South Africa’s most valuable bank kissing the UK goodbye after R17 billion hit

FirstRand profit fell for the first time in six years after a £807 million (R16.8 billion to R17.7 billion) provision for UK clients’ claims over missold car loans at its British motor-finance unit countered growth from loans and fee income. 

Earnings declined 5% to R39.7 billion in the year to June, the Johannesburg-based lender said Thursday, exceeding the estimate of R39.3 billion from analysts surveyed by Bloomberg. 

FirstRand also declared a final dividend of R2.80 per share, bringing the total payout to R5.39 per share, surpassing the R5.06 per share median estimate from analysts surveyed by Bloomberg. 

FirstRand in April more than tripled the provision set aside for Aldermore, its UK unit comprising a specialist lender and a vehicle-finance business, after the UK Financial Conduct Authority finalised its redress plan for the saga.

It has chosen to sell the business and exit the European market, and disclosed it as a discontinued operation for the year.

In May, it hired Bank of America Corp. and its own investment-banking arm, RMB, as advisers to help with the divestiture, with SkyNews reporting that CVC Capital and Lloyds are likely to have made an offer for the unit.

FirstRand expects non-binding offers for the business by the end of this month, after which due diligence processes will start.

Final binding offers are then expected to be submitted by the end of December. 

Collectively, the UK motor-finance industry industry has to pay about £9.1 billion to consumers, with 12.1 million loans eligible.  

Non-interest revenue climbed 12% thanks to a strong growth in trading and fair-value income, gains in fees and commissions and as further private-equity realisations lifted earnings. 

Net interest income grew 8%, driven by improved advances growth across its lending books in South Africa, the rest of the continent, and the UK, as well as gains in deposit growth. 

After classifying Aldermore as a discontinued operation and presenting it separately, FirstRand’s normalised earnings from continuing operations climbed 13% to R44.5 billion, it said.