.
Forward Level 2 Discounted The future cash flows are projected using a forward Market interest Not applicable
contracts cash flows curve and then discounted using a market-related rates and curves
discount curve over the contractual period. Projected
cash flows are obtained by subtracting the strike price
of the forward contract from the market projected
forward value.
Credit Level 2 and Discounted The future cash flows are discounted using a Market interest Credit inputs
derivatives level 3 cash flows market-related interest rate. Where prices are rates and curves
obtainable from the market, individual credit spreads
are used.
Commodity Level 2 Discounted Commodity-linked instruments are measured by taking Futures prices Not applicable
derivatives cash flows into account the price, location differential, grade
differential, silo differential and the discount factor of the
most liquidly traded futures linked to the commodity.
Equity Level 2 and Industry The models calculate fair value based on input Market interest Volatilities
derivatives level 3 standard parameters such as stock prices, dividends, volatilities, rates and curves
models interest rates, equity repo curves and, for multi-asset
products, correlations. Unobservable model inputs are
determined by reference to liquid market instruments
and applying extrapolation techniques to match the
appropriate risk profile.
Loans and advances to customers
Investment Level 3 Discounted The future cash flows are discounted using a Market interest Credit inputs
banking book* cash flows market-related interest rate. To calculate the fair value rates and curves
of credit the Group uses a valuation methodology
based on the credit spread matrix, which considers
loss given default, tenor and the internal credit
committee rating criteria. The fair value measurement
includes the original credit spread and is repriced when
there is a change in rating of the counterparty. A decline
in credit rating would result in an increase in the spread
above the base rate for discounting purposes and
consequently a reduction of the fair value of the
advance. Similarly an increase in credit rating would
result in a decrease in the spread below the base rate
and an increase of the fair value of the advance.
Other loans and Level 2 and Discounted The future cash flows are discounted using a Market interest Credit inputs
advances level 3 cash flows market-related interest rate adjusted for credit inputs, rates and curves
over the contractual period.
Investment securities and other investments
Equities/bonds Level 2 Discounted For listed equities and bonds, the listed price is used Market interest Not applicable
listed in an cash flows where the market is active (i.e. level 1). However if the rates and curves
inactive market market is not active and the listed price is not
representative of fair value, these are classified as level 2
and a valuation technique is used, for example the
discounted cash flow is used for listed bonds. This will
be based on risk parameters of comparable securities
and the potential pricing difference in spread and/or
price terms with the traded comparable is considered.
The future cash flows are discounted using a market-
related interest rate.
Unlisted bonds Level 2 and Discounted Unlisted bonds are valued similarly to advances Market interest Credit inputs
level 3 cash flows measured at fair value. The future cash flows are rates and curves
discounted using a market-related interest rate adjusted
for credit inputs, over the contractual period.
Unlisted Level 2 and Price earnings For unlisted equities, the earnings included in the model Market Growth rates and
equities level 3 (P/E) model are derived from a combination of historical and transactions P/E ratios
budgeted earnings depending on the specific
circumstances of the entity whose equity is being
valued. The P/E multiple is derived from current market
observations taking into account an appropriate
discount for unlisted companies. The valuation of these
instruments may be corroborated by a discounted cash
flow valuation or by the observation of other market
transactions that have taken place.
* The Group has elected to designate the investment banking book advances at fair value through profit or loss. Credit risk is not observable
and has a significant impact on the fair value measurement of these advances and as such, these advances are classified as level 3 on the fair
value hierarchy.
Negotiable Level 2 Discounted The future cash flows are discounted using a Market interest Not applicable
certificates of cash flows market-related interest rate. Inputs to these models rates and curves
deposit include information that is consistent with similar market
quoted instruments, where available.
Treasury bills Level 2 BESA bond The BESA bond pricing model uses the BESA Market interest Not applicable
pricing model mark-to-market bond yield. rates and curves
Non-recourse Level 2 Discounted The future cash flows are discounted using a discount Market interest Not applicable
investments cash flows rate which is determined as a base rate plus a spread. rates and curves
The base rate is determined by the legal agreements as
either a bond or swap curve. The spread approximates
the level of risk attached to the cash flows. When there
is a change in the base rate in the market, the valuation
is adjusted accordingly. The valuation model is
calibrated to reflect transaction price at initial
recognition.
