FirstRand (FSR) H2 2024 earnings summary

Executive summary

• Achieved 4% growth in normalised/headline earnings to R38.0bn, with ROE at 20.1%, absorbing a R3.3bn UK motor commission provision; excluding this, earnings grew 10% and ROE reached 21.3%.

• Dividend per share increased 8% to 415 cents, supported by strong capital generation and a payout ratio of 61%.

• Operational outperformance in the second half, with robust results from FNB, RMB, WesBank, and Aldermore, despite challenging macroeconomic conditions.

• Broader Africa and UK operations delivered strong profit growth, with Africa PBT up 23% and UK PBT up 18%.

Financial highlights

• Net interest income grew 10% to R86.1bn, driven by advances and deposit growth, partially offset by ALM strategy impacts.

• Non-interest revenue increased 6%, with fee and commission income up 5% and trading income up 9%.

• Cost-to-income ratio improved to 50.3% (2023: 51.4%), reflecting tight cost control and IFRS 17 adoption; excluding UK provision, further improved.

• Credit loss ratio at 0.81%, at the bottom of the through-the-cycle range, with NPLs at 4.25%.

• Core lending advances grew 6% to R1 598bn; deposits up 8% to R2 003bn.

Outlook and guidance

• Macroeconomic environment expected to remain challenging, with gradual rate cuts anticipated in key markets.

• NII growth to be weaker due to lower margins and rate cuts, but NIR expected to strengthen, supported by private equity and insurance.

• Cost-to-income ratio expected to decline further; earnings and ROE to remain at the upper end of target ranges.

• Credit losses to trend up slightly but remain below the midpoint of the through-the-cycle range.

• Dividend cover maintained at 1.63x, payout ratio 61%.