FirstRand, SA’s most valuable banking group by market cap, says its operational and financial performance for the six months to end-December is trending in line with previous guidance despite a challenging macroeconomic environment.
In a voluntary statement released on Tuesday, the company said the SA economy, as well as that of its broader African jurisdictions and the UK had remained largely as expected.
However, the strengthening of the rand to levels higher than expected was likely to affect foreign exchange earnings from its operations outside SA, it said.
The group’s SA franchises are expected to show greater momentum in absolute advances growth in the year, although this was weighted towards the second half. New business origination is expected to continue tilting towards commercial and corporate, which is written at comparatively lower margins. As a result, net interest margins would remain under pressure, it said.
The company said it expected the SA repo rate to be 7% by June 2025, which would negatively affect net interest income growth, It could be countered by ongoing healthy growth in the deposit franchise, it said.
Despite weaker-than-expected trading income, which had affected noninterest revenue growth in the first half, the group said some improvement in the area was expected, while insurance income continued to trend up strongly.
FirstRand’s credit performance was better than expected, particularly in the SA retail books, where the credit loss ratio was showing an improving trend.
The commercial credit loss ratio had ticked up in line with expectations but remained below the through-the-cycle range. Corporate credit continued to be more benign than expected.
Operating expenses growth is trending slightly better than guided.
The group also announced that it lodged an application for appeal to the UK Supreme Court regarding the recent judgment from the UK Court of Appeal on motor commission cases. The group said the accounting provision of £127.4m raised as at June 30 remained appropriate.
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