To view the PDF file, sign up for a MySharenet subscription.

FIRSTRAND LIMITED - Unaudited interim results and cash dividend declaration for the six months ended 31 December 2016

Release Date: 09/03/2017 08:15
Code(s): FSR FSRP     PDF:  
Wrap Text
Unaudited interim results and cash dividend declaration for the six months ended 31 December 2016

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 or the company)



UNAUDITED INTERIM RESULTS AND CASH DIVIDEND DECLARATION
for the six months ended 31 December 2016

The group consists of a portfolio of leading financial services franchises; these are First National Bank (FNB), the retail and commercial bank, Rand Merchant Bank (RMB),
the corporate and investment bank, WesBank, the instalment finance business and Ashburton Investments, the group's investment management business. The FCC
franchise represents group-wide functions.

This announcement covers the unaudited condensed consolidated financial results of FirstRand Limited (FirstRand or the group) based on International Financial Reporting
Standards (IFRS) for the six months ended 31 December 2016. 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. A detailed description of the
difference between normalised and IFRS results are provided on pages 102 and 103 of the Analysis of financial results booklet on www.firstrand.co.za. Commentary is
based on normalised results, unless indicated otherwise.



FINANCIAL HIGHLIGHTS

                                                                  Six months ended                    Year ended
                                                                    31 December                          30 June

                                                                    2016         2015      % change         2016

Diluted normalised earnings per share (cents)                      207.6        194.6             7        407.4
Normalised earnings (R million)                                   11 646       10 915             7       22 855
Normalised net asset value per share (cents)                     1 843.0      1 709.2             8      1 779.0
Ordinary dividend per share (cents)                                119.0        108.0            10        226.0
ROE (%)                                                             22.9         23.4                       24.0
Basic headline earnings per share (cents)                          211.5        185.4            14        399.2
Basic earnings per share (cents) - IFRS                            212.0        186.9            13        402.4
Net asset value per share (cents) - IFRS                         1 845.2      1 709.4             8      1 778.8


"The group continued its delivery of real growth in earnings and premium returns off a long track record of outperformance.

Normalised earnings growth of 7% and an ROE of 22.9% were driven by solid operational performances from our franchises and is a very satisfactory outcome given the level of ongoing
investment in new growth initiatives, which is expected to deliver outperformance in the medium term and the level of conservatism applied to the balance sheet.

The group continues to exercise discipline in allocating capital and will not chase growth at the expense of returns. We believe these results demonstrate the quality of our underlying businesses
and strike the right balance between growth, prudent risk management and investment for growth, whilst ensuring premium returns to shareholders."

Johan Burger
CEO



INTRODUCTION

The macroeconomic environment remained tough in the period under review, characterised by increased global and domestic political uncertainty.

Increasing unemployment, rising inflation and low business and consumer confidence resulted in depressed household and business spending, reflected in weak
retail and vehicle sales growth and a low rate of private sector credit expansion. The inflation rate remained well above the South African Reserve Bank's (SARB) 6%
upper-range which prevented any interest rate relief.

Domestic import growth fell with a concurrent decrease in the trade deficit. A significant improvement in South Africa's terms of trade provided a further boost by
lifting export growth. These developments provided support to the rand.

Continued political uncertainty in South Africa negatively impacted local and international investor confidence. This was compounded by increased global political
uncertainty in the aftermath of the US election result.

The macroeconomic environment in the rest of the sub-Saharan region was also challenging as a number of countries had to deal with the ongoing fallout from the lower
commodity price environment, weakening government finances, drought conditions and policy uncertainty.



OVERVIEW OF RESULTS

FirstRand's diversified portfolio produced a satisfactory performance against this backdrop with normalised earnings increasing 7% and the normalised ROE marginally
lower at 22.9%.

The table below shows a breakdown of sources of normalised earnings from the portfolio per operating franchise.



SOURCES OF NORMALISED EARNINGS

                                                                        Six months ended 31 December                            Year ended 30 June

                                                                              %                           %           %                           %
R million                                                    2016   composition        2015     composition      change        2016     composition

FNB                                                         6 462            55       6 278#             58           3      12 294              53
RMB                                                         2 853            25       2 805              26           2       6 287              28
WesBank                                                     1 944            17       1 786#             16           9       3 927              17
FCC (including Group Treasury) and other*,**                  565             5         210               2        >100         689               3
NCNR preference dividend                                     (178)           (2)       (164)             (2)          9        (342)             (1)
Normalised earnings                                        11 646           100      10 915             100           7      22 855             100

* Includes FirstRand Limited (company).
** Includes negative accounting mismatches, improvement of interest rate management and improvement in foreign currency liquidity management.
# December 2015 numbers have been restated for the move of a business unit from WesBank to FNB.
Note: The group refined the franchise segmentation of its operations in the rest of Africa to more accurately reflect the respective franchise contributions.


Across the portfolio, the six months to December 2016 were characterised by a slowdown in topline growth, combined with a strong investment cycle. The
operating franchises, however, continued to produce resilient operating performances.

- FNB's domestic franchise delivered a 6% increase in normalised earnings, underpinned by solid non-interest revenue (NIR) growth on the back of increased
  customer numbers and volumes, and high quality net interest income (NII) growth. The rest of Africa portfolio's performance, however, was negatively impacted by the
  subsidiaries in Zambia and Mozambique.
- RMB produced a very strong performance, although period-on-period growth was impacted by the timing of private equity realisations. In the six month period
  to December 2015, RMB reported realisations net of tax and minorities in excess of R800 million compared to minimal realisations in the period under review. RMB,
  however, remains in a realisation cycle.
- WesBank delivered a solid performance despite the tough operating environment. New business volumes in the domestic motor and corporate loan books were
  muted, however, there was an increased contribution from insurance activities.
- At a group level the rest of Africa performance was satisfactory given the macroeconomic pressures across the portfolio and ongoing investment spend. Total pre-
  tax profits from the rest of Africa in-country business was flat at R1.5 billion.


At a group level total NII increased 12%, driven by ongoing growth in advances (+4%) and deposits (+6%). Margins in many of the asset-generating businesses
continued to come under pressure from higher term funding and liquidity costs. Term lending in both RMB and WesBank was muted due to ongoing discipline in
origination to preserve returns given the prevailing competitive pressures. Earnings and margins benefited from the positive endowment effect.

The group achieved fee and commission income growth of 8%, benefiting from ongoing volume growth specifically in electronic channels together with solid
growth in customer numbers. Fee and commission income represents 83% (December 2015: 80%) of operational NIR. Total group NIR growth moderated to 2% given
the impact of the timing of private equity realisations.

Insurance revenues grew 23% due to volume growth in funeral and credit products in FNB, further augmented by the MMI book transfer being effective October 2016.
WesBank insurance income also grew 13%, driven mainly by the MotoVantage acquisition in November 2015.

Knowledge-based fees at RMB remained robust, underpinned by key lending transactions and underwriting mandates as well as higher levels of structuring fees due to
strong deal flow.

Total operating expenses increased 8% and continued to trend above inflation as the group remains committed to investing in its insurance and asset management
franchises, the footprint in the rest of Africa and platforms to extract efficiencies Core operating cost growth of 8% was driven by above inflation salary increases and
additional headcount, offset by significantly lower variable staff costs. The cost-to-income ratio increased marginally to 51.3%.

Credit impairments increased 19% with the credit impairment ratio increasing from 77 bps to 86 bps. Overall non-performing loans (NPLs) increased 7% (including
the increase related to restructured debt review customers), with retail NPLs increasing 20% driven by:

- the anticipated normalisation of credit experience in retail SA vehicle asset finance (VAF) given the credit cycle;
- new business strain as a result of strong book growth in MotoNovo (UK) and the retail portfolios in FNB (linked to cross-sell and up-sell strategies) and in FNB commercial;
  and
- a tough credit environment in certain African territories, particularly Mozambique and Zambia given that they remain subscale.


Total coverage reduced marginally to 79.5% reflecting a change in NPL mix, an increasing proportion of paying debt review retail NPLs and the work-out and write-off of
certain large corporate exposures. Portfolio provisions and the performing book coverage ratio, however, both increased.

The performing book coverage ratio of 100 bps increased marginally from the prior year's 97 bps. This was as a result of further increases in portfolio impairments in the
franchises, in spite of a partial central overlay release.

