FirstRand expects to deliver full-year earnings growth in the low double digits to mid-teens, which is also above its long-term target range, the group said.
This was an improvement from its previous guidance, issued in March, of earnings growth above its long-term stated target range of nominal GDP plus 0%-3%, as second-half absolute earnings would be marginally higher than the first half, it said in a statement late on Wednesday.
The return on equity (ROE) remains within the stated target range of 18%-22%.
The macroeconomic environments in SA and the broader Africa jurisdictions where the group operates and in the UK remained largely as expected, though political and macroeconomic uncertainty weighed on business and household confidence.
In SA, system growth remained muted with lower-than-expected levels of fixed investment despite the economic reforms under way. Inflation continued to moderate and interest rates declined, though the cutting cycle was shallower and later than initially predicted, it said.
The group said overall balance sheet growth in the year to end-June remained healthy with absolute advances and deposits increasing broadly in line with guidance.
The SA lending franchises remained resilient. Corporate origination year on year showed good momentum, though the strategy to distribute lower margin assets means year-on-year absolute corporate advances growth will be lower.
Commercial advances continued to grow across the portfolio, given targeted lending strategies, including focused SME lending, albeit slightly slower than in the first half. Growth was supported by the acquisition of new customers.
In retail, home loan advance growth was relatively muted, given household confidence remains subdued, however, retail vehicle and asset finance continued to originate strongly given WesBank’s well established relationships with dealers and original equipment manufacturers.
Advances growth in the broader Africa portfolio is generally trending higher, and in the UK operations advances growth trended ahead of guidance, with healthier than expected production still anchored to property finance where margins have remained resilient.
Despite the effect of the rate-cutting cycle on net endowment and the overall origination tilt to comparatively lower margin corporate and commercial advances, growth in net interest income will be slightly better than the group guided in March.
The group said trading income had remained weak, but this was offset by healthy private equity realisations. Insurance income continued to show good momentum in operational terms, but absolute year-on-year growth was affected by the impending sale of MotoVantage.
The group’s core credit performance was still trending broadly in line with guidance, it said.
The group’s guidance does not include any adjustment to the provision raised for the UK motor commission matter. This relates to its Aldermore business in the UK and commissions in its motor finance business.
FirstRand is awaiting a judgment from the UK Supreme Court, which is expected by the end of July and will be followed by an announcement by the UK Financial Conduct Authority (FCA) on the proposed redress scheme.
The group said there had been some constructive developments, particularly with regards to statements made by both the UK FCA and UK Financial Ombudsman Service (FOS).
With Hilary Joffe
mackenziej@arena.africa
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