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Yesterday we had results from FirstRand which was a breath of fresh air compared to some of the other numbers we have been seeing. As a reminder, the FirstRand group comprises of FNB, RMB, Wesbank, Aldermore and Ashburton. An array of quality financial services businesses that cover most bases.
Normalised earnings were up 7% per share, whilst return on equity was 22.3%. Compare that to the other banks who have recently reported results; ABSA 13.4%, Nedbank 17.9%, Standard Bank 18%, Investec 13.4%, and Capitec 27%.
Capitec may have a better return but it also trades at 33 times earnings whilst FirstRand trades at 13 times.
Retail banking was the star of the show. FNB's earnings increased by 13%. FNB compromises 65% of earnings. I listened to Alan Pullinger, the CEO of the group and he was very impressed with FNB's ability to sell on extra products to existing clients. I can see this happening on a personal level. The more FNB products you have the more ebucks you can earn. It is genius.
RMB growth was decent at 5% and contributes 25% to profits. Wesbank grew by 1% and contributes 7%. Aldermore, the UK bank now contributes 8% to profits.
We really like FirstRand as an investment but we feel the best entry is through Remgro. Stay tuned for a research note on Remgro this afternoon.