The overall credit picture remains in line with expectations and reflects both the respective franchise growth strategies and the specific origination actions taken in
the different segments of the group's customer base throughout the current credit cycle. The group has consistently adjusted credit appetite in the high risk segments of
the retail market from as early as 2011. Robust growth has however, been generated on the back of FNB's strategy to focus on lending to its core transactional customer
base.



FRANCHISE PERFORMANCE REVIEW

FirstRand's strategic framework is designed to accommodate a broad set of growth opportunities across the entire financial services universe from a product, market,
segment and geographic perspective. The group believes this will ensure sustainable and superior returns for shareholders.



STATEMENT OF INTENT

FirstRand's portfolio of leading financial services franchises provides a universal set of transactional, lending, investment and insurance products and services. The
franchises operate in markets and segments where they can deliver competitive and differentiated client-centric value propositions, leveraging the relevant distribution
channels, product skills, licences and operating platforms of the wider group. Strategy is executed on the back of disruptive and innovative thinking, underpinned
by an owner-manager culture combined with the disciplined allocation of financial resources.

Execution on this new framework has picked up momentum in the period under review as the customer-facing operating franchises increasingly leverage group-wide
technology platforms, customer bases, distribution channels, licences and skills. The group is incrementally increasing its share of the insurance, savings and
investment profit pools where it is currently under-represented, whilst protecting and growing its large transactional and lending franchises.

Below is a brief overview of the financial and operational performance of each group 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 in both
existing and new markets on the back of a compelling customer offering that provides a broad range of innovative financial services products. This offering is
delivered through efficient and cost effective delivery channels, particularly electronic and digital platforms.



FNB FINANCIAL HIGHLIGHTS

                                                                                       Year
                                                        Six months ended              ended
                                                          31 December               30 June
                                                                             %
R million                                           2016       2015     change         2016

Normalised earnings                                6 462      6 278          3       12 294
Normalised profit before tax                       9 441      9 137          3       17 883
- South Africa                                     8 894      8 366          6       16 586
- Rest of Africa                                     547        771        (29)       1 297
Total assets                                     391 690    372 782          5      383 416
Total liabilities                                381 698    364 222          5      366 942
NPLs (%)                                            3.09       2.66                    3.03
Credit loss ratio (%)                               1.15       0.93                    1.08
ROE (%)                                             38.5       40.0                    38.4
ROA (%)                                             3.36       3.47                    3.36
Cost-to-income ratio (%)                            53.5       53.1                    54.1
Advances margin (%)                                 3.61       3.71                    3.73



SEGMENT RESULTS

                                                                                       Year
                                                         Six months ended             ended
                                                           31 December              30 June
                                                                             %
R million                                           2016       2015     change         2016

Normalised PBT
Retail                                             5 491      5 436          1       10 552
FNB Africa                                           547        771        (29)       1 297
Commercial                                         3 403      2 930         16        6 034
Total FNB                                          9 441      9 137          3       17 883


FNB's total franchise produced pre-tax profits of R9.4 billion, up 3%, and an ROE of 38.5%. The domestic businesses produced solid profit growth of 6%, however,
profit before tax from FNB's African subsidiaries declined 29% period-on-period driven by poor performances in Mozambique and Zambia, as well as the impact
of ongoing investment in footprint and product rollout. In the rest of the portfolio, Botswana performed well, on the back of strong book growth and a reduction in
impairments. FNB Namibia posted a strong operational performance, although overall profitability was impacted by the current investment cycle.

FNB's domestic franchise's performance was driven by its ongoing strategy to:
- grow and retain core transactional accounts;
- use its customer relationships and sophisticated data analytics to effectively cross-sell and up-sell into that customer base; and
- apply disciplined origination strategies and provide innovative transactional and savings products.


During the period under review, overall customer numbers increased 6% and the cross-sell ratio across FNB moved up from 2.63 to 2.72.

NII increased 11% driven by growth in both advances (+6%) and deposits (+11%) and the positive endowment effect from the increase in the repo rate. The table
below shows that FNB's deliberate focus on acquiring and cross-selling into "sweet spot" transactional retail and commercial customers has continued to generate high
quality NII growth.



SEGMENT ANALYSIS OF ADVANCES AND DEPOSIT GROWTH

                                           Deposit growth             Advances growth

Segments                                 %       R billion           %       R billion

Retail                                  14            23.6           4             9.1
FNB Africa                               4             1.3           4             1.7
Commercial                               8            13.1          11             8.1
Total FNB                               10            38.0           5            18.9


This strategy continues to be particularly successful in the premium and commercial segments as indicated in the table below. Conservative credit origination strategies in
the consumer segment constrained book growth.

                                                        Period-on-period growth

                                                   Customer     Unsecured
                                                    numbers      advances     Deposits

Customer segment                                          %             %            %

Consumer                                                  5            (4)           8
Premium                                                   8            16           18
Commercial                                               15             -            8


NIR growth of 6% reflects a mixed picture in that the premium and commercial segments showed excellent growth of 16% and 9%, respectively, however, the consumer
segment NIR was flat. This was a result of certain actions FNB took to rationalise its offering in this segment, simplifying both product and pricing options. These actions
resulted in a number of customers moving into lower revenue generating product lines with the resultant impact on NIR. FNB believes this adjustment will ensure the
consumer segment continues to grow its customer base and remain competitive on a sustainable basis.

Overall fee and commission income benefited from strong volume growth of 11% with ongoing momentum across electronic channels, again demonstrating the success
of FNB's electronic migration strategy. There was some negative impact from a reduction in cash-related NIR and the cost of rewards linked to the e-migration and cross-
sell strategy.

Total cost growth in the South African business was well contained at 8% with total costs growing 10% on the back of continued investment in the rest of Africa
expansion strategy. The domestic cost-to-income ratio decreased marginally to 51.0%.

As expected, bad debts and NPLs increased period-on-period, however, the last six months has seen this trajectory flatten. NPL formation in the rest of Africa increased
further, reflecting the ongoing economic headwinds in the region. NPLs in FNB's domestic unsecured books, which have shown strong advances growth, are trending
in line with expectations, reflecting the quality of new business written, appropriate pricing strategies and the positive effect of risk cutbacks in higher risk origination
buckets.

The adoption of a reclassification of restructured debt review loans in the previous financial year, to align with WesBank's practice, has resulted in an increase in total
NPLs. If the impact of this reclassification is excluded, total NPLs increased 11%. The table below shows the relative contribution to the overall NPL increase.

                                                                            Domestic
                                            Reclassifi-      Rest of      retail and
                                                 cation       Africa      commercial       Total

Total FNB NPLs                                    11.7%         3.5%            7.2%       22.4%


Overall provisioning levels have remained conservative with some of the overlays preserved.



PROGRESS ON SAVE AND INVEST STRATEGIES

FNB's insurance initiative gained traction with more than four million lives now covered. FNB activated further life and health products, with the investment in system
infrastructure significantly reducing time-to-market for new products.

The Horizon series range of funds saw assets under management grow to R529 million with the majority of funds offering upper quartile performance.



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 strategy
leverages a market-leading origination franchise to deliver an integrated corporate and investment banking value proposition to corporate and institutional clients. This,
combined with an expanding market-making and distribution product offering and an excellent track record in private equity investments, contributes to a well diversified
and sustainable earnings base. This strategy is underpinned by sound risk management, designed to effectively balance the relationship between profit growth, returns
and earnings volatility.



RMB FINANCIAL HIGHLIGHTS

                                                                                       Year
                                                   Six months ended                   ended
                                                     31 December                    30 June
                                                                              %
R million                                         2016         2015      change        2016

Normalised earnings                              2 853        2 805           2       6 287
Normalised profit before tax                     4 055        3 956           3       8 918
Total assets                                   440 082      466 348          (6)    435 133
Total liabilities                              430 216      458 371          (6)    423 322
NPLs (%)                                          0.86         1.50                    1.35
Credit loss ratio (%)                             0.20         0.29                    0.27
ROE (%)                                           21.3         22.2                    25.2
ROA (%)                                           1.29         1.25                    1.45
Cost-to-income ratio (%)                          47.0         46.4                    45.1


RMB delivered a solid operational performance, with pre-tax profits increasing 3% to R4.1 billion and the business producing an ROE of 21.3%, despite lower private
equity realisations. This highlights the strength and diversification of RMB's portfolio of businesses. RMB's balance sheet remains robust, with high quality earnings and
solid operational leverage despite platform investments and continued spend on regulatory and compliance initiatives.

RMB's organisational structure continues to be based on its four separate business units, namely Investment Banking Division (IBD), Global Markets, Private Equity
and Corporate Banking, however, the business is managed on a core activity basis, illustrated in the matrix below.



