Africa-Press – South-Africa. South Africa’s most valuable bank, FirstRand, is forking out a record R26.2 billion to shareholders for its 2022 year, getting a boost from higher interest rates and easing pandemic conditions, while also welcoming improved corporate sentiment and some progress in the government’s structural reform efforts.
FirstRand’s profits rose 23% to R34.55 billion in its year to end-June, with the lender upping its ordinary dividend 30% to R3.42 per share, while also paying out a R1.25 via a special dividend.
FirstRand’s earnings remain tilted towards SA and are mainly generated by its large lending and transactional franchises, something which the group says has “resulted in deep and loyal customer bases.”
FNB’s overall 13% deposit growth was led by commercial clients with a rise of 18%, also lending more to them relative to retail customers, at 11% growth vs 6%. FNB, which contributed 60% to group earnings, grew normalised profits by 22% to R19.6 billion.
“With confidence slowly improving, credit demand in the corporate sector increased,” the firm said.
“Signs of positive structural reform developments included the liberalisation of energy production, confirmed private sector involvement in Transnet and the ports, and the successful completion of the 5G spectrum auction in March 2022.”
Real economic activity continued to slow – domestic household consumption in particular was impacted by the higher headline inflation.
Despite the slowdown in overall activity, household data indicates that income levels among the employed have improved, following the deep contractions experienced in 2020, and retail confidence is returning, the banking group said. This, combined with a reduction in precautionary savings rates, underpinned household credit growth and provides some support to house prices.
FirstRand’s baseline case for SA’s GDP growth is for 2% in 2022, which is in line with the forecast given by the Reserve Bank at its July meeting, but lower than Standard Bank’s 2.34% baseline given at its half-year results. Absa also expects 2%, a forecast given during its half-year results to end-June.
“In South Africa the group expects the current credit cycle to continue to gather momentum, although commodity-induced cyclical tailwinds are expected to fade. As inflation subsides and economic reforms progress, these trends will support accelerated advances growth across the domestic retail, commercial and corporate portfolios,” FirstRand said.
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