Our opinion on the current state of FSR

FirstRand (FSR) has five divisions - First National Bank (FNB), Rand Merchant Bank (RMH), Wesbank, Ashburton (in the UK) and Aldermore. It operates in 10 African countries, has platforms in Africa, Asia and Europe. It also has representative offices in Dubai and Shanghai. FNB has a branch in India. The company was founded by Laurie Dippenaar, G.T. Ferriera and Paul Harris in the 1970's. With a market capitalisation of about R385bn it is by far the largest banking group in South Africa. FNB offers a diverse range of banking products to consumers, small and large businesses and government departments. Wesbank is the largest asset financing company in Southern Africa covering vehicles of all types, both private and consumer as well as aviation assets and agriculture. RMH offers corporate and investment banking in 35 African countries. Banking shares in general have been taking strain in the current economic environment, but FirstRand has benefited from its strong focus on innovation and technology. All banks are now benefiting from rising interest rates. The full impact of the coronavirus on its performance is unknown at this time, but it appears that FNB gained market share in this difficult environment and has weathered the storm very well. In its results for the year to 30th June 2023 the company reported headline earnings per share (HEPS) up 12%, a return on equity (ROE) of 21,2% and a credit loss ratio of 0,78%. The company said, "The 12% increase in the group’s normalised earnings was driven by good topline growth, reflecting continued momentum in new business origination in all large lending portfolios, ongoing growth from the deposit franchise and the performance of the group’s transactional franchise (measured by customer growth and volumes)". In a trading update for the six months to 31st December 2023 the company reported, "The group expects earnings growth of real GDP plus CPI plus >0% to 3%. ROE will remain at the upper end of the targeted range of 18% to 22%". In our view, this is a very solid secure investment trading at a good price. On a P:E of 10,05 and a dividend yield of 4,67% it looks like good value. In May 1989, you could have bought this share for 15c and today it trades for around R66.00. It is a long-term performer that has shown its resilience to economic recessions and political uncertainty. Technically, the share has broken strongly up out of the "island formation" it was in after the advent of COVID-19.