BREAKDOWN OF PROFIT CONTRIBUTION BY ACTIVITY


                                                                                             Six months ended 31 December

                                                                                       2016                                    2015
                                                                                                                                              %
R million                                                     IB&A     C&TB     M&S      INV      IM      Other     Total     Total      change

Normalised PBT
Global Markets                                                   -        -     714        5      16        (60)      675       655           3
IBD                                                          1 585        -      32       85      22          -     1 724     1 546          12
Private Equity                                                   -        -       -      535       -          -       535     1 256         (57)
Other RMB                                                      (50)       -       -        -       -        294       244      (257)      (>100)
Investment banking                                           1 535        -     746      625      38        234     3 178     3 200          (1)
Corporate banking                                                -      877       -        -       -          -       877       756          16
Total RMB - 2016                                             1 535      877     746      625      38        234     4 055     3 956           3
Total RMB - 2015                                             1 202      756     648    1 357      88        (95)    3 956
% change                                                        28       16      15      (54)    (57)     (>100)        3

Note:
IB&A   - investment banking and advisory
C&TB   - corporate and transactional banking
M&S    - markets and structuring
INV    - investing
IM     - investment management


The performance of Investment banking and advisory activities reflects ongoing discipline in financial resource allocation in an environment characterised by difficult credit
markets and lower economic growth. Despite these conditions, the business delivered good growth, underpinned by strong fee income on the back of lending transactions
and underwriting mandates. Lending margins continued to compress but this was offset by solid balance sheet growth. Profits further benefited from lower credit
impairments raised due to proactive provisioning in prior periods. A conservative portfolio coverage ratio was maintained given the prevailing weak credit cycle.

Corporate and transactional banking's continued focus on leveraging platforms and expanding the client franchise delivered strong profit growth. The business benefited
from increased demand for structured and traditional trade products, coupled with the successful execution of liability strategies aimed at increasing transactional
volumes and average deposit balances. The global foreign exchange business produced a mixed performance with regulatory pressures in certain African jurisdictions
dampening results, whilst currency volatility assisted client flows locally.

Markets and structuring activities delivered a balanced performance across asset classes, relative to the previous reporting period that was impacted by heightened
levels of volatility in foreign exchange, fixed income and credit trading markets, as well as a specific credit loss incurred in the structuring portfolio. The execution of large
structuring deals, a strong commodities performance and sustained equity performance, buoyed by higher market volumes, further contributed to good profit growth in
the current period.

Investing activities continued to perform well, despite the absence of large realisations in the current period. The quality and diversity of the Ventures and Corvest
portfolios contributed to healthy annuity earnings from associates and joint ventures, and investment subsidiaries and continues to underpin the unrealised value of the
portfolio at R4.4 billion (December 2015: R4.5 billion; June 2016: R4.2 billion).

Other activities reported a profit in the current year, driven mainly by the curtailment of losses in the RMB Resources business and higher endowment earned on capital
invested. This performance was partly offset by costs associated with an organisational and technological transformation project in the Global Markets business which is
aimed at driving efficiencies and risk mitigation. Significant investment in this project is expected over the next five years.



WESBANK

WesBank represents the group's activities in asset-based finance in the retail, commercial and corporate segments of South Africa and rest of Africa where represented,
and asset-based motor finance 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
                                                           Six months ended                  ended
                                                              31 December                  30 June
                                                                                      %
R million                                                 2016         2015      change       2016

Normalised earnings                                      1 944        1 786           9      3 927
Normalised profit before tax                             2 755        2 518           9      5 518
Total assets                                           203 848      202 701           1    205 016
Total liabilities                                      200 556      197 739           1    199 686
NPLs (%)                                                  3.63         3.09                   3.38
Credit loss ratio (%)                                     1.65         1.43                   1.59
ROE (%)                                                   19.9         20.5                   21.9
ROA (%)                                                   1.87         1.82                   1.99
Cost-to-income ratio (%)                                  40.6         41.2                   39.1
Net interest margin (%)                                   4.99         4.92                   4.89


WesBank's performance is pleasing, particularly in its domestic businesses which are operating in an environment characterised by constrained consumer disposable
income and a challenging credit cycle, growing profits 9%, delivering an ROE of 19.9% at a higher comparative ROA of 1.87%. The increasing level of diversification in
WesBank's portfolio of businesses continues to position the franchise well to weather the domestic credit cycle. The table below shows the relative performance period-
on-period of WesBank's activities.



BREAKDOWN OF PROFIT CONTRIBUTION BY ACTIVITY

                                                                                              Year
                                                          Six months ended                   ended
                                                            31 December                    30 June
                                                                                      %
R million                                                 2016         2015      change       2016

Normalised PBT
VAF                                                      2 108        1 837          15      4 100
- Retail SA                                              1 351        1 015          33      2 358
- MotoNovo (UK)*                                           588          681         (14)     1 360
- Corporate and commercial                                 169          141          20        382
Personal loans                                             622          637          (2)     1 327
Rest of Africa                                              25           44         (43)        91
Total WesBank                                            2 755        2 518           9      5 518

* MotoNovo (UK) declined by 14% in ZAR terms and remained flat period-on-period in GBP terms.


Overall advances growth was marginally down period-on-period, mainly due to a decline in new business in the local secured portfolios, both retail and corporate,
although personal loans increased production 9%. MotoNovo (UK) new business volumes continued to track up (ZAR +18%; GBP +27%), but are slowing as risk
appetite has been tightened. All new business volumes continue to reflect good quality and the overall risk profile remains in line with current credit appetite.

Retail SA VAF (excluding MotoVantage) has shown a 19% pre-tax profit growth period-on-period. The primary drivers of this are improved margins despite competitive
pressures, reduced costs as a result of good cost containment and a significant improvement in the equity-accounted profits generated from the investment in associates.

Interest margins have shown resilience despite higher funding and liquidity costs and the shift in mix from fixed to floating rate business within total advances. From a
new business perspective, however, this shift in mix has started to reverse.

As anticipated, impairment levels in the retail SA VAF portfolio are trending upwards, but remain within WesBank's through-the-cycle thresholds and WesBank is
conservatively provided for. NPLs as a percentage of advances are up marginally period-on-period. NPLs continue to be inflated by the high proportion of restructured
debt review accounts, most of which are still paying according to arrangement, have never defaulted or have balances lower than when these entered debt review.
WesBank continues to monitor vintage performance closely. MotoNovo (UK)'s impairments are now trending above its through-the-cycle threshold. This is due to
increased conservatism in impairment models and a deterioration in underlying arrears levels. This in turn has resulted in increased portfolio provisions.

WesBank produced strong growth in operational NIR of 20%. This was mainly driven by increased insurance and VAP-related income following the acquisition of
MotoVantage, and increases in full maintenance lease (FML) rental income on the back of good new business growth. Advances-related NIR growth was muted in line
with book growth.

MotoNovo (UK)'s performance was impacted by higher than expected levels of additional investment, particularly in its collections area and building out the personal loans
offering. In addition, new business reduced on the back of relationship terminations in certain distribution channels showing elevated risk, and some adjustment to credit
appetite.

Growth in operating expenses was 10%, mainly driven by the investments in new business initiatives and volume-related expenditure in MotoNovo (UK), Direct Axis
and WesBank FML. Core operational costs were well contained.

ROE has declined period-on-period, primarily a function of increased capital held as a result of certain additional investments, and deterioration in credit risk weighted
assets. The ROA has, however, increased period-on-period, due to a widening of operating jaws driven by strong topline growth and cost containment.

The acquisition of Regent's VAPS business by MotoVantage, a WesBank subsidiary, has not yet been concluded as all conditions precedent are not yet fulfilled.

The relative contribution to the group's normalised earnings mix and growth rates from types of income and business units are shown in the table below.



