FNB delivers big jump in earnings thanks to unsecured loans and up-selling customers to premium accounts

Banking group FirstRand has published its annual results for the year ended June 2019.

Despite the constrained macroeconomic backdrop and the high earnings base created in the previous year by significant private equity realisations, FirstRand said its portfolio of businesses produced resilient growth in the 2019 financial year.

Headline earnings were 5% higher to R27.9 billion, while basic and diluted headline earnings per share were also 5% better at 497.2 cents per share.

FirstRand pointed to a normalised return on equity (ROE) of 22.8%.

Income before tax was up 8% to R39.97 billion, with profit for the year up 5% to R29.44 billion.

The group declared an ordinary dividend of 291 cents per share.

First National Bank (FNB) continues to be the biggest driver of revenue in the group, making up 63% of the normalised earnings contribution – up from 60% in 2018.

FirstRand-owned insurance company, DirectAxis, which was previously reported under WesBank, has now been moved to the FNB stable, which, FirstRand said, better aligns the businesses and will play into the group’s strategy of cross-selling insurance products.

Including DirectAxis, FNB reported an 11% increase in headline earnings for the year to R17.64 billion, up from R15.87 billion the year before.

Rand Merchant Bank (RMB) and WesBank both saw declines in contributing earnings, with the former down 4% to R7.1 billion and the latter down 2% to R1.808 billion for the year.

Specialist UK bank Aldermore contributed 6% to earnings, with R1.658 billion, however the comparative period in 2018 only reflects three months of earnings.

Group non-interest revenue (NIR) increased 6%, a resilient performance given the lack of private equity realisations compared to the prior year (realisations down 80% year-on-year).

The main drivers were strong fee and commission income growth of 9%, supported by higher volumes across FNB’s digital and electronic channels and ongoing customer growth in the premium and commercial segments, the group said.


According to FirstRand, FNB has continued to see growth through up-selling consumers on its premium products. It has also seen massive growth (+50%) in its personal loan segment, where the bank is targeting customers who have been turned down by other lenders.

Highlights include:

  • Growth in both the premium and consumer segments driven by unsecured lending origination.
  • Writing to credit appetite after risk cuts in previous periods, mainly focused on personal loans.
  • Card growth down year-on-year.
  • The strong growth in premium personal loans and credit card was driven by the upward migration of customers from consumer to premium, and leveraging digital platforms for pre-scored origination based on customer behaviour.
  • Personal loans continue to focus on the displacement of other providers of credit in FNB’s main-banked client base.

Total customer growth was up only 1% year on year, with a 4% decline in consumer banking. However, this was countered by a 17% increase in premium banking clients, and an 11% jump in commercial clients.

The drop in consumer banking was driven largely by conservative credit risk appetite and ongoing upward migration to premium accounts, the group said.


According to FirstRand, given the structural nature of South Africa’s challenges, the group believes that domestic economic activity will remain under pressure for the foreseeable future.

“Weak domestic demand and low income growth will continue to weigh on real GDP growth and core inflation, and the real economy remains constrained by high government indebtedness, inefficiency of large SOEs, and low private sector investment,” it said.

“The country needs urgent economic reform, which should, at a minimum, include energy supply, price stability and policy certainty in key areas such as fiscal consolidation, SOE reform, land reform and mining rights. Without action on these critical issues, the risk of further sovereign rating downgrades remains elevated.”

However, despite these risks, the group said that it remains optimistic that its strategy is paying off and will lead to ongoing growth in earnings and sustainable superior returns to shareholders.

Notably, it said that FNB’s momentum is expected to continue, on the back of customer and volume growth.

Here it is applying cross-sell and up-sell strategies that will deliver higher insurance revenues and good deposit and advances growth.

“RMB’s client franchises are expected to remain resilient and the business has the benefit of an earnings rebase to grow off in the coming financial year. WesBank’s performance is expected to remain subdued given underlying macro constraints, such as low vehicle sales,” it said.

Read: A first look at FNB’s new BankCity development in the heart of Joburg

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FNB delivers big jump in earnings thanks to unsecured loans and up-selling customers to premium accounts