Deposits
Call and Level 2 None - the The undiscounted amount of the deposit is the fair None - the Not applicable
non-term undiscounted value due to the short-term nature of the instruments. undiscounted
deposits amount is used These deposits are financial liabilities with a demand amount
feature and the fair value is not less than the amount approximates fair
payable on demand, i.e. the undiscounted amount of value and no
the deposit. valuation is
performed
Non-recourse Level 2 Discounted Fair value for interest rate and foreign exchange risk Market interest Not applicable
deposits cash flows with no valuation adjustment for own credit risk. rates and foreign
Valuation adjustments are affected for changes in the exchange rates;
applicable credit ratings of the assets. credit inputs
Deposits that Level 3 Discounted These deposits represent the collateral leg of credit Market interest Credit inputs on
represent cash flows linked notes. The forward curve adjusted for liquidity rates and curves related advance
collateral on premiums and business unit margins are used. The
credit linked valuation methodology does not take early withdrawals
notes and other behavioural aspects into account.
Other deposits Level 2 and Discounted The forward curve adjusted for liquidity premiums and Market interest Credit inputs
level 3 cash flows business unit margins. The valuation methodology does rates and curves
not take early withdrawals and other behavioural aspects
into account.
Other liabilities Level 2 Discounted The future cash flows are discounted using a Market interest Not applicable
and Tier 2 cash flows market-related interest rate. rates and curves
liabilities
Investment Level 2 Adjusted The fair value of investment properties is determined by Market prices, Not applicable
properties market prices obtaining a valuation from an independent professional rental
valuer not related to the Group. This fair value is based capitalisation
on observable market prices adjusted, if necessary, for rates, current
any difference in the nature, location or condition of the rentals obtained,
specific asset. Variables are obtained through surveys remaining lease
and comparable recent market transactions not publicly term and the
quoted. These valuations are reviewed annually by a specialised
combination of independent and internal valuation nature of the
experts. properties
Financial assets Level 2 and Discounted The future cash flows are discounted using a Market interest Credit inputs
and liabilities level 3 cash flows market-related interest rate and curves adjusted for rates and curves
not measured credit inputs.
at fair value but
for which fair
value is
disclosed
During the current reporting period there were no changes in the valuation techniques used by the Group.
The following table presents the recurring fair value measurements and fair value hierarchy of assets and liabilities of the Group recognised at fair value.
As at 30 June 2014
Total
R million Level 1 Level 2 Level 3 fair value
Assets
Recurring fair value measurements
Derivative financial instruments 22 38 896 120 39 038
Advances* - 31 923 151 810 183 733
Investment securities and other investments 57 601 38 106 3 958 99 665
Non-recourse investments - 18 370 - 18 370
Commodities 7 904 - - 7 904
Investment properties - 419 - 419
Total financial assets measured at fair value 65 527 127 714 155 888 349 129
Liabilities
Recurring fair value measurements
Short trading positions 5 442 - - 5 442
Derivative financial instruments 25 41 629 5 41 659
Deposits 125 84 940 1 327 86 392
Non-recourse deposits - 18 370 - 18 370
Other liabilities - 3 505 - 3 505
Tier 2 liabilities - 1 030 - 1 030
Total financial liabilities measured at fair value 5 592 149 474 1 332 156 398
* Although the fair value of credit is not significant year-on-year it may become significant in future. For this reason, together with the fact that
the majority of South African counterparties do not have actively traded or observable credit spreads, the Group has classified loans and
advances to customers in level 3 of the fair value hierarchy. In the event that credit spreads are observable for counterparty, loans and advances
to customers are classified as level 2 of the fair value hierarchy.
During the current year there were no assets or liabilities measured at fair value on a non-recurring basis.
There were no transfers of assets or liabilities between level 1 and level 2 during the current year.
