FirstRand reports strong first half operational performance, grows earnings

FirstRand said Tuesday its operational and financial performance for the six months to December 31 were trending in line with its expectations as outlined in the annual results announcement in September.

The banking, investment and financial services group said in a trading update the macroeconomic environments in South Africa, the Africa markets where the group operates, and the UK, remained largely as anticipated with Mozambique and Botswana continuing to be challenging.

Lower inflation and interest rates were supporting a gradual recovery in household affordability levels in the group's domestic market South Africa.

"Net interest income (NII) growth continues to be driven by improving advances growth from the material lending books in South Africa, broader Africa and UK. Large corporate overall production has maintained strong momentum, with the originate and distribute strategy resulting in a much-improved margin," the group said.

Absolute advances growth in the first half will be muted given that the distribution strategy was not in place in the comparative period; however, this was expected to normalise in the second half.

Commercial advances continued to grow given targeted strategies, including focused SME lending. There was a gradual pickup in retail lending volumes in both secured and unsecured portfolios.

Growth in retail advances was expected to exceed the previous year, with a particularly stronger second half trajectory, as the benefits to households from improving macros fully emerge.

Advances growth from broader Africa remainsedat similar levels, with the UK expected to deliver slightly better new business production, anchored to property finance where margins remain resilient.

All the group deposit franchises were growing in line with expectations.

Growth in non interest revenue (NIR) is trending higher. This was due to good momentum in the insurance business, a significant rebound in the performance of the global markets business and further private equity realisations.

The group's core credit performance was well within expectations. The credit performance in the UK operations was normalising off a base that benefited from the release of cost of living and NOSIA provisions raised in prior periods.

Growth in expenses would increase 2% to 3% above inflation. The group's inflation number was anchored to salary inflation of 5%, which was negotiated with the unions in June 2023. The guidance statement that "the group now expects to deliver full-year earnings growth off the prior year base… of high mid-teens, which is significantly above the group's long-term stated target range" remained intact, the group said.

On the UK motor commission matter, the group only intended to make an adjustment to its provision, if required, based on the FCA's final redress scheme (the scheme) which was anticipated to be published by March 2026.

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