Future outlook

OUTLOOK FOR THE COMING YEAR TO JUNE 2010

Extract from 2009 Annual report

Outlook for the coming year

We believe that the operating environment will remain tough for the rest of 2009 with a slow improvement from 2010 as lower interest rates and fiscal stimulus begin to have a positive impact.

The South African economy is still facing significant difficulties. The consumer will remain under pressure in the medium term despite the recent easing of interest rates, and therefore volumes in the retail segment will continue to be subdued and bad debts will unwind very slowly given the high levels of consumer debt that still exist. House prices are in the near term expected to continue to fall, resulting in lower recovery rates on mortgage security. Wholesale lending portfolios, which have been resilient for a large part of the economic downturn, are now showing signs of stress. Job losses are increasing and the manufacturing sector is still contracting.

At FirstRand these issues, combined with low asset growth and transaction volumes, means that FNB and WesBank’s earnings will remain under pressure. Further mark to market losses on the remaining legacy portfolios in RMB cannot be ruled out and the private equity realisations in the first half of the year to June 2008 will not be repeated in the current financial year. Momentum’s inherently defensive business model due to its diversified product range, strong distribution model, upper-income target market focus, capital efficient liability mix and the conservative investment mandate used to manage Momentum’s capital, will continue to provide protection to earnings.

Against a macro background of subdued economic activity FirstRand believes that top line growth will remain under pressure. However, the Group expects non-performing loans and bad debts to start to unwind in the large lending books such as vehicle finance and mortgages, and that these ratios will start to show improvement in the first six months of the year to June 2010.

Of our other investments, both Discovery and OUTsurance are well positioned in their respective market segments and should continue to extract superior growth therefrom. Their respective international initiatives should also begin to gain traction during the current year.

Given its size in local markets, and the incremental nature of our international strategies, it will be difficult for the Group to track back to previous levels of earnings growth in the short term. However, the board still anticipates that RMBH will over time deliver acceptable real returns to shareholders.