FirstRand, Africa’s biggest bank by market value, expects to achieve “peak earnings” ahead of its original target after reaching its highest-ever results for a half-year period through June.
“The group previously indicated that it expected to reach peak earnings during the 2023 financial year,” the Johannesburg-based lender said in a statement on Thursday. “However, the speed, extent and breadth of the rebound has exceeded expectations.”
While much of its performance can be attributed to a low-base effect on the back of last year’s pandemic profit decline, the lender grew pre-provision operating profit by 5% in the 12 months ending in June, it said.
Profit after tax grew 48% to 28.1 billion rand ($1.9 billion) as South Africa’s economy shows signs of recovery. The firm will distribute a dividend for the period representing a 56% payout, it said.
FirstRand and other local banks are paying dividends and reporting better profits as their reserves set aside to cover souring loans fall, after bad debts resulting from the pandemic were less severe than expected. Rivals including Absa Group Ltd. are seeking opportunities to drive growth but have warned that further surges in coronavirus infections and disruptions in power supply remain constraints for businesses in South Africa.
FirstRand on Wednesday announced that it was joining peer Nedbank Group Ltd. in halting its funding on new coal-fired power stations with immediate effect as banks pursue greener technologies.
While FirstRand’s growth was underpinned by the underlying performances from units including FNB and RMB, its vehicle financing arm WesBank experienced a drop in pre-provision operating profit due to lower advances and revenue, and higher costs.
FirstRand has underperformed the FTSE/JSE All Share Banks Index with shares up 21% this year compared to 24.5% increase in the six-member index.
© 2021 Bloomberg L.P.