South Africa’s number two banking group, FirstRand, posted a drop in full-year profit on Tuesday as bad debts mount, and said it expected its operating environment to slowly improve from 2010.
FirstRand said diluted headline earnings per share for the year to end June fell 29% to 133,1 cents from 187,8 cents, as bad debts climbed at its banking and vehicle financing units. It had forecast a 28% to 33% slide in June.
Its results matched its peers, which all reported lower first-half profits in August as bad debts mount in the banking sector and a tough economic environment hits consumers.
South Africa is battling its first recession in 17 years and local banks have been hard hit by impairments at their consumer and retail units, as customers default on loans after a series of interest-rate hikes up to June 2008.
FirstRand said it expected earnings at its banking business FNB and vehicle financing unit Wesbank to remain under pressure as its corporate lending portfolios continued to show signs of stress.
Its investment banking unit RMB was hard hit, with losses of R782-million for the year in its equity trading division.
The group’s earnings were also hit by single-stock future losses related to the collapse of brokerage Dealstream, for which RMB was a clearing agent.
FirstRand declared a final dividend of 22 cents compared with 38,25 cents in the previous corresponding period. — Reuters