As at 30 June 2013
Total
R million Level 1 Level 2 Level 3 fair value
Assets
Recurring fair value measurements
Derivative financial instruments 181 51 986 110 52 277
Advances* - 40 376 116 749 157 125
Investment securities and other investments 59 108 44 006 5 330 108 444
Non-recourse investments - 19 225 - 19 225
Total financial assets measured at fair value 59 289 155 593 122 189 337 071
Liabilities
Recurring fair value measurements
Short trading positions 2 991 - - 2 991
Derivative financial instruments 75 52 932 1 53 008
Deposits - 84 141 1 517 85 658
Non-recourse deposits - 19 225 - 19 225
Other liabilities - 2 023 - 2 023
Tier 2 liabilities - 1 049 - 1 049
Total financial liabilities measured at fair value 3 066 159 370 1 518 163 954
* Although the fair value of credit is not significant year-on-year it may become significant in future. For this reason, together with the fact that
the majority of South African counterparties do not have actively traded or observable credit spreads, the Group has classified loans and
advances to customers in level 3 of the fair value hierarchy. In the event that credit spreads are observable for counterparty, loans and advances
to customers are classified as level 2 of the fair value hierarchy.
There were no transfers of assets or liabilities between level 1 and level 2 during the prior year.
ADDITIONAL DISCLOSURES FOR LEVEL 3 FINANCIAL INSTRUMENTS
Changes in level 3 instruments with recurring fair value measurements
The following tables show a reconciliation of the opening and closing balances for fair value assets and liabilities classified as level 3 in terms of the fair value hierarchy, for which recurring fair value measurements are required.
As at 30 June 2014 As at 30 June 2014
Gains/losses
recognised Purchases,
Gains/losses in other sales, Acquisitions/
Fair value on recognised in comprehensive issues and disposals Transfers into Transfer out Exchange Fair value on
R million 30 June 2013 profit or loss income settlements of subsidiaries level 3 of level 3 rate difference 30 June 2014
Assets
Derivative financial instruments 110 30 - (20) - - - - 120
Advances 116 749 3 511 - 31 110 - - - 440 151 810
Investment securities and other investments 5 330 361 4 (1 752) - 187 (185) 13 3 958
Total financial assets measured at fair value in level 3 122 189 3 902 4 29 338 - 187 (185) 453 155 888
Liabilities
Derivative financial instruments 1 4 - - - - - - 5
Deposits 1 517 59 - (383) - 111 - 23 1 327
Total financial liabilities measured at fair value in level 3 1 518 63 - (383) - 111 - 23 1 332
Note: Decreases in level 3 assets and liabilities are included in brackets. Decreases in the value of assets may be as a result of losses, sales and settlements or the disposal of subsidiaries. Decreases in the value of liabilities may be as a
result of gains, settlements or the disposal of subsidiaries.
During the current reporting period investment securities to the value of R185 million were transferred out of level 3 into level 1 and 2 due to these investment securities listing on an exchange. Of these, investment securities of R150 million
were transferred to level 2 as the market is not yet considered to be active for these investments. In addition, investment securities of R187 million and deposits of R111 million were transferred into level 3 out of level 2 because the significant
inputs in the fair value measurements became unobservable.
As at 30 June 2013 As at 30 June 2013
Gains/losses
recognised in Purchases,
Gains/losses other sales, issues Acquisitions/
Fair value on recognised in comprehensive and disposals Transfers into Transfer out Exchange Fair value on
R million 30 June 2012 profit or loss income settlements of subsidiaries level 3 of level 3 rate difference 30 June 2013
Assets
Derivative financial instruments 198 34 - (122) - - - - 110
Advances 101 109 2 106 - 12 507 - 349 - 678 116 749
Investment securities and other investments 5 404 (852) 24 721 (3) - (14) 50 5 330
Total financial assets measured at fair value in level 3 106 711 1 288 24 13 106 (3) 349 (14) 728 122 189
Liabilities
Derivative financial instruments 147 72 - (18) - - (200) - 1
Deposits 3 267 (243) - (1 614) - - - 107 1 517
Total financial liabilities measured at fair value in level 3 3 414 (171) - (1 632) - - (200) 107 1 518
Note: Decreases in level 3 assets and liabilities are included in brackets. Decreases in the value of assets may be as a result of losses, sales and settlements or the disposal of subsidiaries. Decreases in the value of liabilities may be as a
result of gains, settlements or the disposal of subsidiaries.