SEGMENT ANALYSIS OF NORMALISED EARNINGS

                                                                            Six months ended 31 December                       Year ended 30 June

                                                                                   %                       %          %                           %
R million                                                        2016    composition      2015   composition     change        2016     composition

Retail                                                          5 834             50     5 854            54          -      11 597              50
- FNB                                                           4 012                    4 168                                                7 950
- WesBank                                                       1 822                    1 686                                                3 647
Commercial                                                      2 572             22     2 210            20         16       4 624              20
- FNB                                                           2 450                    2 110                                                4 344
- WesBank                                                         122                      100                                                  280
Corporate and investment banking                                2 853             25     2 805            26          2       6 287              28
- RMB                                                           2 853                    2 805                                                6 287
Other                                                             387              3        46             -       >100         347               2
- FirstRand and dividends paid on NCNR preference
  shares                                                         (178)                    (164)                                                (342)
- FCC (including Group Treasury) and consolidation
  adjustments                                                     565                      210                                                  689


Normalised earnings                                            11 646            100    10 915           100          7      22 855             100



UPDATE ON INVESTMENT MANAGEMENT STRATEGY

The group has an organic strategy to grow its asset management, and wealth and investment management activities. The group's asset management business, Ashburton
Investments (AI) comprises a wide range of funds including single manager, multi-manager, index tracking, multi-asset, listed equity, specialist equity, fixed income,
specialist credit, private equity, renewable energy, infrastructure and hedge funds.

AI grew AUM 12% period-on-period to R105 billion. Flows into traditional funds period-on-period are down 10% largely as a result of isolated large institutional
outflows. This has been offset by strong flows into the institutional fixed income solutions business of R4.5 billion in new mandates won. Despite a tough year for
global financial markets, investment performance continues to show resilience with the majority of funds delivering performances that placed the funds in the top
two quartiles of relative peer groups. The structured or guaranteed product solutions currently delivered through RMB Global Market Fund Solutions have increased to
R26 billion.

The group's wealth and investment management activities include portfolio management, share trading and stockbroking, share investing and all related investor platform
administration capabilities. There are two pillars to the strategy:

- asset management solutions/funds originated by Ashburton were launched to the FNB customer base branded FNB Horizon in July 2016. This has delivered R900
  million in new flows in the first six months of the launch; and
- a bespoke offering of tailored portfolio management solutions to FNB's wealth-advised clients managed by AI.

Traction has been satisfactory in the period under review. Some highlights include:
- growth in assets under administration on the LISP platform from R12.2 billion to R14.6 billion, an increase of 19%; and
- customer numbers on the platform increasing to over 23 000.



MANAGEMENT OF FINANCIAL RESOURCES

The management of the group's financial resources, which it defines as capital, funding and liquidity, and risk appetite (in all currencies), is critical and supportive to the
achievement of FirstRand's stated growth and return targets, and is driven by the group's overall risk appetite.

Forecast growth in earnings and balance sheet risk weighted assets is based on the group's macroeconomic outlook and evaluated against available financial resources,
taking into account the requirements of capital providers and regulators. The expected outcomes and constraints are then stress tested and the group sets financial
and prudential targets through different business cycles and scenarios to enable FirstRand to deliver on its commitments to stakeholders at a defined confidence level.

The management of the group's financial resources is executed through Group Treasury and is independent of the operating franchises. This ensures the required
level of discipline is applied in the allocation of financial resources and pricing of these resources. This also ensures that Group Treasury's mandate is aligned with
the operating franchises' growth, return and volatility targets, in order to deliver shareholder value.

Given the high levels of uncertainty and volatility in funding markets, the group is exploring strategic options to protect its counterparty status. In addition, access to
hard-currency funding is key to execution on the group's rest of Africa strategy and to grow MotoNovo (UK).



BALANCE SHEET STRENGTH
Capital position

Current targeted ranges and actual ratios are summarised below.

%                                                                                                                                 CET1        Tier 1        Total     Leverage#
Regulatory minimum*                                                                                                                6.9           8.1         10.4           4.0
Targets                                                                                                                    10.0 - 11.0         >12.0        >14.0          >5.0
Actual**                                                                                                                          14.1          14.8         17.3           8.4
* Excluding the bank-specific individual capital requirement and add-on for domestic systemically important banks.
** Includes unappropriated profits.
# Based on Basel III regulations.


The group has maintained its strong capital position. Capital planning is undertaken on a three-year forward-looking basis, and the level and composition of capital is
determined taking into account business units' organic growth plans and stress-testing scenario outcomes. In addition, the group considers external issues that could
impact capital levels, which include regulatory and accounting changes, macroeconomic conditions and future outlook.

The group continues to actively manage its capital composition and, to this end, issued approximately R2.3 billion Basel III-compliant Tier 2 instruments in the domestic
market during the past six months. This resulted in a more efficient capital structure which is closely aligned with the group's internal targets. It remains the group's
intention to continue optimising its capital stack by frequently issuing Tier 2 instruments, either in the domestic and/or international markets. This ensures
sustainable support for ongoing growth initiatives and also compensates for the haircut applied to Tier 2 instruments which are not compliant with Basel III.



Liquidity position

Taking into account the liquidity risk introduced by its business activities across various currencies, the group's objective is to optimise its funding profile within
structural and regulatory constraints to enable its franchises to operate in an efficient and sustainable manner. Liquidity buffers are actively managed via high quality
liquid assets (HQLA) that are available as protection against unexpected events or market disruptions. The quantum and composition of the available sources of liquidity
are defined by the behavioural funding liquidity at risk and the market liquidity depth of available liquidity resources. In addition, adaptive overlays to liquidity requirements
are derived from stress testing and scenario analysis of the cash inflows and outflows related to business franchise activity.

The group exceeds the 70% (2016: 60%) minimum liquidity coverage ratio (LCR) requirement as set out by the Basel Committee for Banking Supervision (BCBS) with an
LCR for the group of 95% (December 2015: 71%). FirstRand Bank's LCR was 104% (December 2015: 74%). At 31 December 2016, the group's available HQLA sources
of liquidity per the LCR was R173 billion, with an additional R21 billion of management liquidity available.



Regulatory changes

On 18 November 2015, the SARB released a proposed directive related to the Net Stable Funding Ratio (NSFR). The SARB believes that the BCBS calibration does not
reflect the actual stability of institutional funding in the SA context, given the significant barriers preventing liquidity from leaving the domestic financial system. It has,
therefore, proposed a 35% available stable funding factor for institutional funding less than six months in tenor, compared to 0% under the BCBS framework. It is
expected that this change will significantly assist the SA banking sector in meeting the NSFR requirements without severely impacting the economy. FirstRand expects
to be fully compliant with NSFR requirements on the new calibration.



DIVIDEND STRATEGY

Given the sustained superior return profile and strong operational performances from the franchises, combined with a strong capital position and low growth in RWA
for the six months to December 2016, the board was comfortable to grow the dividend above normalised earnings. As a result, the dividend cover is slightly below the
group's stated long-term cover range of 1.8x to 2.2x. The long-term cover range is assessed on an annual basis as part of the year end results process.



PROSPECTS

Looking ahead the group expects economic growth to pick up slightly in calendar year 2017, although this is unlikely to provide significant support to topline growth for
some time. In addition, global and domestic political risks continue to pose downside risk to this expectation.

FirstRand is committed to its current investment cycle despite ongoing topline pressures, as it believes its growth strategies both in broadening its financial services
offerings and building its rest of Africa franchise will deliver outperformance over the medium to long term. The group aims to deliver real growth in earnings and an ROE
of between 18% and 22%.



BOARD CHANGES

Vivian Wade Bartlett retired as an independent non-executive director of FirstRand and FirstRand Bank on 29 November 2016.

Deepak Premnarayen retired as an independent non-executive director of FirstRand and FirstRand Bank on 29 November 2016.

Thandie Sylvia Mashego was appointed as a non-executive director of FirstRand and FirstRand Bank on 1 January 2017.



CASH DIVIDEND DECLARATIONS
Ordinary shares

The directors declared a gross cash dividend totalling 119 cents per ordinary share out of income reserves for the six months ended 31 December 2016.



DIVIDENDS
Ordinary shares

                                                                                       Six months ended
                                                                                         31 December

Cents per share                                                                       2016          2015

Interim (declared 8 March 2017)                                                      119.0         108.0


The salient dates for the interim ordinary dividend are as follows:

Last day to trade cum-dividend                                                     Tuesday 28 March 2017
Shares commence trading ex-dividend                                              Wednesday 29 March 2017
Record date                                                                         Friday 31 March 2017
Payment date                                                                         Monday 3 April 2017


Share certificates may not be dematerialised or rematerialised between Wednesday 29 March 2017 and Friday 31 March 2017, both days inclusive.

In the interest of facilitating safer and faster payment of dividends and other payments by FirstRand, it has been decided that no further cheques will be issued and
all future payments will only be made by electronic funds transfer into a nominated bank account. FirstRand's Memorandum of Incorporation has been amended
accordingly. FirstRand dividends, therefore, will no longer be paid by cheque to stakeholders. Shareholders who have not yet provided bank account details to
Computershare Investor Services (Pty) Ltd are reminded to contact Computershare on 0861 100 930/933 with their bank account details into which FirstRand's
ordinary and B preference dividends can be electronically paid.

