16 September 2010

South Africa: Good Performance by Investments Boosts RMB

Johannesburg — RMB Holdings (RMBH) yesterday reported a 36% surge in headline earnings in the year to June on a good performance by diversified banking and insurance portfolio.

The group's earnings were boosted by a better than expected performance at key asset FirstRand , which reported a 39% rise in normalised headline earnings to R9,9bn in the same reporting period.

The group, which is considering a separate listing of its insurance and banking assets under a restructuring programme, said headline earnings rose to R3,59bn, or 299,8c per share. Normalised earnings were up 42% to R3,57bn, or 295c per share, and attributable earnings increased 45% to R3,61bn, or 300,8c per share.

RMB is also mulling an increas e of its stake in the new company to be formed after the merger of its insurance unit Momentum with rival Metropolitan Holdings.

Analyst Rob Nagel at Cadiz Asset Management said yesterday that it was still too early to speculate on the effect of the proposed listing of RMB's assets as the group had not yet outlined its plans in detail.

CEO Peter Cooper said in a regulatory statement announcing the results that shareholders would be updated once there were material developments .

RMB is the largest shareholder in FirstRand, with an effective interest of 32,3% as of the end of June, a 26% shareholding in health insurance firm Discovery, 61,7% in short-term insurance group OUTsurance and 79,6% in RMBSSI, which provides insurance and risk solutions for large corporations in SA.

"RMBH's diversified portfolio of banking and insurance businesses produced a strong outcome against a volatile and difficult macro background that is only now starting to show signs of improving, with normalised earnings increasing by 42% to R3,6bn," Mr Cooper said.

He was particularly pleased with the performance of FirstRand, whose recovery in earnings was mainly driven by a slight increase in top-line revenue.

"Many of the banking operations also showed strong operational performances and a significant private equity realisation positively impacted earnings.

"Overall, impairments decreased 29% from R8 bn to R5,7bn , primarily in the retail franchises of FNB and WesBank, reflecting the positive benefits of the lower interest rate environment," Mr Cooper said.

FirstRand's noninterest revenue grew 32% from R20bn to R26bn, representing a strong recovery in RMB's trading activities and the realisation of the private equity investment in Life Healthcare.

Mr Cooper said RMB included R389m of Discovery's earnings in its own normalised earnings, compared with R315m the year before.

RMB's share of normalised earnings from OUTsurance fell from R384m last year to R341m , following start-up losses of R290m at its Australian-based business, Youi.

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