FirstRand Ltd., South Africa’s second-biggest financial services company, said first-half profit fell 48 percent as it spun off and sold insurance assets.
Net income dropped to 6.59 billion rand ($874 million) in the six months through December from a restated 12.6 billion rand a year earlier, the Johannesburg-based company said in a statement today. Earnings per share adjusted to exclude the effect of the disposal in 2010 rose 26 percent to 1.02 rand, beating the 1-rand median estimate of three analysts surveyed by Bloomberg.
“The increase in earnings was delivered through very strong operational performances from First National Bank and WesBank, driven by loan and customer deposit growth, new customer acquisition, expanding lending margins and robust transactional volumes,” FirstRand said in the statement today.
FirstRand spun off and merged its insurance unit Momentum Group Ltd. and sold Outsurance in 2010, using some of the surplus capital to pay a special dividend last year. Like Standard Bank Group Ltd. and Absa Group Ltd., FirstRand wants to grow in Africa to boost profit as its domestic market slows. FirstRand has said it wants to buy a Nigerian lender to expand in the continent’s most populous economy.
“The prior year base was already quite strong so to grow off that base is a great achievement and shows how strong the First National Bank, WesBank franchise is at the moment,” Neville Chester, who helps oversee the equivalent of $35 billion at Coronation Fund Managers Ltd. in Cape Town, said in an e-mailed response to questions. Management has “done an excellent job in managing the business through these difficult markets and importantly they have achieved it by growing the top line as much as by controlling costs,” Chester said.
FirstRand has climbed 16 percent in Johannesburg this year, making it the best-performing stock on the six-member FTSE/JSE Africa Banks Index.
“Achieving revenue growth is likely to remain a challenge and, therefore, achieving a sustainable return on equity and cost-to-income ratio continues to be a balancing act between investment and cost management,” FirstRand said. The dividend rose to 44 cents from 35 cents a year earlier, the lender said.