Financial services group FirstRand said on Tuesday that while four weeks remain until the end of its first half, it is clear to the board that the combination of the acceleration of bad debts in the retail businesses combined with the losses incurred in the investment bank will negatively affect the group’s earnings for the financial year to June 30 2009.
Pro-forma diluted normalised earnings for the half year to December 2008 are expected to be down by between 18% and 26% compared with December 2007.
“However, if compared with the six-month period to June 2008, this would represent an earnings increase of between 1% and 9%. The ROE of the group is expected to be between 17% and 19%,” the group stated in a trading update.
“Barring any unforeseen circumstances, the group is reasonably certain that pro-forma diluted normalised earnings per share for the full year to June 30 2009 will be down between 0% and 15%,” it added.
FirstRand said that when it had announced its results for the year to June 2008, the group had highlighted to shareholders that it expected the macro environment, both domestically and globally, to remain challenging. This scenario has played out more negatively than expected, characterised by:
a severe crisis in international markets and economies;
slowing GDP growth;
high interest rates and inflation;
reducing disposable income levels;
falling house and equity prices; and
a weakening rand. — I-Net Bridge