Firstrand Earnings Retreat As UK Exit Weighs Arabian Post

2026-09-11 02:16:41

(MENAFN- The Arabian Post) clearfix">FirstRand's full-year earnings fell as provisions tied to its UK motor finance business offset strong growth across its core operations in South Africa and the rest of Africa.

The financial services group said earnings on its previously reported basis declined 5% to R39.7 billion for the year ended June 30, 2026, after it booked an additional provision linked to potential customer redress in Britain. Return on equity on that basis was 18.3%, within the group's stated target range.

FirstRand recognised an additional pre-tax provision of £518.4 million, or about R11.3 billion, for potential redress arising from the UK Financial Conduct Authority's review of historical motor finance commission arrangements. It also recorded £29.4 million, or R692 million, in associated costs.

<p>The group has decided to exit the UK consumer market and has classified Aldermore Group, as a discontinued operation. The classification required FirstRand to reassess goodwill attached to the business, resulting in a R3.7 billion impairment that affected IFRS earnings but was excluded from headline and normalised earnings.</p><p>Chief executive Mary Vilakazi said the underlying performance remained strong, driven by double-digit profit growth at FNB and Rand Merchant Bank. Excluding the additional UK motor commission provision and related costs, earnings increased 16% and return on equity reached 21.5%, at the upper end of its previous target range.</p><p>Normalised earnings from continuing operations rose 13% to R44.46 billion, while return on equity improved to 24.9% from 24.3%. FirstRand said this measure better reflects the earnings profile of the group after its planned UK withdrawal.</p>See also  Grindstone establishes R500m fund for African startups <p>Total normalised earnings, after adjusting both 2025 and 2026 for the motor finance provision and related costs, increased 10% to R48.41 billion. Normalised earnings per share rose 10% to 867.4 cents, while basic headline earnings per share for the total group declined 5% to 712.9 cents.</p><p>Despite the earnings contraction on the previously reported basis, FirstRand declared a record ordinary dividend of 539 cents per share, up 16% from 466 cents. The final dividend rose 13% to 280 cents, following an interim payout of 259 cents.</p><p>FirstRand also lifted its medium-term return expectations, setting a through-the-cycle return-on-equity range of 19% to 23%, compared with 18% to 22% previously, as management reallocates capital towards higher-returning businesses in South Africa and broader Africa. For the 2027 financial year, the group expects normalised earnings from continuing operations to grow in the high single digits to low double digits, while net interest income is forecast to increase at a high single-digit rate.</p><p>The continuing businesses expanded their balance sheet during the year. Net advances rose 11% to R1.49 trillion and deposits and debt funding increased 8% to R1.87 trillion. The credit loss ratio eased to 1.05% from 1.08%, reflecting broadly resilient asset quality despite a difficult operating backdrop.</p><p>Vilakazi said the strategic reset following the UK withdrawal would sharpen FirstRand's focus on its African franchises and capital allocation. The group said the exit process is intended to remove the earnings volatility associated with the motor commission matter and provide a clearer base for measuring future growth and returns.</p><p>The group's capital position remained strong, with its common equity tier one ratio at 13.9%, above its target range of 11.5% to 12.5%. FirstRand said its capital generation allowed it to maintain dividend cover at 1.6 times despite the charge.</p>See also  Alan buys Tanel to enter African health market <p>Aldermore's own statutory profit before tax fell sharply to £51.2 million from £193.5 million a year earlier, reflecting motor finance redress charges, restructuring expenses and costs connected with the sale. Underlying profit before tax fell 6% to £238.9 million.</p><p>Customer lending at Aldermore nevertheless increased during the full reporting period 13% to £18.8 billion and deposits rose 12% to £19.1 billion. Its net interest margin narrowed to 3.46% from 3.78%, while the common equity tier one ratio stood at 13.6%.</p><div class='code-block code-block-1'><h2></h2></div>

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Firstrand Earnings Retreat As UK Exit Weighs Arabian Post

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