- Advances to the value of R349 million were transferred out of level 2 to level 3 in the prior year. This transfer was as a result of certain unobservable inputs becoming significant to the calculation of fair value. The inclusion of these
advances in level 3 of the fair value hierarchy was, therefore, more appropriate.
- Investment securities to the value of R14 million were transferred out of level 3 and into level 1 as these were previously unlisted shares which listed during June 2013.
- Derivative financial liabilities to the value of R200 million were transferred out of level 3 and into level 2 as a result of a change in input into the valuation techniques used to value these derivatives. The inputs around volatility are based
on observable market inputs.
Unrealised gains or losses on level 3 instruments with recurring fair value measurements
The Group classifies assets or liabilities in level 3 of the fair value hierarchy when the significant inputs into the valuation model are not observable.
In addition the valuation model for level 3 assets or liabilities typically also relies on a number of inputs that are readily observable either directly or
indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.
The table below presents the total gains or losses relating to fair value remeasurement of assets and liabilities classified in level 3 that are still held
at reporting date. With the exception of interest on funding instruments and available-for-sale financial assets, all gains or losses are recognised in
non-interest revenue.
As at 30 June 2014
Gains/losses
Gains/losses recognised
recognised in in other
the income comprehensive Total
R million statement income gains/losses
Assets
Derivative financial instruments 22 - 22
Advances* 3 039 - 3 039
Investment securities and other investments 287 (1) 286
Total 3 348 (1) 3 347
Liabilities
Derivative financial instruments 4 - 4
Deposits (23) - (23)
Total (19) - (19)
* Amount mainly comprises accrued interest on the fair value loans and advances and movements in interest rates that have been hedged.
Note: Decreases in the value of level 3 assets and liabilities are indicated with brackets. Decreases in the value of assets may be as a result of
losses recognised in profit or loss and other comprehensive income. Decreases in the value of liabilities may be as a result of gains recognised
in profit or loss.
As at 30 June 2013
Gains/losses
Gains/losses recognised
recognised in in other
the income comprehensive Total
R million statement income gains/losses
Assets
Derivative financial instruments 32 - 32
Advances* 2 414 - 2 414
Investment securities and other investments 155 24 179
Total 2 601 24 2 625
Liabilities
Derivative financial instruments - - -
Deposits (146) - (146)
Total (146) - (146)
* Amount mainly comprises accrued interest on the fair value loans and advances and movements in interest rates that have been hedged.
Note: Decreases in level 3 assets and liabilities are indicated with brackets. Decreases in the value of assets may be as a result of losses.
Decreases in the value of liabilities may be as a result of gains, recognised in profit or loss.
Effect of changes in significant unobservable assumptions of level 3 financial instruments to reasonably possible alternatives
As at 30 June 2014 As at 30 June 2014 As at 30 June 2013
Reasonably possible alternative fair value Reasonably possible alternative fair value
Reasonably possible changes
Using more Using more Using more Using more
to significant unobservable positive negative positive negative
R million Significant unobservable inputs inputs Fair value assumptions assumptions Fair value assumptions assumptions
Assets
Derivative financial instruments Volatilities Volatilities increased and
decreased by 10% 120 175 107 110 136 93
Advances Credit Credit migration matrix* 151 810 153 180 151 817 116 749 118 166 115 625
Investment securities and other investments Growth rates and P/E ratios of Unobservable inputs increased
unlisted investments and decreased by 10% 3 958 4 381 3 540 5 330 5 985 4 591
Total financial assets measured at fair value in level
3 155 888 157 736 155 464 122 189 124 287 120 309
Liabilities
Derivative financial instruments Volatilities Volatilities increased and
decreased by 10% 5 5 5 1 1 1
Deposits Credit risk of the cash collateral Credit migration matrix**
leg of credit linked notes 1 327 1 195 1 460 1 517 1 365 1 668
Total financial liabilities measured at fair value in
level 3 1 332 1 200 1 465 1 518 1 366 1 669
* The credit migration matrix is used as part of the Group's credit risk management process for advances measured at fair value through profit or loss. The matrix is a simulation model that contains a matrix of probabilities for downgrading or
upgrading to another rating bucket. The migration matrix is based on actual observed rating migrations from S&P over the long term and is based on the fair value in the 75th percentile.
