FNB feels the pressure as it pushes customers towards ‘premium’
Lender FNB says it has lost consumer clients over the six months ending December 2019 – largely due to upselling them to more premium products and pressure from competitors.
FNB represents the FirstRand’s activities in the retail and commercial segments in South Africa. The bank reported 4% growth in pre-tax profits to R10.7 billion, while its cost-to-income ratio improved to 50.3%, it said.
Profit before tax was more muted in the retail segment, growing 3% to R7.48 billion (2018: R7.30 billion), with the balance coming from commercial (+9%) and rest of Africa.
“Overall, FNB’s South African business experienced a slowdown in some of its key growth drivers as the prevailing macroeconomic environment placed further pressure on customers.” the bank said.
FNB CEO, Jacques Celliers said the lift in profit before tax is underpinned by the group’s focus on attracting main banked clients coupled with “ensuring that clients have access to solutions for their needs”.
Celliers highlighted the strong performance from both rest of Africa and commercial while attributing the subdued retail performance to the deteriorating financial position among consumers as a result of the poor macroeconomic circumstances.
Client crunch
According to the bank, while its overall client base increased 1% year on year, this was mainly due to acquisitions in the premium (+15%) and commercial banking space (+8%), with its consumer clients seeing a 3% decline.
This decline, it said, was due to competitive pressures, as well as some migration from the base to the premium segment.
“Attrition of transactional accounts in the consumer segment continued, mainly due to conservative credit risk appetite, ongoing upward migration to premium, and competitive activity,” the bank said.
More than half the clients acquired in the premium segment were from upward migration, it said – however, it provided no figures to quantify the impact.
Reflecting the pressures in the consumer segment, deposit growth was muted at only 2% higher, while advances were down in the card business (-5%) and other retail (-3%). The biggest growth was seen in personal loans (7%).
The premium segment, meanwhile, was significantly higher, with deposit growth up 16%, and all advances up, led by personal loans (+30%) and the card business (+28%).
Digital banking
FNB also reported significant growth in its digital banking platforms, with active mobile banking app user penetration sitting at 50% of its active customer base as at December 2019, up from 28% in December 2016.
Similarly, active online user penetration is now at 42% of its active customer base – up from 34% in 2016.
The group is seeing 51.2 million monthly logins via mobile, and 55.5 million via the banking app. It sees 13.4 million logins each month via online banking.
“Over the period, digital logins were up 14% and logins across all digital interfaces reached a record high 120.1 million in December 2019. Financial transactions on the FNB App continued to grow by 37% for the period, with increased uptake of money management functionality via our App and other digital platforms,” FNB said.
The bank said that its free ‘wallet’ account (FNB Easy Zero) grew its active base by 16% over the period, and provides an opportunity to upsell customers to its consumer banking products.
Future growth
The bank said that it continues to grow its penetration into insurance and investment activities, and the last six months “has seen excellent growth in both areas”.
Insurance saw strong sales across the portfolio with standalone life products and sales in the MotoVantage environment performing strongly, it said.
The Wealth and Investments efforts saw a lift in revenue, and it is very pleasing to see that distribution to bank customers is gaining traction.
Both insurance and investment areas are key pillars for future growth, it said.
Read: FirstRand warns it is not immune to serious macroeconomic challenges facing South Africa
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