FirstRand, Africa’s largest lender by value, anticipates a decline in its normalized earnings for the year ending June 30, 2026, due to a substantial provision related to a UK motor finance commission redress scheme. The total provision for this matter is projected to reach £750 million ($1.02 billion), with an additional pre-tax accounting charge of £510 million ($693 million) recognized during the financial year. This provision is expected to reduce reported profitability, with normalized earnings forecast to decrease by 4% to 9%, and return on equity slightly below the group’s target range.
Despite the significant UK charge, FirstRand's underlying businesses are performing solidly. Excluding the additional UK charge, business performance aligned with expectations, supporting previously issued guidance for normalized earnings growth and return on equity across its core markets. Balance-sheet growth strengthened in the second half of the year, driven by increased lending activity in South Africa and other African regions. Net interest income also saw improvement, benefiting from a robust deposit base and effective asset-liability management, although margins in the UK remained pressured by intense competition for customer deposits.
FirstRand reported strong non-interest revenue, with contributions from trading, fair-value income, and knowledge-based fees from Rand Merchant Bank. FNB's fee and commission income remained resilient, and private-equity investments supported earnings. However, operating expenses are expected to exceed previous guidance due to costs associated with integrating the HSBC client franchise, investments in African platform projects, and staff offshoring initiatives at Aldermore in the UK. The group also announced its intention to exit its UK operations, with the process expected to be largely completed within the next 12 months, pending regulatory approvals.
Performance in South Africa and the rest of Africa largely compensated for the weaker UK earnings. FNB’s South African operations delivered solid revenue growth, controlled costs, and improved credit quality. Rand Merchant Bank benefited from stronger lending activity and improved market conditions, while WesBank maintained strong growth in vehicle finance. FirstRand confirmed its robust capital position, with capital ratios above targeted levels, and plans to pay a dividend based on earnings before the post-tax impact of the UK motor commission provision.
