* H1 earnings up 21 pct
* Net interest income jumps 22 pct
* Shares have dropped around 3 pct this year
(Adds details, quotes)
By Helen Nyambura-Mwaura
JOHANNESBURG, March 4 FirstRand, South
Africa's second largest bank, sees its full-year results largely
in line with the 21 percent increase in first-half earnings
reported on Tuesday, despite an expected drop in lending.
South African banks are bracing themselves for an increase
in bad debts and non-performing loans after the central bank
raised its benchmark interest rate by half a percentage point in
January, signalling the start of higher borrowing costs.
"We expect to see wage inflation and consumption as well as
government spending slowing down, which will result in slowing
... GDP growth and increased pressure on disposable income,"
Chief Executive Sizwe Nxasana told Reuters.
"Interest rate hikes will likely continue and that will
lower the retail credit extension and will result, obviously, in
increasing non-performing loans and bad debts."
However, a weakening local rand currency would underpin
growth by boosting manufacturing and exports, he said.
South African banks are struggling to boost lending as
corporate demand for credit remains slack and many households
remain under pressure, given rising fuel costs, high
unemployment and weak growth in Africa's largest economy.
FirstRand said its portfolio provisions were 0.97 percent of
its total performing book, well above bad debt charges of 0.77
The bank is now more reliant on its retail arm First
National Bank, and Wesbank, its vehicle and asset finance
business, for revenues than it is on investment banking
operations, as was the case a few years ago.
INTEREST INCOME BOOST
FirstRand said diluted headline earnings totalled 159.1
cents in the six months to end-December, from 131.2 cents a year
Headline EPS, the main measure of profit in South Africa,
excludes certain one-time items.
The results were expected after FirstRand said last month
that earnings could rise as much as 22 percent.
Net interest income, or earnings from lending, increased by
22 percent to 12.38 billion rand ($1.14 billion) driven by
growth at its retail unit.
Non-interest income, which includes fees and commissions,
grew by 13 percent.
Smaller rivals Barclays Africa recently reported a
14 percent increase in full-year earnings, while Nedbank
posted a 15 percent rise.
Leading lender Standard Group is scheduled to
report on its performance on Thursday.
All four banks are expanding operations in Africa, where
burgeoning economies are beckoning investment from across the
Shares of FirstRand are down around 3 percent this year,
underperforming a 3.7 percent rise in Johannesburg's benchmark
($1 = 10.8163 South African rand)
(Editing by Mike Collett-White)