Financial services company, FirstRand published its financial results for the year ending 30 June 2024, showcasing a strong operational performance, particularly in the second half.
This success allowed the group to absorb a R3.0 billion provision related to the UK's motor commission review without hindering its overall financial health.
CEO Mary Vilakazi remarked, "Despite a tough operating environment, a standout feature of these results is the operational outperformance delivered by FirstRand’s portfolio in the second half of the year.
"This allowed the group to absorb a R3.0 billion accounting provision raised for the UK motor commission review and still produce robust growth in normalised earnings of 4% and an ROE of 20.1%, which is well within its target range.”
Excluding the provision, earnings grew by 10%, and ROE reached 21.3%, underscoring the strength of FirstRand's subsidiaries, including FNB, RMB, WesBank, and Aldermore.
The group also increased its dividend by 8%, reflecting its capacity to generate high returns and strong capital growth.
Net income climbed 4% to R38 billion in the 12 months through June from R36.6 billion a year earlier.
The group's strategy of disciplined resource allocation has continued to drive shareholder value, while its strong customer-facing businesses have capitalised on growth opportunities across various markets, sectors, and segments.
Despite competitive pressures and higher interest rates, FirstRand focused on capturing quality risk business and satisfying customer needs.
Retail advances grew by 6% at FNB and WesBank, while FNB's commercial segment and RMB saw advances growth of 12% and 11%, respectively. FNB also increased SME lending by 18%, making it South Africa's largest lender to SMEs.
In the UK, advances growth was muted at 1%, reflecting a challenging environment.
FNB remained the largest custodian of retail and commercial deposits in South Africa, with strong growth in deposits and transactional balances across the portfolio. This balance sheet strength is attributed to the group's financial resource management strategy.
Non-interest revenue (NIR) grew by 6%, with FNB's NIR increasing by 5%, driven by customer growth, higher activity levels, and transactional volumes.
FNB also reduced fees for low-value real-time payments, resulting in a 34% increase in payment volumes. Insurance activities and RMB's private equity and knowledge-based fee income also contributed to NIR growth.
The group's credit performance exceeded expectations, with a credit loss ratio of 81 bps, reflecting its cautious approach to new business. Operating expenses were tightly managed, particularly at FNB, with a 1% cost increase, offset by ongoing investment at RMB.
Looking ahead, Vilakazi noted that challenging macroeconomic conditions are expected to persist. While commercial and corporate advances growth in South Africa is likely to exceed that of the past year, retail growth will remain subdued until inflation and interest rates ease.
NIR growth is expected to rebound as fee income recovers, and private equity and insurance income continue to perform well. The credit loss ratio is anticipated to rise but stay within target levels.
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