** The deposits included in level 3 of the hierarchy represent the collateral leg of credit linked notes. The most significant unobservable input in determining the fair value of the credit linked notes is the credit risk component. The sensitivity to
credit risk has been assessed in the same way as for advances using the credit migration matrix with the deposit representing the cash collateral component thereof.
OTHER FAIR VALUE MEASUREMENTS
The following represents the fair values of financial instruments not carried at fair value on the statement of financial position, but for which fair
value is required to be disclosed.
As at 30 June 2014 As at 30 June 2013
Carrying Fair Carrying Fair
R million amount value Level 1 Level 2 Level 3 amount value
Assets
Advances 502 195 505 747 - 72 581 433 166 443 940 437 876
Investment securities and other investments 1 072 1 070 - 729 341 719 715
Total financial assets at amortised cost 503 267 506 817 - 73 310 433 507 444 659 438 591
Liabilities
Deposits 663 472 664 789 18 156 646 537 96 592 152 593 585
Other liabilities 3 075 2 850 - 975 1 875 4 068 3 911
Tier 2 liabilities 10 953 11 216 - 11 099 117 7 067 7 189
Total financial liabilities at amortised cost 677 500 678 855 18 156 658 611 2 088 603 287 604 685
For all other financial instruments the carrying value is equal to or a reasonable approximation of the fair value.
Day 1 profit or loss
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price (i.e. the entry or exit price) unless the fair
value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e. without
modification or repackaging) or based on a valuation technique whose variables include only data from observable markets. Day 1 profit or loss
arises on the initial recognition of a financial instrument when the fair value of the instrument is determined using a valuation technique that makes
use of inputs that are not observable in an active market. In terms of IAS 39 if the fair value determined in accordance with such a valuation
technique differs from the transaction price the initial recognition should take place at the transaction price. The day 1 profits or losses arising as
a result of the difference between the two values should only be recognised over the life of the instrument as a result of changes that would also
be considered by market participants.
The following table represents the aggregate difference between transaction price and fair value based on a valuation technique yet to be
recognised in profit or loss.
R million 2014 2013
Balance at 1 July 28 37
Day 1 profits or losses not recognised on financial instruments initially recognised in the current year - -
Amount recognised in profit or loss as a result of changes which would be observable by market
participants (8) (9)
Balance at 30 June 20 28
RESTATEMENT OF PRIOR YEAR NUMBERS (AUDITED)
DESCRIPTION OF RESTATEMENTS
IFRS 10, IFRS 11, IFRS 12, IAS 27R and IAS 28R
Under IFRS 10 there is one approach for determining consolidation of all entities based on concepts of power, variability of returns and linkage. The application of
control will be applied irrespective of the nature of the investee. The Group has control over an investee when the Group is exposed, or has rights to, variable
returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
IFRS 11 places more focus on the investor's rights and obligations than on the structure of the arrangement when determining whether a joint arrangement
exists.
IFRS 12 is a comprehensive standard on disclosure requirements for all forms of interests in other entities, including unconsolidated structured entities. The
standard impacts disclosure only and has no impact on recognition and measurement.
The adoption of IFRS 10 and 11 resulted in the following:
- reclassification of a number of entities between associates and joint ventures. As it has always been the Group's policy to account for joint ventures in
accordance with the equity accounting method the reclassification did not result in a change in measurement;
- a number of structured entities no longer meet the control criteria in terms of IFRS 10 and consequently are no longer consolidated;
- a private equity investment previously classified as an associate was considered to be controlled under IFRS 10; and
- first and third party insurance cell captives do not meet the definition of asset silos in terms of IFRS 10 and, therefore, do not qualify for consolidation. The
insurance policies in the Group's first party cells insure the risk arising from the Group's defined benefit plans. Those insurance contracts are now considered to
be plan assets in terms of IAS 19 and are accounted for as such. The excess profit in the cell captive is recognised as a financial asset in accounts receivable.
The third party cell captives previously consolidated by the Group are now treated as profit share arrangements and the income arising from the arrangements is
included in other non-interest revenue. To the extent that these remain unpaid the balance is recognised in accounts receivable.
