FirstRand H1 earnings up 13 percent
|Published
File photo: Simphiwe Mbokazi. File photo: Simphiwe Mbokazi.
Johannesburg - FirstRand reported a 13 percent rise in first-half earnings on Tuesday despite setting aside more money in anticipation of souring debt as oil and commodity prices decline.
Africa's second-largest lender by assets said it had identified R900 million ($73 million) of loans to oil, gas and commodity companies as high risk, many of these in Nigeria and Angola, the continent's top oil producers.
Nations outside its home market make up about 11 percent of FirstRand's R240 billion corporate loan portfolio.
The bank said bad debt charges increased 26 percent to 3.1 billion rand in the six months to end-December, while its credit loss ratio rose to 0.86 percent from 0.77 percent.
Without the additional provisions, the ratio would have fallen to 0.66 percent, deputy Chief Executive Johan Burger, said at an earnings presentation.
“There remains a lot of uncertainty in this area. We believe it is the right thing to be proactive in looking at specific portfolio provisions, not as a function of defaults, but being proactive in strengthening our balance sheet,” he said.
FirstRand's exposure is not in underlying commodities, but through clients whose revenues are under pressure from lower oil or commodity prices, said Burger, who will be taking over as CEO when current head Sizwe Nxasana retires in September.
“An increasing level would be expected but the underlying risk quality seems to be in good shape,” Neelan Hansjee, an investment analyst at Old Mutual Equities, said of the credit loss ratio.
FirstRand reported diluted headline earnings of 180.5 cents per share from 159.1 cents a year earlier. Headline EPS, the main measure of profit in South Africa, excludes certain one-time items.
Its net interest income increased by 19 percent to R17.5 billion while non-interest revenue, which includes income from fees and commissions, grew 9 percent to R18.8 billion.
“This was driven mainly by ongoing increases in advances, and solid growth from both retail and corporate deposits,” the bank said of its net interest income.
FirstRand shares were down 1.8 percent at 1303 GMT, compared with the Top-40 index that had lost 1 percent. Investors dumped liquid stocks at Johannesburg's bourse on Tuesday as the rand currency sunk to 13-year lows.
Reuters