South African bank FirstRand's full-year profits rise 5%

JOHANNESBURG (Reuters) - South African bank FirstRand said on Thursday it managed to weather a tough domestic economy to increase full-year profits by 5%, but called for urgent reform in the country to avoid another sovereign credit rating downgrade.

South Africa suffered its worst economic contraction in a decade in the first quarter of the year. High government debts, troubled state-run firms, including energy company Eskom, and uncertainty over certain reforms have hit confidence in the country's economy.

FirstRand's retail division is the largest in South Africa by market share, and is therefore more exposed to pressures on consumers than rivals. But earnings at the bank's consumer division rose more than 10%, outperforming those of key competitors.

A weaker performance at its corporate and investment bank (CIB), car finance unit and in the group's treasury however weighed on the lender's overall headline earnings per share (HEPS) - the main profit measure in South Africa.

Its diluted HEPS stood at 497.2 cents in the year to June 30, compared to 472.7 cents a year earlier.

CEO Alan Pullinger said in a statement the bank produced real quality growth despite a challenging operating environment and high earnings base in 2018.

"The underlying growth momentum in FNB, RMB and Aldermore remains strong, and WesBank continues to weather tough conditions," he said, referring to its retail division, corporate and investment bank, UK bank and car finance units respectively.

Non-performing loans increased across a number of its businesses, which FirstRand attributed in most cases to growth in advances. At RMB, however, a 7% increase in NPLs reflected higher levels of corporate stress in South Africa, it said.

RMB's earnings fell by 4% during the period, which FirstRand said was due to the non-repeat of significant private equity realisations that had happened in the prior year.

FirstRand said it expected economic activity in South Africa to remain under pressure for the "foreseeable future".

"The country needs urgent reform, which should, at minimum, include energy supply, price stability and policy certainty in key areas such as fiscal consolidation, SOE reform, land reform and mining rights," it said, adding without these the risk of a further sovereign ratings downgrade remained elevated.

South Africa has already been downgraded to "junk" status by two ratings agencies - Fitch and S&P.

($1 = 15.2369 rand)

(Reporting by Emma Rumney; editing by Jason Neely and Jane Merriman)