FirstRand’s R4.7bn Optasia stake ‘credit positive’

Ratings agency Moody’s says FirstRand’s purchase of a 20% stake in AI-powered fintech multinational Optasia for about R4.7bn was credit positive for Africa’s most valuable banking group.

The agency said that was because the transaction, announced before Optasia’s listing on the JSE last week in the bourse’s biggest listing of the year, could leverage Optasia’s strong growth potential and increase its capabilities to lend to underbanked customers.

Optasia closed its first week of trading on the JSE valued at R24.5bn on the bourse.

“Beyond the direct impact on FirstRand’s financials, the transaction will benefit FirstRand’s retail and business bank (First National Bank), which could leverage Optasia’s platform to accelerate its own strategy to grow its activities in sectors that are currently underrepresented, namely entry-level client cohorts and markets in its broader Africa portfolio,” the agency said.

“It can therefore support FirstRand’s geographic expansion and new product development across both lending and treasury/funding solutions.”

FirstRand’s investment in Optasia comes while the lender is on the up. The Dubai-based company, founded in 2012 by Nigerian-born Lebanese entrepreneur Bassim Haidar, reported a bottom-line profit for the 2024 full year of $36.2m and projected 40%-plus growth for the 2025 and 2026 financial years.

“Optasia provides microfinancing and airtime credit solutions, enabled through its AI platform and credit decisioning algorithms. These provide real-time processing and analysis of customer data points, assess a customer’s ability and willingness to repay, and generate a financing decision,” Moody’s said.

“Optasia operates through a network of 49 distribution partners (mainly mobile network operators and mobile wallet operators) and 13 financial institutions (principally banks) across 38 countries. With about 121-million monthly active users, Optasia processes over 32-million loan transactions per day,” the agency said.

FirstRand under Mary Vilakazi has not been shy in spending money to grow its scale. The group, worth R443bn on the JSE last year, moved to grow its corporate and investment banking proposition, taking transfer of the clients, banking assets and liabilities and employees of HSBC’s SA branch.

The banking major is also on the verge of acquiring the wealth and retail banking business of Standard Chartered Bank Zambia.

Its rival Absa bought Standard Chartered’s Ugandan wealth and retail businesses.

SA banks have looked at upping their AI and fintech capabilities. Nedbank in August moved to buy a 100% stake in fintech iKhokha for R1.65bn as part of its strategy to deepen its support for small and medium-sized enterprises through digital innovation and inclusive financial services.

Fintech groups, which have over the past decade kept traditional banks on their toes by bringing new SME lending propositions to market, are also set for a boost with the Reserve Bank poised to open up the national payment system, which has long been the exclusive terrain of established lenders, to new players.