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FirstRand drops as profit miss estimates

Johannesburg - FirstRand [JSE:FSR], Africa’s biggest bank by market value, headed for the biggest decline in two weeks after fiscal full-year profit missed estimates as the company invested in an expansion on the continent and loan-impairment charges rose.

Earnings excluding one-time items rose to R22.4bn in the 12 months through June compared with R21.1bn a year earlier, Johannesburg-based FirstRand said in a statement on Thursday.

The average estimate of nine analysts for adjusted profit was R22.9bn. FirstRand’s so-called normalised earnings, its main measure of profit, rose 7% to R22.9bn.

Net income increased 4.2%, the slowest pace since 2009, as the company invested in building out its asset-management and insurance businesses and expanding FirstRand’s operations across the 11 sub-Saharan African countries in which it operates.

In South Africa, where it also owns an investment bank, a retail lender and a vehicle-financing unit, the company is having to contend with an economy that the central bank has predicted won’t expand this year.

"To achieve the same level of growth in the year ahead is going to be very difficult," chief executive officer Johan Burger said by phone, referring to adjusted profit figures and a return an equity of 24%. "We’re committed to delivering growth in the next 12 months.”

The stock slid as much as 3.5% and was trading 2.4% down at R45.98 as of 9:39 a.m. in Johannesburg, heading for the biggest one-day drop since August 24.

"South Africa’s economy remains fragile due to continuing low domestic growth, which is forecast to prevail over the next few years," FirstRand said.

"Low growth combined with weaker balance sheets of some state-owned enterprises has added fiscal risk which is likely to result in a sovereign downgrade by the end of 2016."

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