For shareholders who are subject to dividend withholding tax (DWT), tax will be calculated at 20% (or such lower rate if a double taxation agreement applies for foreign
shareholders).

For South African shareholders who are subject to DWT, the net interim dividend after deducting 20% tax will be 95.20000 cents per share.

The issued share capital on the declaration date was 5 609 488 001 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

                                                                                                Preference
Cents per share                                                                                  dividends

Period:
24 February 2015 - 31 August 2015                                                                    363.9
1 September 2015 - 29 February 2016                                                                  366.5
1 March 2016 - 29 August 2016                                                                        394.7
30 August 2016 - 27 February 2017                                                                    395.6



LL Dippenaar                                                      JP Burger                                               C Low

Chairman                                                          CEO                                                     Company secretary



8 March 2017



STATEMENT OF HEADLINE EARNINGS

                                                                                                Six months ended                  Year ended
                                                                                                   31 December                       30 June

R million                                                                                         2016          2015    % change        2016

Profit for the period                                                                           12 563        11 278          11      24 075
Non-controlling interests                                                                         (493)         (634)        (22)     (1 170)
NCNR preference shareholders                                                                      (181)         (164)         10        (342)
Earnings attributable to ordinary equityholders                                                 11 889        10 480          13      22 563
Adjusted for                                                                                       (30)          (81)        (63)       (176)
Loss on disposal of investment securities and other investments of a capital nature                  -            (5)                     (5)
(Gain)/loss on disposal of available-for-sale assets                                               (64)            2                      (6)
Loss on disposal of investments in associates                                                        4             -                       -
Loss on disposal of investments in subsidiaries                                                      6            (1)                    (82)
Loss/(gain) on disposal of property and equipment                                                    9           (78)                   (148)
Fair value movement on investment properties                                                         -             -                      22
Impairment of goodwill                                                                               -             -                       8
Impairment of assets in terms of IAS 36                                                              1             -                      47
Other                                                                                               (1)            -                       -
Tax effects of adjustments                                                                          15             1                     (20)
Non-controlling interests adjustments                                                                -             -                       8


Headline earnings                                                                               11 859        10 399          14      22 387



RECONCILIATION FROM HEADLINE TO NORMALISED EARNINGS

                                                                                                Six months ended                  Year ended
                                                                                                   31 December                       30 June

R million                                                                                         2016          2015    % change        2016

Headline earnings                                                                               11 859        10 399          14      22 387
Adjusted for                                                                                      (213)          516       (>100)        468
TRS and IFRS 2 liability remeasurement*                                                           (166)          569                     494
Treasury shares**                                                                                    7            (1)                     (6)
IAS 19 adjustment                                                                                  (54)          (53)                   (102)
Private equity subsidiary realisations                                                               -             1                      82

Normalised earnings                                                                             11 646        10 915           7      22 855

*  The group uses a TRS with external parties to economically hedge itself against the exposure to changes in the FirstRand share price associated with the group's
   long-term incentive schemes.
   The TRS is accounted for as a derivative in terms of IFRS, with the full fair value change recognised in NIR.
   In the current period, FirstRand's share price increased R8.33 and during the prior period decreased R10.95.
   This resulted in a significant mark-to-market fair value profit in the current period (compared to a loss in the prior period) being included in the group's IFRS
   attributable earnings. The normalised results reflect the adjustment to normalise this period-on-period IFRS fair value volatility from the TRS.
** Includes FirstRand shares held for client trading activities.



BASIS OF PRESENTATION

FirstRand prepares its condensed consolidated interim results in accordance with:

- the requirements of IAS 34 Interim Financial Reporting;
- Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council;
- SAICA Financial Reporting Guide as issued by the Accounting Practices Committee; and
- requirements of the Companies Act, no 71 of 2008, applicable to summary financial statements.


The condensed consolidated interim results for the six months ended 31 December 2016 and any reference to future earnings in this announcement have not been
audited or independently reviewed by the group's external auditors.

This announcement does not include information required pursuant to paragraph 16A(j) of IAS 34 as allowed by the JSE Listings Requirements. The full interim report,
which includes these disclosures, is available on the issuer's website, at the issuer's offices and upon request.

The directors take full responsibility and confirm that this information has been correctly extracted from the underlying report. Jaco van Wyk, CA(SA), supervised the
preparation of the condensed consolidated financial results.



ACCOUNTING POLICIES

The accounting policies applied in the preparation of these condensed consolidated financial statements are in terms of IFRS and are prepared in accordance with the
going concern principle under the historical cost basis as modified by the fair value accounting of certain assets and liabilities where required or permitted.

The group has voluntarily changed the manner in which it presents certain items of NII and NIR as well as the classification of certain credit investments. The change in
presentation has had no impact on the profit or loss or net asset value of the group, and only affects the classification of items on the income statement and statement of
financial position. The impact on previously reported results is set out below.

Other than the change in presentation described above, the accounting policies are consistent with those applied for the year ended 30 June 2016. There were no other
new or revised standards adopted for the six months ended 31 December 2016 that have an effect on the group's reported earnings, financial position or reserves, or a
material impact on the accounting policies.



NORMALISED RESULTS

The group believes normalised earnings more accurately reflect its economic performance. Consequently, headline earnings have been adjusted to take into account non-
operational and accounting anomalies, which, in terms of the JSE Listing Requirements, constitute pro forma financial information.

This pro forma financial information, which is the responsibility of the group's directors, has been prepared for illustrative purposes to more accurately reflect operational
performance and because of its nature may not fairly present in terms of IFRS, the group's financial position, changes in equity and results of operations or cash flows. Details of
the nature of these adjustments and reasons therefore can be found on www.firstrand.co.za.


CONDENSED CONSOLIDATED INCOME STATEMENT - IFRS

                                                                                     Six months ended                             Year ended
                                                                                      31 December                                    30 June
R million                                                                              2016               2015*         % change        2016*

Net interest income before impairment of advances                                    22 200             20 020                11      42 041
Impairment charge                                                                    (3 741)            (3 145)               19      (7 159)
Net interest income after impairment of advances                                     18 459             16 875                 9      34 882
Non-interest revenue                                                                 19 514             17 141                14      36 934
Income from operations                                                               37 973             34 016                12      71 816
Operating expenses                                                                  (21 708)           (19 756)               10     (41 657)
Net income from operations                                                           16 265             14 260                14      30 159
Share of profit of associates after tax                                                 340                349                (3)        930
Share of profit of joint ventures after tax                                             127                453               (72)        526
Income before tax                                                                    16 732             15 062                11      31 615
Indirect tax                                                                           (573)              (427)               34        (928)
Profit before tax                                                                    16 159             14 635                10      30 687
Income tax expense                                                                   (3 596)            (3 357)                7      (6 612)
Profit for the period                                                                12 563             11 278                11      24 075
Attributable to
Ordinary equityholders                                                               11 889             10 480                13      22 563
NCNR preference shareholders                                                            181                164                10         342
Equityholders of the group                                                           12 070             10 644                13      22 905
Non-controlling interests                                                               493                634               (22)      1 170
Normalised earnings attributable to ordinary equityholders of the group              12 563             11 278                11      24 075
Earnings per share (cents)
- Basic                                                                               212.0              186.9                13       402.4
- Diluted                                                                             212.0              186.9                13       402.4
Headline earnings per share (cents)
- Basic                                                                               211.5              185.4                14       399.2
- Diluted                                                                             211.5              185.4                14       399.2
* Restated, refer to below for more detailed information.



CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - IFRS

                                                                                     Six months ended                             Year ended
                                                                                       31 December                                   30 June
R million                                                                              2016               2015          % change        2016

Profit for the period                                                                12 563             11 278                11      24 075
Items that may subsequently be reclassified to profit or loss
Cash flow hedges                                                                         45                528               (91)        118
Gains arising during the period                                                         116                717               (84)        144
Reclassification adjustments for amounts included in profit or loss                     (53)                16             (>100)         20
Deferred income tax                                                                     (18)              (205)              (91)        (46)
Available-for-sale financial assets                                                    (210)              (684)              (69)       (504)
Losses arising during the period                                                       (199)              (966)              (79)       (671)
Reclassification adjustments for amounts included in profit or loss                     (64)                 2             (>100)         (6)
Deferred income tax                                                                      53                280               (81)        173
Exchange differences on translating foreign operations                               (1 437)             2 521             (>100)        567
(Losses)/gains arising during the period                                             (1 437)             2 521             (>100)        567
Share of other comprehensive income of associates and joint ventures after tax and
non-controlling interests                                                               (60)                63             (>100)         87
Items that may not subsequently be reclassified to profit or loss
Remeasurements on defined benefit post-employment plans                                 (82)               (64)               28        (139)
Losses arising during the period                                                       (113)               (89)               27        (194)
Deferred income tax                                                                      31                 25                24          55


Other comprehensive (loss)/income for the period                                     (1 744)             2 364             (>100)        129
Total comprehensive income for the period                                            10 819             13 642               (21)     24 204
Attributable to
Ordinary equityholders                                                               10 213             12 742               (20)     22 665
NCNR preference shareholders                                                            181                164                10         342
Equityholders of the group                                                           10 394             12 906               (19)     23 007
Non-controlling interests                                                               425                736               (42)      1 197
Total comprehensive income for the period                                            10 819             13 642               (21)     24 204



CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION - IFRS

                                                                                                             As at                     As at
                                                                                                         31 December                 30 June
R million                                                                                               2016              2015**        2016**

ASSETS
Cash and cash equivalents                                                                               65 983            61 120      64 303
Derivative financial instruments                                                                        35 721            69 001      40 551
Commodities                                                                                              9 110            10 779      12 514
Investment securities                                                                                  166 245           130 867     142 648
Advances                                                                                               864 171           828 533     851 405
- Advances to customers                                                                                821 384           794 428     808 699
- Marketable advances                                                                                   42 787            34 105      42 706
Accounts receivable                                                                                      9 514             9 509      10 152
Current tax asset                                                                                          509             1 321         428
Non-current assets and disposal groups held for sale                                                       833               181         193
Reinsurance assets                                                                                          81               587          36
Investments in associates                                                                                5 173             6 242       4 964
Investments in joint ventures                                                                            1 458             1 424       1 344
Property, plant and equipment                                                                           17 591            17 032      16 909
Intangible assets                                                                                        1 689             1 574       1 569
Investment properties                                                                                      399               416         386
Defined benefit post-employment asset                                                                        8                 4           9
Deferred income tax asset                                                                                2 003               918       1 866
Total assets                                                                                         1 180 488         1 139 508   1 149 277
EQUITY AND LIABILITIES
Liabilities
Short trading positions                                                                                 13 874             6 069      14 263
Derivative financial instruments                                                                        45 499            82 014      50 782
Creditors, accruals and provisions*                                                                     16 890            15 232      17 285
Current tax liability                                                                                      536               375         270
Liabilities directly associated with disposal groups held for sale                                         508               207         141
Deposits                                                                                               951 970           899 619     919 930
- Deposits from customers                                                                              693 053           660 203     667 995
- Debt securities                                                                                      157 522           140 500     153 727
- Asset-backed securities                                                                               38 382            31 146      29 305
- Other                                                                                                 63 013            67 770      68 903
Employee liabilities                                                                                     7 316             6 963       9 771
Other liabilities                                                                                        7 674             7 492       8 311
Policyholder liabilities                                                                                 3 296             1 236       1 402
Tier 2 liabilities                                                                                      20 146            15 554      18 004
Deferred income tax liability                                                                            1 005               956       1 053
Total liabilities                                                                                    1 068 714         1 035 717   1 041 212
Equity
Ordinary shares                                                                                             56                56          56
Share premium                                                                                            8 034             7 980       7 952
Reserves                                                                                                95 317            87 825      91 737
Capital and reserves attributable to ordinary equityholders                                            103 407            95 861      99 745
NCNR preference shares                                                                                   4 519             4 519       4 519
Capital and reserves attributable to equityholders of the group                                        107 926           100 380     104 264
Non-controlling interests                                                                                3 848             3 411       3 801
Total equity                                                                                           111 774           103 791     108 065
Total equity and liabilities                                                                         1 180 488         1 139 508   1 149 277

* In December 2015, provisions were presented in a separate line on the statement of financial position. The prior year has been restated accordingly.
** Restated, refer to below for more detailed information.



CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - IFRS

                                                                                                      Six months ended              Year ended
                                                                                                        31 December                    30 June
R million                                                                                                 2016              2015**        2016**

Cash generated from operating activities
Interest and fee commission receipts                                                                    53 326            45 042        95 004
Trading and other income                                                                                 1 378             1 868         4 167
Interest payments                                                                                      (17 308)          (13 580)      (28 884)
Other operating expenses                                                                               (18 183)          (16 612)      (33 417)
Dividends received                                                                                       2 441             3 327         6 544
Dividends paid                                                                                          (6 800)           (6 727)      (12 950)
Dividends paid to non-controlling interests                                                               (480)             (583)         (761)
Cash generated from operating activities                                                                14 374            12 735        29 703
Movement in operating assets and liabilities
Liquid assets and trading securities                                                                   (23 372)            7 112        (4 009)
Advances                                                                                               (21 869)          (37 904)      (69 673)
Deposits                                                                                                37 909            19 276        44 739
Creditors (net of debtors)                                                                                 543            (4 601)       (3 495)
Employee liabilities                                                                                    (4 956)           (4 902)       (5 350)
Other liabilities                                                                                        4 323             4 635         8 245
Taxation paid                                                                                           (3 891)           (4 152)       (7 793)
Net cash generated from/(utilised by) operating activities                                               3 061            (7 801)       (7 633)
Cash flows from investing activities
Acquisition of investments in associates                                                                   (88)             (138)         (187)
Proceeds on disposal of investments in associates                                                            1                 3         1 932
Acquisition of investments in joint ventures                                                               (44)              (30)            -
Proceeds on disposal of investments in joint ventures                                                       16                 -             -
Acquisition of investments in subsidiaries                                                                   -                 -        (1 071)
Proceeds on disposal of investments in subsidiaries                                                          -                 -           621
Acquisition of property and equipment                                                                   (2 585)           (1 887)       (4 135)
Proceeds on disposal of property and equipment                                                             198               402         1 170
Acquisition of intangible assets and investment properties                                                (237)             (146)         (294)
Proceeds on disposal of intangible assets and investment properties                                         (8)               45            45
Proceeds on disposal of non-current assets held for sale                                                   246               373         1 017
Net cash outflow from investing activities                                                              (2 501)           (1 378)         (902)
Cash flows from financing activities
(Redemption)/issue of other liabilities                                                                   (232)              440         1 587
Proceeds from the issue of Tier 2 liabilities                                                            2 153             3 029         5 486
(Acquisition)/disposal of additional interest in subsidiaries from non-controlling interests               (43)              107        (1 357)
Issue of share of additional interest in subsidiaries from non-controlling interests                       129                30            39
Net cash inflow from financing activities                                                                2 007             3 606         5 755
Net increase/(decrease) in cash and cash equivalents                                                     2 567            (5 573)       (2 780)
Cash and cash equivalents at the beginning of the period                                                64 303            65 567        65 567
Cash and cash equivalents acquired through the acquisition of subsidiaries                                   -                 -           890
Cash and cash equivalents impacted by the disposal of subsidiaries                                           -                (1)          (33)
Effect of exchange rate changes on cash and cash equivalents                                              (767)            1 127           663
Transfer to non-current assets held for sale                                                              (120)                -            (4)
Cash and cash equivalents at the end of the period                                                      65 983            61 120        64 303
Mandatory reserve balances included above*                                                              24 048            21 762        22 959

* 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.
** Restated.



CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - IFRS
for the six months ended 31 December

                                                                                               Ordinary share capital and ordinary equityholders' funds

                                                                          Share        Defined                                                                                                  Reserves
                                                                        capital        benefit                             Share-                         Foreign                           attributable
                                                                            and           post-       Cash flow            based         Available-      currency                            to ordinary         NCNR          Non-
                                                 Share        Share       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 at 1 July 2015                           56        7 997       8 053           (791)             190               21                64          2 757        261      80 223          82 725        4 519        3 307     98 604
Issue of share capital and premium                   -            -           -              -                -                -                 -              -          -           -               -            -           30         30
Proceeds from the issue of share capital             -            -           -              -                -                -                 -              -          -           -               -            -           30         30
Share issue expenses                                 -            -           -              -                -                -                 -              -          -           -               -            -            -          -
Disposal of subsidiaries                             -            -           -              -                -                -                 -              -          -           -               -            -          (81)       (81)
Movement in other reserves                           -            -           -              -                -                -                 -              -         (1)         (4)             (5)           -            2         (3)
Ordinary dividends                                   -            -           -              -                -                -                 -              -          -      (6 563)         (6 563)           -         (583)    (7 146)
Preference dividends                                 -            -           -              -                -                -                 -              -          -           -               -         (164)           -       (164)
Transfer from/(to) general risk reserves             -            -           -              -                -                -                 -              -         12         (12)              -            -            -          -
Changes in ownership interest of subsidiaries        -            -           -              -                -                -                 -              -          -      (1 077)         (1 077)           -            -     (1 077)
Consolidation of treasury shares                     -          (17)        (17)             -                -                -                 -              -          -           -               -            -            -        (17)
Total comprehensive income for the period            -            -           -            (64)             528                -              (667)         2 421         44      10 480          12 742          164          736     13 642
Vesting of share-based payments                      -            -           -              -                -                -                 -              -          -           3               3            -            -          3
Balance as at 31 December 2015                      56        7 980       8 036           (855)             718               21              (603)         5 178        316      83 050          87 825        4 519        3 411    103 791
Balance as at 1 July 2016                           56        7 952       8 008           (930)             308                9              (441)         3 310        374      89 107          91 737        4 519        3 801    108 065
Issue of share capital and premium                   -            -           -              -                -                -                 -              -          -           -               -            -          129        129
Proceeds from the issue of share capital             -            -           -              -                -                -                 -              -          -           -               -            -          130        130
Share issue expenses                                 -            -           -              -                -                -                 -              -          -           -               -            -           (1)        (1)
Disposal of subsidiaries                             -            -           -              -                -                -                 -              -          -           -               -            -            -          -
Movement in other reserves                           -            -           -              -                -                2                 -              -         54         (44)             12            -          (10)         2
Ordinary dividends                                   -            -           -              -                -                -                 -              -          -      (6 619)         (6 619)           -         (480)    (7 099)
Preference dividends                                 -            -           -              -                -                -                 -              -          -           -               -         (181)           -       (181)
Transfer from/(to) general risk reserves             -            -           -              -                -                -                 -              -          7          (7)              -            -            -          -
Changes in ownership interest of subsidiaries        -            -           -              -                -                -                 -              -          -         (26)            (26)           -          (17)       (43)
Consolidation of treasury shares                     -           82          82              -                -                -                 -              -          -           -               -            -            -         82
Total comprehensive income for the period            -            -           -            (82)              45                -              (197)        (1 395)       (47)     11 889          10 213          181          425     10 819
Vesting of share-based payments                      -            -           -              -                -                -                 -              -          -           -               -            -            -          -
Balance as at 31 December 2016                      56        8 034       8 090         (1 012)             353               11              (638)         1 915        388      94 300          95 317        4 519        3 848    111 774



RESTATEMENT OF PRIOR YEAR NUMBERS



DESCRIPTION OF RESTATEMENTS

The group has made the following changes to the presentation of NII, NIR and advances.


FAIR VALUE OF CREDIT ADJUSTMENTS

The group has historically included all fair value gains and losses on advances measured at fair value through profit or loss (including interest and fair value credit
adjustments) in NIR. The group's presentation has been changed to include the credit valuation adjustment on fair value advances with impairments in the income
statement rather than as part of NIR. The movement in the credit valuation adjustment on fair value advances is separately disclosed in the impairment of advances note.



CREDIT-BASED INVESTMENTS INCLUDED IN ADVANCES

The group's classification of debt investment securities qualifying as HQLA that are under the control of the Group Treasurer and corporate bonds held by RMB IBD
was changed to advances rather than investment securities. These instruments, given their specific nature, are included as a separate category of advances, namely
marketable advances, in a sub-total on the face of the statement of financial position.

The changes in presentation had no impact on the profit or loss or net asset value of the group and only affect the classification of items on the income statement and
statement of financial position. The changes in presentation have reduced the number of adjustments between IFRS and normalised results.



RESTATED CONDENSED CONSOLIDATED INCOME STATEMENT - IFRS

                                                                              Six months ended                                              Year ended
                                                                              31 December 2015                                            30 June 2016
                                                                        As              Credit                                  As              Credit
                                                                previously           valuation                          previously           valuation
R million                                                         reported          adjustment          Restated          reported          adjustment         Restated

Net interest income before impairment of advances                   20 020                   -            20 020            42 041                   -           42 041
Impairment charge                                                   (2 870)               (275)           (3 145)           (6 902)               (257)          (7 159)
Net interest income after impairment of advances                    17 150                (275)           16 875            35 139                (257)          34 882
Non-interest revenue                                                16 866                 275            17 141            36 677                 257           36 934
Income from operations                                              34 016                   -            34 016            71 816                   -           71 816
Operating expenses                                                 (19 756)                  -           (19 756)          (41 657)                  -          (41 657)
Net income from operations                                          14 260                   -            14 260            30 159                   -           30 159
Share of profit of associates after tax                                349                   -               349               930                   -              930
Share of profit of joint ventures after tax                            453                   -               453               526                   -              526
Income before tax                                                   15 062                   -            15 062            31 615                   -           31 615
Indirect tax                                                          (427)                  -              (427)             (928)                  -             (928)
Profit before tax                                                   14 635                   -            14 635            30 687                   -           30 687
Income tax expense                                                  (3 357)                  -            (3 357)           (6 612)                  -           (6 612)
Profit for the period                                               11 278                   -            11 278            24 075                   -           24 075
Attributable to
Ordinary equityholders                                              10 480                   -            10 480            22 563                   -           22 563
NCNR preference shareholders                                           164                   -               164               342                   -              342
Equityholders of the group                                          10 644                   -            10 644            22 905                   -           22 905
Non-controlling interests                                              634                   -               634             1 170                   -            1 170
Normalised earnings attributable to ordinary equityholders
of the group                                                        11 278                   -            11 278            24 075                   -           24 075



RESTATED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION - IFRS

                                                                                         As at                                    As at
                                                                              31 December 2015                             30 June 2016
                                                                           As     Reallocation                      As     Reallocation
                                                                   previously        of credit              previously        of credit
R million                                                            reported      investments    Restated    reported      investments    Restated

ASSETS
Cash and cash equivalents                                              61 120                -      61 120      64 303                -      64 303
Derivative financial instruments                                       69 001                -      69 001      40 551                -      40 551
Commodities                                                            10 779                -      10 779      12 514                -      12 514
Investment securities                                                 164 972          (34 105)    130 867     185 354          (42 706)    142 648
Advances                                                              794 428           34 105     828 533     808 699           42 706     851 405
- Advances to customers                                               794 428                -     794 428     808 699                -     808 699
- Marketable advances                                                       -           34 105      34 105           -           42 706      42 706
Accounts receivable                                                     9 509                -       9 509      10 152                -      10 152
Current tax asset                                                       1 321                -       1 321         428                -         428
Non-current assets and disposal groups held for sale                      181                -         181         193                -         193
Reinsurance assets                                                        587                -         587          36                -          36
Investments in associates                                               6 242                -       6 242       4 964                -       4 964
Investments in joint ventures                                           1 424                -       1 424       1 344                -       1 344
Property, plant and equipment                                          17 032                -      17 032      16 909                -      16 909
Intangible assets                                                       1 574                -       1 574       1 569                -       1 569
Investment properties                                                     416                -         416         386                -         386
Defined benefit post-employment asset                                       4                -           4           9                -           9
Deferred income tax asset                                                 918                -         918       1 866                -       1 866
Total assets                                                        1 139 508                -   1 139 508   1 149 277                -   1 149 277
EQUITY AND LIABILITIES
Liabilities
Short trading positions                                                 6 069                -       6 069      14 263                -      14 263
Derivative financial instruments                                       82 014                -      82 014      50 782                -      50 782
Creditors, accruals and provisions                                     15 232                -      15 232      17 285                -      17 285
Current tax liability                                                     375                -         375         270                -         270
Liabilities directly associated with disposal groups held for sale        207                -         207         141                -         141
Deposits                                                              899 619                -     899 619     919 930                -     919 930
- Deposits from customers                                             660 203                -     660 203     667 995                -     667 995
- Debt securities                                                     140 500                -     140 500     153 727                -     153 727
- Asset-backed securities                                              31 146                -      31 146      29 305                -      29 305
- Other                                                                67 770                -      67 770      68 903                -      68 903
Employee liabilities                                                    6 963                -       6 963       9 771                -       9 771
Other liabilities                                                       7 492                -       7 492       8 311                -       8 311
Policyholder liabilities                                                1 236                -       1 236       1 402                -       1 402
Tier 2 liabilities                                                     15 554                -      15 554      18 004                -      18 004
Deferred income tax liability                                             956                -         956       1 053                -       1 053
Total liabilities                                                   1 035 717                -   1 035 717   1 041 212                -   1 041 212
Equity
Ordinary shares                                                            56                -          56          56                -          56
Share premium                                                           7 980                -       7 980       7 952                -       7 952
Reserves                                                               87 825                -      87 825      91 737                -      91 737
Capital and reserves attributable to ordinary equityholders            95 861                -      95 861      99 745                -      99 745
NCNR preference shares                                                  4 519                -       4 519       4 519                -       4 519
Capital and reserves attributable to equityholders of the group       100 380                -     100 380     104 264                -     104 264
Non-controlling interests                                               3 411                -       3 411       3 801                -       3 801
Total equity                                                          103 791                -     103 791     108 065                -     108 065
Total equities and liabilities                                      1 139 508                -   1 139 508   1 149 277                -   1 149 277



