By Nqobile Dludla
JOHANNESBURG (Reuters) -South Africa’s FirstRand Ltd on Thursday forecast marginally higher second-half earnings than the 10% growth it reported in the first half, but net interest income (NII) is seen slightly weaker on declining interest rates.
During the first half ended December 2024, global economic growth and inflation continued to moderate and central banks implemented interest-rate cutting cycles, providing some relief to households.
The bank’s normalised earnings rose to 20.9 billion rand ($1.14 billion) in the period, helped by topline growth.
“We expect balance sheet growth to remain healthy, driven by similar advances and deposits growth in the second half compared to the first six months,” Group CEO Mary Vilakazi told investors, citing improving credit performance and good cost management.
“However, NII growth is expected to be slightly weaker as the endowment impact from the current rate cutting cycle continues to fully materialize,” she added.
FirstRand, which also operates across certain markets in sub-Saharan Africa and the UK, said while retail credit impairments are elevated, they have peaked and are now trending down faster than initially anticipated.
The group’s credit loss ratio – a measure of bad loans as a percentage of total loans – at 84 basis points (bps) is at the bottom of the group’s range of 80 bps to 110 bps.
Net income after cost of capital (NIACC) increased 12% to 6.2 billion rand, while overall group NII – the difference between what they earn on loans and pay out for deposits- increased 4%, driven by core lending advances growth of 7% and continued deposit growth of 8%.
FirstRand said the outcome of the U.K. Supreme Court hearing and the Financial Conduct Authority’s (FCA) update on a motor finance industry probe may give it greater insights, particularly with regard to potential remedy scenarios.
“At that point the group will revisit the need to raise a further provision for the year to June 2025,” it said.
The lender has set aside some 3 billion rand to cover the potential cost of the FCA’s probe.
($1 = 18.3016 rand)
(Reporting by Nqobile Dludla; Editing by Himani Sarkar, Kim Coghill and Chizu Nomiyama )
