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Divestment gain lifts FirstRand fiscal H1 earnings

FirstRand Ltd. posted higher earnings in the six months ended Dec. 31, 2018, largely on the back of gains from the divestment of its take in Discovery Card.

The South African financial services group posted normalized earnings attributable to ordinary equity holders of 13.34 billion rand for the six months ended Dec. 31, 2018, up from 12.46 billion rand in the same period in 2017.

The group's figures for the period were reported under IFRS 9, while the year-ago figures were under IAS 39.

Headline earnings for the period came in at 13.34 billion rand, up from 12.57 billion rand a year earlier. Headline EPS was 237.9 cents, up from 224.2 cents a year ago. Return on equity ticked down to 22.3% from 22.5% over the period.

Normalized net interest income before impairment of advances amounted to 29.41 billion rand, up from the year-ago 24.57 billion rand. Fee and commission income rose year over year to 15.63 billion rand from 13.96 billion rand. Insurance income also increased, to 2.07 billion rand from 1.94 billion rand.

The group booked an impairment charge of 5.02 billion rand in the period, up from 4.05 billion rand incurred in the same period a year ago. Operating expenses increased on a yearly basis to 26.73 billion rand from 23.03 billion rand.

The bank recognized an after-tax profit of approximately 2.3 billion rand from the sale of its 25.01% stake in unit Discovery Bank, along with all economic interests and rights of Discovery Card, to insurer Discovery Ltd. FirstRand noted that the figure was included in its attributable earnings for the period under review. However, given the non-operational nature of the profit, it was excluded from headline and normalized earnings.

FirstRand declared an interim dividend of 139.0 cents per ordinary share, up from 130.0 cents per ordinary share a year ago.

The group's common equity Tier 1 ratio was 12.0% as of Dec. 31, 2018, compared with 14.0% as of Dec. 31, 2017, and 11.5% as of June 30, 2018. Its leverage ratio stood at 7.4% at the end of 2018, compared with 8.5% at the end of 2017.

As of March 11, US$1 was equivalent to 14.37 South African rand.