FirstRand ‘not fazed’ by newcomers entering the banking market

FIRSTRAND is not fazed by the new banks that have entered the market in South Africa, boosting competition amid a sluggish economy, according to the JSE-listed financial services group’s chief executive, Alan Pullinger.

He was speaking yesterday after FirstRand delivered a 7 percent increase in normalised earnings to R13.3 billion with normalised return on equity (ROE) of 22.3 percent for the six months to end-December, boosted by FNB’s earnings, which were up by 13 percent during the period.

FirstRand comprises First National Bank (FNB), Rand Merchant Bank (RMB), WesBank and UK specialist lender Aldermore.

Pullinger said: “The new entrants are targeting different customers and if you look at Discovery Bank they are targeting premium segments of the market.”

The banking sector has seen a number of new entrants, including Discovery Bank, TymeBank and Bank Zero.

“But again it gives us the opportunity to respond to their challenge if we must not take them for granted, should they target the space we are already occupying in the market,” Pullinger said. The group’s performance included a full six-month posttax earnings contribution of R1.034bn from Aldermore, which FirstRand acquired in April last year.

Net interest income after impairment of advances increased by 28 percent to R25.11bn, while basic and diluted headline earnings a share increased by 6 percent to 237.9 cents a share.

The group declared a 7 percent increase in dividends to 139c from income reserves.

Pullinger said: “FNB’s results were impressive with earnings increasing by 13 percent on the back of strong growth in customers, transactional volumes, advances and deposits. RMB’s portfolio delivered high-quality earnings from both its domestic and rest of Africa activities.

“WesBank remained resilient, despite competitive pressures and low vehicle sales. As expected, Aldermore enhanced group earnings and ROE.”

FNB increased its earnings to R8.7bn, driven by good growth from its domestic retail and commercial segments and the turnaround in the rest of Africa business.

RMB, which represents FirstRand’s activities in the corporate and institutional banking segments in South Africa, the broader African continent and India, delivered a 5 percent increase in earnings to R3.3bn, while Wesbank grew its earnings marginally by R957m.

Going forward Pullinger said despite the difficult macroeconomic environment in South Africa, it would continue to invest in its long-term growth strategies.

“FNB has consistently demonstrated that despite a very subdued operating environment, its strategy to grow customers, activate digital channels to drive volumes, and cross-sell and up-sell to main banked customers using behavioural analytics is generating growth significantly above that currently provided by the system. This momentum is expected to continue,” he said.

FirstRand shares closed 2.04 percent higher at R63.39 on the JSE yesterday.