IAS 19
Amendments to IAS 19 require that all actuarial gains and losses in respect of defined benefit post-employment plans are recognised in other comprehensive
income. In addition, the standard no longer requires the expected return on plan assets to be recognised in profit or loss, rather a net interest income/expense
be recognised on the net asset or liability. All other remeasurements relating to plan assets are also recognised in other comprehensive income.
Loans to associates and joint venture
In accordance with IAS 28, the Group's net investment in associates and joint ventures includes loans for which settlement is neither planned nor likely in the
foreseeable future. The Group historically included these loans as part of investments in associates and joint ventures and reflected these as such on the
statement of financial position.
Given the underlying debt nature of these loans and developing industry practice, the Group has decided to present these loans as advances. These loans will
continue to form part of the Group’s net investment in the associate or joint venture for purposes of determining the share of losses of the investee attributable to
the Group and impairment.
The change in presentation had no impact on the net asset value of the Group, only on the classification of items on the statement of financial position.
RESTATED SUMMARISED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2013 - IFRS (AUDITED)
Reclass-
ification
of loans to
As associates
previously IFRS 10 and joint
R million reported and 11 IAS 19 ventures Restated
Net interest income before impairment of advances 24 715 54 - - 24 769
Impairment of advances (4 812) 20 - (15) (4 807)
Net interest income after impairment of advances 19 903 74 - (15) 19 962
Non-interest revenue 31 614 (880) - - 30 734
Income from operations 51 517 (806) - (15) 50 696
Operating expenses (31 486) 667 15 - (30 804)
Net income from operations 20 031 (139) 15 (15) 19 892
Share of profit of associates after tax 523 (15) - 15 523
Share of profit of joint ventures after tax 301 - - - 301
Income before tax 20 855 (154) 15 - 20 716
Indirect tax (645) - - - (645)
Profit before tax 20 210 (154) 15 - 20 071
Income tax expense (4 532) 415 - - (4 117)
Profit for the year 15 678 261 15 - 15 954
Attributable to:
Ordinary equityholders 14 539 231 15 - 14 785
NCNR preference shareholders 297 - - - 297
Equityholders of the Group 14 836 231 15 - 15 082
Non-controlling interests 842 30 - - 872
Profit for the year 15 678 261 15 - 15 954
RESTATED SUMMARISED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2013 - IFRS (AUDITED)
Reclass-
ification
of loans to
As associates
previously IFRS 10 and joint
R million reported and 11 IAS 19 ventures Restated
Profit for the year 15 678 261 15 - 15 954
Items that may subsequently be reclassified to profit or loss
Cash flow hedges 853 - - - 853
Gains arising during the year 417 - - - 417
Reclassification adjustments for amounts included in profit or loss 768 - - - 768
Deferred income tax (332) - - - (332)
Available-for-sale financial assets (89) (15) - - (104)
Losses arising during the year (102) (15) - - (117)
Reclassification adjustments for amounts included in profit or loss (33) - - - (33)
Deferred income tax 46 - - - 46
Exchange differences on translating foreign operations 990 8 - - 998
Gains arising during the year 990 8 - - 998
Share of other comprehensive income of associates and joint ventures
after tax and non-controlling interests 129 - - - 129
Items that may not subsequently be reclassified to profit or loss
Remeasurement on defined benefit post-employment plans - - 22 - 22
Gains arising during the year - - 30 - 30
Deferred income tax - - (8) - (8)
Other comprehensive income for the year 1 883 (7) 22 - 1 898
Total comprehensive income for the year 17 561 254 37 - 17 852
Attributable to:
