FirstRand, SA’s biggest bank by market value, posted an 11% rise in annual profit, benefiting from rising interest rates even as its bad loans rose.
The lender, which owns FNB, vehicle financier WesBank and Rand Merchant Bank, said on Thursday that its net interest income rose 16% in the year ended June from a year ago as customer deposits and advances rose.
Noninterest revenue rose 11%, supported by 8% growth in fee and commission income, 16% growth in trading and other fair value income, and a 26% increase in insurance income.
Its headline earnings per share rose to R6.49 from R5.84 a year ago.
“FirstRand delivered a solid set of results, largely in line with the market's expectations,” said Rowan Williams, director of Nitrogen Fund Managers, citing a return on equity (ROE), which remains the highest among its banking peers.
ROE, a metric that measures how well a company is using its shareholders’ equity to generate profits, was at 21.2% during the reporting period vs 20.6% the year before.
“Profit growth was well balanced across the key divisions of FNB, RMB, WesBank and the UK operations. One significant negative was a R498m charge related to the restructuring of Ghanaian sovereign debt exposure,” Williams said.
The top five private SA banks — among the continent's biggest — are generally considered well-capitalised, conservative in lending and help drive an otherwise ailing economy.
But inflation, high interest rates, regular power blackouts and logistical bottlenecks are taking a toll on its most sensitive retail and small business customers, leading to defaults.
FirstRand posted a credit loss ratio (CLR) — a measure of bad loans vs total loans — of 78 basis points, up from 56 basis points last year.
The share price fell 3% to R68.96 at midday on the JSE, trimming the year-to-gains to 11%, according to infront data.
Williams said the outlook for the year ahead appears “solid if not too exciting” for the bank with credit losses expected to peak next year, following the sharp increase in interest rates.
With Reuters
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