South African banking giant plans to exit the UK

FirstRand has informed shareholders that it plans to sell its UK-based Aldermore business amid what the banking giant describes as a “disproportionate and unfair” redress scheme.

FirstRand previously warned that this was the route it would take should the scheme’s requirements severely undermine the viability of its UK business.

This matter arose from a dispute surrounding transparency concerns in how dealers earn commissions from lenders, including JSE-listed banking group FirstRand, which owns FNB, RMB and Wesbank.

FirstRand also owns Aldermore, a UK specialist lender and savings bank, as well as MotoNovo, which forms part of the Aldermore Group and is one of the UK’s fastest-growing independent vehicle finance companies.

In October 2024, the UK Court of Appeal found that FirstRand and other lenders unlawfully arranged motor finance deals without properly disclosing commissions paid to car dealers. The lenders were also accused of not obtaining fully informed consent from customers.

FirstRand appealed this decision to the UK Supreme Court, which largely overturned key parts of the Court of Appeal’s ruling.

However, it also upheld one “unfair relationship” ruling, finding that a lender had acted unfairly because of the high, undisclosed commission paid to the broker and the failure to disclose a contractual tie.

Therefore, in October 2025, the UK’s financial regulator, the Financial Conduct Authority (FCA), proposed a redress scheme for commission practices in the UK motor finance industry.

The regulator said a compensation scheme is the best way to ensure consumers who have lost out receive fair compensation, while securing a well-functioning and competitive motor finance market.

The FCA took various factors into account in drafting the scheme, including input from FirstRand’s legal teams and economic specialists.

However, in an update released to shareholders on Tuesday, 7 April, FirstRand said the latest amendments to the scheme have resulted in a financial impact above the group’s expectations.

‘Disproportionate and unfair’

FirstRand claimed that the final redress scheme proposed by the FCA is “disproportionate and unfair”, saying there are material flaws.

According to FirstRand, one of these flaws is that the FCA included more customer contracts in the payout scheme than originally expected.

The banking giant also claimed that the way the FCA calculated some of these payouts is “unsubstantiated”.

Given the final redress scheme’s terms, FirstRand has had to raise an additional provision of £510 million (around R11.9 billion), bringing total provisions raised to £750 million (around R17.7 billion).

“This total provision compares to the £275 million of profits the group extracted from motor finance activities from over a decade of motor lending in the UK,” FirstRand pointed out.

“The group has done everything in its power to protect shareholders from a redress scheme that it considers deeply flawed in its construction and which goes against two of the FCA’s original guiding principles.”

FirstRand said it has previously told UK regulators that, should the redress scheme result in this level of provisioning, it would be forced to consider whether it can continue to sustainably participate in motor finance lending in the UK market.

The group said that, given the provision amount now facing MotoNovo, the business will require further recapitalisation from FirstRand’s existing available resources in its UK operations. 

“This may mean financial resources available for allocation to motor finance in the UK will be severely constrained, resulting in capital not being available to fund growth in the MotoNovo business,” it said.

“This will have a negative impact for FirstRand’s excess capital position. However, the capital positions of FirstRand, FirstRand Bank and Aldermore Group remain above their respective targeted capital ratios.”

FirstRand explained that while it believes that Aldermore Bank is a strong business, “the UK as a consumer finance jurisdiction will not deliver the returns the group requires”.

Therefore, the business case for FirstRand to own and operate a UK consumer finance entity is no longer within the group’s risk appetite.

“Cognisant of protecting shareholder value and ensuring Aldermore’s future success, the group will work with the Aldermore board and respective regulators to facilitate an orderly ownership transition,” it said.

“FirstRand reiterates its view that the FCA scheme significantly and inappropriately diverges from the Supreme Court ruling and therefore the group’s legal rights remain reserved.”