FAIR VALUE MEASUREMENTS

There were no transfers in or out of the various levels for the six months ended 31 December 2016.

The following represents the significant transfers into levels 1, 2 and 3 and the reasons for these transfers. Transfers between levels of the fair value hierarchy are
deemed to occur at the beginning of the reporting period.

                                                                                       As at 31 December 2015

R million                        Transfers in     Transfers out       Reasons for transfers in

Level 1                                     -            (2 821)      There were no transfers into level 1.
Level 2                                     -                 -       There were no transfers in or out of level 2.
Level 3                                 2 821                 -       Corporate bonds to the value of R2 821 million were transferred into level 3. Due to the market for
                                                                      these bonds becoming less active, fair value was determined using a valuation technique that makes
                                                                      use of unobservable inputs for credit. The fair value measurement of these bonds were, therefore,
                                                                      categorised in level 3 of the fair value hierarchy.
Total transfers                         2 821            (2 821)



                                                                                            As at 30 June 2016

R million                        Transfers in     Transfers out       Reasons for transfers in

Level 1                                     -            (2 821)      There were no transfers into level 1.
Level 2                                     -              (522)      There were no transfers into level 2.
Level 3                                 3 343                 -       The market for certain bonds listed in South Africa became inactive because of stresses in the macro
                                                                      environment. The market price is, therefore, not representative of fair value and a valuation technique
                                                                      was applied. Because of credit valuation being unobservable the bonds were classified from level 1 into
                                                                      level 3 of the hierarchy.
                                                                      An evaluation of the observability of volatilities used in determining the fair value of certain over-the-
                                                                      counter options resulted in a transfer of R107 million out of level 2 of the fair value hierarchy and into
                                                                      level 3.
                                                                      An evaluation of the significant inputs utilised in determining the fair value of investment property,
                                                                      considering current market factors, resulted in a transfer of R416 million out of level 2 of the fair value
                                                                      hierarchy and into level 3.
Total transfers                         3 343            (3 343)



SUMMARISED SEGMENT REPORT - IFRS


                                                                                                     Six months ended 31 December 2016
                                                                             FNB                       RMB                                   FCC       Consoli-
                                                                                                                                      (including        dation
                                                                                                                                           Group      and IFRS
                                                                                             Investment     Corporate                   Treasury)       adjust-
R million                                                           FNB SA    FNB Africa*       banking       banking     WesBank      and other         ments         Total

Profit for the year before tax                                       8 885           548          3 191           877       2 755            598          (695)       16 159
Total assets                                                       342 837        48 853        397 703        42 379     203 848        287 063      (142 195)    1 180 488
Total liabilities                                                  333 267        48 431        388 989        41 227     200 556        135 642       (79 398)    1 068 714




                                                                                                     Six months ended 31 December 2015
                                                                          FNB                          RMB                                   FCC       Consoli-
                                                                                                                                      (including        dation
                                                                                                                                           Group      and IFRS
                                                                                             Investment     Corporate                   Treasury)       adjust-
R million                                                           FNB SA    FNB Africa*       banking       banking     WesBank      and other         ments         Total

Profit for the year before tax                                       8 370           771          3 198           756       2 523           (515)         (468)       14 635
Total assets                                                       324 704        48 078        416 480        49 868     202 701        227 785      (130 108)    1 139 508
Total liabilities                                                  316 262        47 960        409 524        48 847     197 739         83 054       (67 669)    1 035 717


                                                                                                           Year ended 30 June 2016
                                                                          FNB                          RMB                                   FCC       Consoli-
                                                                                                                                      (including        dation
                                                                                                                                           Group      and IFRS
                                                                                             Investment     Corporate                   Treasury)       adjust-
R million                                                           FNB SA    FNB Africa*       banking       banking     WesBank      and other         ments         Total

Profit for the year before tax                                      16 591         1 313          7 496         1 454       5 475            575        (2 217)       30 687
Total assets                                                       334 199        49 217        395 822        39 311     205 016        271 289      (145 577)    1 149 277
Total liabilities                                                  317 633        49 309        385 887        37 435     199 686        135 134       (83 872)    1 041 212
* Includes FNB's activities in India.



CONTINGENCIES AND COMMITMENTS

                                                                                                    As at 31 December                                          As at 30 June
R million                                                                                            2016                 2015             % change                     2016

Contingencies
Guarantees                                                                                         40 317               34 304                   18                   34 733
Letters of credit                                                                                   6 318                8 637                  (27)                   7 339
Total contingencies                                                                                46 635               42 941                    9                   42 072
Committed capital expenditure                                                                       2 054                4 098                  (50)                   4 264
Other commitments
Irrevocable commitments                                                                           115 381              114 413                    1                  101 418
Operating lease and other commitments                                                               4 101                4 954                  (17)                   3 978
Total other commitments                                                                           119 482              119 367                    -                  105 396
Total contingencies and commitments                                                               168 171              166 406                    1                  151 732



NUMBER OF ORDINARY SHARES IN ISSUE


                                                                              Six months ended 31 December                                        Year ended 30 June

                                                                      2016                                     2015                                      2016

                                                                   IFRS         Normalised                IFRS          Normalised                IFRS            Normalised
Shares in issue

Opening balance as at 1 July                              5 609 488 001      5 609 488 001       5 609 488 001       5 609 488 001       5 609 488 001         5 609 488 001
Less: treasury shares                                          (473 626)                 -          (1 713 430)                  -          (2 201 270)                    -
- Shares for client trading*                                   (473 626)                 -          (1 713 430)                  -          (2 201 270)                    -


Number of shares in issue (after treasury shares)         5 609 014 375      5 609 488 001       5 607 774 571       5 609 488 001       5 607 286 731         5 609 488 001
Weighted average number of shares
Weighted average number of shares before
treasury shares                                           5 609 488 001      5 609 488 001       5 609 488 001       5 609 488 001       5 609 488 001         5 609 488 001
Less: treasury shares                                        (1 075 586)                 -          (1 638 742)                  -          (1 800 471)                    -
- Shares for client trading*                                 (1 075 586)                 -          (1 638 742)                  -          (1 800 471)                    -


Basic and diluted weighted average number of
shares                                                    5 608 412 415      5 609 488 001       5 607 849 259       5 609 488 001       5 607 687 530         5 609 488 001

* For normalised reporting, shares held for client trading activities are treated as externally issued.



COMPANY INFORMATION



DIRECTORS

LL Dippenaar (chairman), JP Burger (chief executive officer), AP Pullinger (deputy chief executive officer), HS Kellan (financial director), MS Bomela, P Cooper (alternate),
JJ Durand, GG Gelink, PM Goss, NN Gwagwa, PK Harris, WR Jardine, F Knoetze, RM Loubser, PJ Makosholo, TS Mashego, EG Matenge-Sebesho, AT Nzimande, BJ van
der Ross, JH van Greuning



COMPANY 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



NAMIBIAN SPONSOR

Simonis Storm Securities (Pty) Ltd
4 Koch Street
Klein Windhoek
Namibia



TRANSFER SECRETARIES - SOUTH AFRICA

Computershare Investor Services (Pty) Ltd
1st Floor
Rosebank Towers
15 Biermann Avenue
Rosebank 2196
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

Date: 09/03/2017 08:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story