REVIEW OF OPERATIONS // BANKING GROUP // FNB

MICHAEL JORDAAN
CEO, First National Bank

FNB –SOUTH AFRICA

       
Year ended 30 June    %   
R million 2009    2008    change   
Normalised earnings 3 756    4 654    (19)  
Return on equity based on normalised earnings (%) 26    33       
Income before indirect tax 5 317    6 698    (21)  
Indirect tax (257)   (353)   (27)  
Income before direct tax 5 060    6 345    (20)  
Advances 204 370    207 658    (1)  
Total deposits 192 550    192 467    –   
Assets under management 41 927    48 198    (13)  
Cost to income ratio (%) 57.5    57.3       
Non performing loans (%) 8.7    4.2       
       
Year ended 30 June    %   
R million 2009    2008    change   
Mass 1 215    1 160    5   
Consumer segment (292)   1 159    (>100)  
– HomeLoans (1 754)   (381)   (>100)  
– Card (Issuing) (108)   106    (>100)  
– Other Consumer 1 570    1 434    9   
Wealth segment 298    444    (33)  
Commercial segment 2 723    2 908    (6)  
Corporate segment 776    676    15   
FNB Other and Support 340    (2)   >100   
Total FNB 5 060    6 345    (20)  


INTRODUCTION

The year under review remained difficult given elevated levels of consumer indebtedness, a recessionary operating environment and high levels of local and global economic uncertainty. FNB’s performance was satisfactory, given the challenging economic conditions during the year, and can be ascribed to the following:

  • a diversified retail portfolio which continued to show good growth in non interest revenue and deposits;
    growth in non interest revenue and deposits;
  • whilst the retail lending portfolios experienced continued increases in non performing loans (“NPLs”) and bad debts, the arrears in the mortgages book (which is the most significant) appear to have reached a plateau;
  • stringent credit strategies resulted in better quality of new business written in retail lending books, particularly credit cards and mortgages;
  • strong franchises in the Commercial and Corporate segments continued to deliver profitability, although the Commercial segment’s deposit margins were negatively impacted by the endowment effect of reducing interest rates; and
  • a relentless focus on cost management resulted in an increase of only 6% in operating expenses.