FirstRand has announced a 10% increase in its annual earnings, with all major domestic operations contributing to this growth. The financial services group reported headline earnings of R41.88 billion for the year ending in June, compared to R38.05 billion the previous year, equating to 748.8 cents per share.
The company declared a final dividend of 247 cents per share, bringing the total annual dividend to 466 cents, which represents a 12% year-on-year increase. Despite facing macroeconomic challenges in its operating regions, FirstRand managed to deliver a strong operational performance.
Financial Impact
This robust performance allowed the group to absorb a further pre-tax accounting provision of R2.7 billion related to the previously disclosed UK motor commission issue. This was a reduction from the R3 billion provision made in the prior year. Additionally, FirstRand incurred R253 million in legal and professional fees concerning this matter, resulting in a total pre-tax impact of R2.96 billion for the year.
Even with these provisions, normalised earnings rose by 10% to R41.8 billion, and the group achieved a normalised return on equity of 20.2%, well within its stated target range of 18% to 22%. The diversified nature of its portfolio played a crucial role in this operational success, with a gradual recovery in retail and strong performance from WesBank helping to offset early credit strains in FNB’s commercial portfolio.
Performance Across Regions
The RMB division saw healthy profit growth, primarily driven by its private equity and investment banking operations. However, contributions from the broader Africa portfolio were more subdued, with FNB recording a 5% increase in profit before tax (8% in constant currency) while RMB experienced a 2% decline, although it grew by 2% when adjusted for constant currency.
The UK operations delivered a 2% growth in underlying profit before tax in Sterling. The Centre, which includes group treasury and support functions, reported normalised earnings of R4.6 billion, marking a 29% increase from the previous year.
Overall, FirstRand’s net interest income rose by 6%, supported by a 6% growth in core lending advances, an 8% increase in customer deposits, and a 14% boost from capital endowment benefits. The group’s credit loss ratio stood at 85 basis points, at the lower end of its through-the-cycle range of 80 to 110 basis points.
Future Outlook
FirstRand remains optimistic about its underlying operational performance, expecting it to improve beyond the 2025 financial year across various income statement lines. For the 2026 financial year, the group anticipates normalised earnings growth to trend into the high mid-teens, significantly exceeding its long-term target range of nominal GDP plus 0% to 3%. The normalised return on equity is also expected to approach the upper end of the 18% to 22% range.
Despite some global uncertainties, such as shifts in US trade policy, FirstRand believes the direct GDP impact from higher tariffs on broader Africa will be minimal, given limited exports to the US and strong trade links with China. The group sees several positive signals, including gradual progress on structural reforms and a shift towards lower inflation levels, which should support future growth.