Ordinary equityholders 16 358 230 37 - 16 625
NCNR preference shareholders 297 - - - 297
Equityholders of the Group 16 655 230 37 - 16 922
Non-controlling interests 906 24 - - 930
Total comprehensive income for the year 17 561 254 37 - 17 852
RESTATED SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2013 - IFRS (AUDITED)
Reclass-
ification
of loans to
As associates
previously IFRS 10 and joint
R million reported and 11 IAS 19 ventures Restated
ASSETS
Cash and cash equivalents 49 620 (1 055) - - 48 565
Derivative financial instruments 52 316 (39) - - 52 277
Commodities 6 016 - - - 6 016
Accounts receivable 7 471 333 - - 7 804
Current tax asset 275 (9) - - 266
Advances 598 975 488 - 1 602 601 065
Investment securities and other investments 131 293 (2 905) - - 128 388
Investments in associates 6 082 6 - (1 602) 4 486
Investments in joint ventures 910 - - - 910
Property and equipment 14 058 (605) - - 13 453
Intangible assets 1 169 - - - 1 169
Reinsurance assets 394 - - - 394
Post-employment benefit asset 13 - (13) - -
Investment properties 459 - - - 459
Deferred income tax asset 598 (138) - - 460
Non-current assets and disposal groups held for sale 20 - - - 20
Total assets 869 669 (3 924) (13) - 865 732
EQUITY AND LIABILITIES
Liabilities
Short trading positions 2 991 - - - 2 991
Derivative financial instruments 53 013 (5) - - 53 008
Creditors and accruals 11 155 (76) - - 11 079
Current tax liability 553 (40) - - 513
Deposits 697 005 30 - - 697 035
Provisions 600 - - - 600
Employee liabilities 8 092 (2 546) 311 - 5 857
Other liabilities 6 669 (568) - - 6 101
Policyholder liabilities under insurance contracts 1 112 (466) - - 646
Deferred income tax liability 735 18 - - 753
Tier 2 liabilities 8 116 - - - 8 116
Total liabilities 790 041 (3 653) 311 - 786 699
Equity
Ordinary shares 55 - - - 55
Share premium 5 397 212 - - 5 609
Reserves 66 733 (455) (324) - 65 954
Capital and reserves attributable to ordinary equityholders 72 185 (243) (324) - 71 618
NCNR preference shares 4 519 - - - 4 519
Capital and reserves attributable to equityholders of the Group 76 704 (243) (324) - 76 137
Non-controlling interests 2 924 (28) - - 2 896
Total equity 79 628 (271) (324) - 79 033
Total equity and liabilities 869 669 (3 924) (13) - 865 732
RESTATED SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2012 - IFRS (AUDITED)
Reclass-
ification
of loans to
As associates
previously IFRS 10 and joint
R million reported and 11 IAS 19 ventures Restated
ASSETS
Cash and cash equivalents 38 363 (1 046) - - 37 317
Derivative financial instruments 52 913 (202) - - 52 711
Commodities 5 108 - - - 5 108
Accounts receivable 6 007 220 - (5) 6 222
Current tax asset 331 (4) - - 327
Advances 524 507 660 - 2 112 527 279
Investment securities and other investments 119 708 (2 932) - - 116 776
Investments in associates 6 132 - - (2 107) 4 025
Investments in joint ventures 737 - - - 737
Property and equipment 12 026 (798) - - 11 228
Intangible assets 1 743 - - - 1 743
Reinsurance assets 898 - - - 898
Post-employment benefit asset 7 - (7) - -
Investment properties 215 - - - 215
Deferred income tax asset 471 (128) - - 343
Non-current assets and disposal groups held for sale 599 - - - 599
Total assets 769 765 (4 230) (7) - 765 528
EQUITY AND LIABILITIES
Liabilities
Short trading positions 5 343 - - - 5 343
Derivative financial instruments 53 760 - - - 53 760
Creditors and accruals 9 086 (82) - - 9 004
Current tax liability 386 (52) - - 334
Deposits 606 281 18 - - 606 299
Provisions 592 - - - 592
Employee liabilities 6 933 (2 613) 663 - 4 983
Other liabilities 6 383 (589) - - 5 794
Policyholder liabilities under insurance contracts 1 517 (428) - - 1 089
Deferred income tax liability 1 679 (267) - - 1 412
Tier 2 liabilities 7 885 1 - - 7 886
Liabilities directly associated with disposal groups held for sale 113 - - - 113
