FirstRand has thrived on Nxasana’s watch

UNDER the stewardship of outgoing CEO Sizwe Nxasana, FirstRand’s share price has more than trebled, beating its closest rivals.

The lender’s share price grew by 213.66% over the last five years. Nedbank advanced 90.41%, Standard Bank gained 45.23% and Barclays Africa lagged with 45%. This was while the JSE banks index climbed 96.62%.

However, the company has been left behind in expanding its footprint in Africa. Barclays Africa, the parent of Absa, bought 10 African operations, excluding Egypt and Zimbabwe, for R18.3-billion in 2013 from its parent, Barclays plc. But earlier this year, Barclays Africa CEO Maria Ramos announced plans to acquire the Egyptian operation and enter Nigeria.

Standard Bank operates in more than 20 countries in Africa. Nedbank is exposed to at least 39 African countries.

But FirstRand’s deal team has been battling to close transactions in Africa. Former CEO Paul Harris says one of the reasons is that it is not prepared to overpay for an asset that could take years to turn around.

The group plans to invest more than R10-billion in the rest of Africa, according to Paul Formanko, a financial analyst at JPMorgan.

The strategy seems to have worked as its return on equity is the highest of the big four banks, having surged from 19.49% in 2010 to 24.24% at the end of last year.

Barclays Africa’s return grew from 11.63% to 16.50% over the period, Nedbank’s swelled from 11.49% to 15.35%, and Standard Bank’s from 12.59% to 13.47%.

Harris says the banking industry is a national asset that is rightfully ranked among the best in the world. It proved its mettle during the 2008-09 financial crisis without needing a bailout from the government, which was “unprecedented”.

But the sector has some challenges — the biggest being the “absolute tsunami of regulation”. The sector has been criticised for being uncompetitive, with the big four banks controlling about 90% of the industry.