By Adelaide Changole, Bloomberg.
FirstRand’s profit rose 10% as South Africa’s biggest lender by market value boosted loans in its home market.
Net income increased to R20.9 billion ($1.14 billion) in the six months through December and the lender declared an interim dividend of 2.19 rand per share, it said in a statement Thursday.
Net interest income grew 4% amid declining South African interest rates that FirstRand estimates the central bank will reduce by a further 50 basis points to 7% this year. A hedging strategy that trims the cost of the foregone interest charges — together with a 9% increase in deposits — partially countered the effect of lower borrowing costs.
FirstRand is still sitting on excess funds, with its tier-one capital ratio at 14.5%. It has exceeded the board-approved range of 11% to 12% since 2019. Its return on equity at 20.8% is also at the top of its guided range.
Meanwhile, FirstRand kept its £127.4 million ($164 million) provision to cover possible compensation linked to UK regulators’ probe of its British auto-lending business, MotoNovo.
The UK’s Financial Conduct Authority is reviewing historical motor-finance commission arrangements to establish whether companies sold the loans in a way that treated customers unfairly.
FirstRand says it focused on appealing an adverse UK Court of Appeal ruling that motor-finance brokers must fully inform customers about commissions when taking out car loans.