FirstRand opted for low- and medium-risk customers instead of pursuing high loans growth. This strategy helped the bank avoid a sharp increase in bad loans that has affected some of its competitors.
- The credit loss ratio of FirstRand, which measures bad loans as a percentage of the total book, increased to 78 basis points for the 12 months to June, up from 56 basis points the previous year. However, it remained below the bank’s target range of 80-110 basis points.
- In comparison, rival banks such as Standard Bank Group, Nedbank Group, and Absa Group experienced higher credit loss ratios. Standard Bank Group had 97 basis points, close to the upper end of its target range, while Nedbank Group exceeded its upper target and Absa Group’s ratio stood at 1.27%.
- FirstRand’s CEO, Alan Pullinger, stated that the bank was aware that households and businesses would not quickly recover to pre-pandemic levels. Therefore, they made a deliberate decision to lend money carefully to both the household and business sectors.
- While the credit loss ratio is expected to rise in the coming year, Pullinger believes it will remain within the middle of its target range. The increase will be driven by consumer and business strain due to a weak macroeconomic outlook that dampens recovery.
- FirstRand’s overall impairment charge increased by 55% to R10.9 billion, mainly driven by its South African retail segment and a surge in bad loans in the UK business.
- Despite the challenges, FirstRand’s franchises in other African countries experienced significant growth in pretax profit, demonstrating the bank’s commitment to expanding its presence in the broader African market.