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FirstRand's results reflect on-going credit recovery and good operational performances from all franchises.

Media release

FirstRand Limited (FirstRand) today reported results for the six months to December 2010. Against a mixed macro background, FirstRand’s diverse financial services portfolio produced a strong performance. Normalised earnings on continuing operations (stripping out the contribution from Momentum in both the current and comparative period following its unbundling in November 2010) improved 20% to R4.8 billion with a normalised return on equity (“ROE”) of 19%.

Commenting on the results, FirstRand CEO, Sizwe Nxasana said:- “We are extremely pleased with this performance which was achieved against a mixed macro picture of sluggish GDP growth offset by low interest rates and an improving credit environment. It reflects the quality of our franchises which have all produced strong operational performances and are showing early signs of success from some of their growth strategies, both in South Africa and Africa”.

Earnings continued to be driven by significant decreases in retail bad debts (impairment charge 35% down) on the previous comparative period and 15% down on the six months to June 2010). This positively impacted both WesBank and FNB’s performance. Asset margins improved slightly benefiting from the re-pricing strategies across all of the large lending books, although the current low levels of new business mean that the full benefits are still to materialise. In addition, margins continued to be impacted by the negative endowment effect on capital and deposits due to lower average interest rates.

The cost to income ratio has increased, but should be seen against sluggish revenue growth, the impact of endowment and investment in the Group’s growth strategy. The increase of 10% in operating costs, when adjusted for expansion investments, share-based payments and JV profit shares, was actually limited to 8%, which reflects the Group’s ongoing focus on managing costs.

Nxasana believes that given its strategy and high quality franchises, the Group remains well positioned to grow, despite the expected pressures on revenue growth going forward.

“We continue to focus on delivering on our strategic intent to be the African financial services group of choice, creating long term franchise value and delivering superior and sustainable economic returns to our shareholders within acceptable levels of volatility”, he said.

In executing on this objective, our franchises have made significant progress on their specific strategies. We are growing our domestic and African franchises, targeting those markets that are expected to produce above average domestic growth and we are strongly positioned to benefit from the trade and investment flows between Africa and Asia, particularly China and India”.