Total liabilities 699 958 (4 012) 663 - 696 609
Equity
Ordinary shares 55 - - - 55
Share premium 5 216 216 - - 5 432
Reserves 57 250 (368) (670) - 56 212
Capital and reserves attributable to ordinary equityholders 62 521 (152) (670) - 61 699
NCNR preference shares 4 519 - - - 4 519
Capital and reserves attributable to equityholders of the Group 67 040 (152) (670) - 66 218
Non-controlling interests 2 767 (66) - - 2 701
Total equity 69 807 (218) (670) - 68 919
Total equity and liabilities 769 765 (4 230) (7) - 765 528
CONTINGENCIES AND COMMITMENTS (AUDITED)
as at 30 June
R million 2014 2013 % change
Contingencies
Guarantees 33 114 30 137 10
Letters of credit 7 588 9 195 (17)
Total contingencies 40 702 39 332 3
Capital commitments
Contracted capital commitments 1 169 1 585 (26)
Capital expenditure authorised not yet contracted 2 795 1 902 47
Total capital commitments 3 964 3 487 14
Other commitments
Irrevocable commitments 78 785 78 783 -
Operating lease and other commitments 3 166 3 113 2
Total other commitments 81 951 81 896 -
Total contingencies and commitments 126 617 124 715 2
NUMBER OF ORDINARY SHARES IN ISSUE (AUDITED)
for the year ended 30 June
2014 2013
Shares in issue
Opening balance as at 1 July 5 637 941 689 5 637 941 689
Less: treasury shares (152 823 701) (151 690 151)
– BEE staff trusts (151 401 072) (151 401 072)
– Shares held by policyholders (1 422 629) (289 079)
Number of shares in issue (after treasury shares) 5 485 117 988 5 486 251 538
Weighted average number of shares
Weighted average number of shares before treasury shares 5 637 941 689 5 637 941 689
Less: treasury shares (152 688 931) (155 454 963)
– Staff schemes – (446 141)
– BEE staff trusts (151 401 072) (151 401 072)
– Policyholder and mutual funds deemed treasury shares (1 287 859) (3 607 750)
Weighted average number of shares in issue 5 485 252 758 5 482 486 726
Dilution impact
Staff schemes 30 121 25 846 994
BEE staff trusts 57 719 182 41 690 956
Diluted weighted average number of shares in issue 5 543 002 061 5 550 024 676
Number of shares for normalised earnings per share calculation
Actual weighted average and diluted weighted average number of shares for calculation
of normalised earnings and diluted earnings per share 5 637 941 689 5 637 941 689
COMPANY INFORMATION
DIRECTORS
LL Dippenaar (Chairman), SE Nxasana (Chief executive officer), JP Burger (Deputy chief executive officer), HS Kellan (Financial director), VW Bartlett, JJH Bester,
MS Bomela, P Cooper (alternate), L Crouse, JJ Durand, GG Gelink, PM Goss, NN Gwagwa, PK Harris, WR Jardine, RM Loubser, EG Matenge-Sebesho, AT Nzimande,
D Premnarayen (India), KB Schoeman, BJ van der Ross, JH van Greuning
SECRETARY AND REGISTERED OFFICE
C Low
4 Merchant Place, Corner Fredman Drive and Rivonia Road
Sandton 2196
PO Box 650149, Benmore 2010
Tel: +27 11 282 1808
Fax: +27 11 282 8088
Website: www.firstrand.co.za
JSE SPONSOR
Rand Merchant Bank (a division of FirstRand Bank Limited)
Corporate Finance
1 Merchant Place, Corner Fredman Drive and Rivonia Road
Sandton 2196
Tel: +27 11 282 8000
Fax: +27 11 282 4184
JSE INDEPENDENT SPONSOR
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
2 Eglin Road
Sunninghill
Sandton 2196
NAMIBIAN SPONSOR
Simonis Storm Securities (Pty) Ltd
4 Koch Street
Klein Windhoek
Namibia
TRANSFER SECRETARIES - SOUTH AFRICA
Computershare Investor Services (Pty) Ltd
70 Marshall Street
Johannesburg 2001
PO Box 61051, Marshalltown 2107
Tel: +27 11 370 5000
Fax: +27 11 688 5248
TRANSFER SECRETARIES - NAMIBIA
Transfer Secretaries (Pty) Ltd
4 Robert Mugabe Avenue, Windhoek
PO Box 2401, Windhoek, Namibia
Tel: +264 612 27647
Fax: +264 612 48531
Sandton
9 September 2014
SPONSOR
Rand Merchant Bank (a division of FirstRand Bank Limited)
Date: 09/09/2014 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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