• FirstRand is an integrated financial services businesse, consisting of FNB, RMB, WesBank, Aldermore (in the UK) and Ashburton Investments. The company produced a resilient set of interim results in the face of a major slowdown in the local economy.

  • Headline earnings increased by 5%, with dividends per share increasing with a like amount of 5%, whilst ROE came in with a normalised 21.2% return. This reflects the testimony and the ability of management’s skill to produce sustainable and superior returns relative to its peers over a prolonged period. NAV growth was up by 9%.

  • Management believe that the ROE levels are sustainable between 18% and 22%, but believe that the Coronavirus will pose challenges to growth in 2020.

  • There was a divergence of contributions from the various operations, with FNB being the largest, with group contribution of around 30% (up 5%) driven by growth in premium customers (up 15%), aided by the e-Wallets rewards programme, whilst commercial clients rose by 8%.

  • The RMB contribution increased by 6%, mainly due to cross border activities in sub-Saharan Africa, whilst corporate structured deal flow was also a positive aspect.

  • From the Rest of Africa division pre-tax profits were up by 5% mainly on the corporate business.

  • Challenges persist in the Aldermore banking operation, with PBT declining by 8%. The UK trading environment remains volatile but the business has a strong secured mortgage book.

  • From a group perspective, FNB has not pursued aggressive lending at the lower end of the market spectrum (unlike many of its peers), which should be a positive in terms of a lower risk profile. Non-performing loans, however, are likely to remain elevated for the remainder of 2020.

  • Competition in the banking sector is likely to increase due to the entry of Tyme Bank and Bank Zero. Neither are really stepping into the turf of FNB. The new Discovery Bank, however, presents a challenge, but this should take some time before it has built up critical mass, giving FNB a fair amount of breathing space for now..