Africa-Press – South-Africa. FirstRand is South Africa’s largest bank by market capitalisation, with a near 30 year history rooted in the merger between Rand Merchant Bank (RMB), First National Bank (FNB) and Momentum.
With a market cap of R407 billion, FirstRand Limited leads all other banks on the JSE, including Capitec’s R392 billion and Standard Bank’s R371 billion.
FirstRand was founded in 1998 via a merger between RMB and the financial service industries of Anglo American, which included FNB and Momentum.
RMB had been founded twenty years earlier and had changed its name from Rand Consolidated Investments (RCI) to RMB following a merger with a Johann Rupert-controlled company.
The bank primarily focused on Corporate and Investment Banking and was led by Executive Chairman Laurie Dippenaar.
RMB had expanded its influence and, alongside Anglo American, purchased the local banking operations interests of Barclays in 1987, which left the country due to a disinvestment campaign over apartheid.
Meanwhile, Momentum was fully controlled by Anglo-American after it was purchased in 1986 as part of the miner’s diversification efforts.
By the 1990s, the mining giant had done a one-eighty and started selling its financial services businesses as it looked to focus on its core mining activities.
In 1998, Anglo American and RMB merged their financial service offerings to create FirstRand with Dippenaar serving as the inaugral CEO.
This would create a financial juggernaut, with FNB looking after retail banking, RMB focusing on investment banking, and Momentum prioritising insurance.
Anglo American remained a major shareholder in FirstRand after the merger, but it would gradually reduce its stake and has now completely exited the business.
Expansion and breakup
RMB co-founder and FirstRand’s first CEO Laurie Dippenaar
The FirstRand group operations were not limited to its three largest businesses, with motor finance company WesBank already being part of FNB before the 1998 merger.
FirstRand added another motor finance business to its portfolio in 2006, purchasing Wales-based MotoNovo finance.
MotoNovo would expand from a small regional player in South Wales, focusing on a footprint covering the whole of the UK mainland and Northern Ireland.
FirstRand also purchased a majority stake in the personal loan provider DirectAxis in 2001, and acquired the remaning minority stake in 2015.
FNB would also expand into several other markets, including Lesotho, Mozambique, Botswana, Tanzania, Ghana and more.
Although FirstRand saw significant expansion in its first decade of existence, it decided to sell Momentum to Metropolitan.
The group said the unbundling Momentum would help unlock value to shareholders and simplify its regulatory oversight. The deal saw Metropolitan issue new ordinary shares to FirstRand in 2010.
Momentum and Metropolitan would then merge into MMI Holdings, combining the former’s upper-income focus with the latter’s emerging market expertise.
The Momentum Metropolitan Holdings was renamed to the Momentum Group in 2024. The JSE-listed company now has a market cap of R45 billion.
After selling Momentum, FirstRand noted that there was a significant gap in its standalone asset management capabilities.
In response, the group purchased the Jersey-based Ashburton Investments in 2013 and opened a local franchise. Ashburton has grown its assets under management since its launch to R140 billion.
FirstRand continued its international expansion and acquired the UK-based specialist lender, Aldermore, for roughly £1.1 billion (R20 billion) in 2018. MotoNovo was then integrated into Aldermore.
Recent performance and future in the UK
Looking at its recent financial performance, FirstRand is expecting a low-double-digit to early teen rise for its full-year earnings from the R38 billion seen in the 2024 financial year.
This comes despite political and macroeconomic uncertainty weighing on business and household confidence.
South Africa saw slower-than-expected fixed investment despite the economic reforms underway.
The group’s ROE remains within the stated target range of 19% to 22%. However, the guidance does not adjust the provision raised for a UK motor commission matter.
FirstRand is also awaiting a judgment from the UK Supreme Court over historic practices in its motor finance business.
Several lenders, including FirstRand and Investec, are accused of telling car dealers to sell their loans to motorists without their consent.
For FirstRand, the outcome of the Supreme Court ruling could determine the future of the company’s business in the UK, according to Chief Executive Officer Mary Vilakazi.
“It would have an implication of how we think about lending and whether we can actually still get appropriate returns,” Vilakazi said in an interview with Bloomberg Television on March 6.
“If sanity prevails, I think we’ll work through these things and I think we can get to a better landing. But if not, I suppose questions have to be asked about our ability to generate returns in the long run.”
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