FNB sounds the alarm for consumers in South Africa

 ·29 Feb 2024

FNB has seen a growth in profit in the first half of the financial year, but its retail customers are increasingly struggling to repay debt.

In its parent company FirstRand’s interim results for the six months ended 31 December 2023, FNB said that its normalised profit before tax grew by 5%, with a return on earnings (ROE) of 40.3%.

The group also saw net interest income (NII) growth of 9% period-on-period, driven by the strong performance of the deposit franchise, as deposits increased by 11% domestically and 16% in broader Africa.

“In addition, despite challenging macroeconomic conditions and the resultant pressure on customer affordability levels, FNB grew advances 8%. The current interest rate cycle resulted in a net endowment benefit,” the group said.

“However, this was lower period-on-period, given the impact of the group’s Asset and liability management (ALM) strategy.”

The group saw a R477 million reduction in fee and commission income over the period, but this was due to sub-inflation fee increases across both retail and commercial accounts.

“In addition, with the introduction of PayShap, FNB reviewed its pricing structures for low-value real-time payments, and took the decision to reduce all related fees. Despite the impact on fee and commission income in the current period, FNB believes this is the correct outcome for customers.”

Furthermore, amid the challenging macroeconomic environment, as customers struggle with both high inflation and increased interest rates, FNB’s impairment charges increased by 31%.

The credit loss ratio thus increased from 128 bps in H1 2023 to 155 bps in H1 2024.


“This outcome is broadly in line with expectations given the group’s origination strategies and economic outlook. The strain was most evident in the retail portfolios,” the group said.

Several other financial services providers have highlighted an increase in impairments as consumers buckle under the pressure of the current cost-of-living crisis.

Despite this, FNB could still see positives, such as cost management, with expenses growing below inflation (+5%), resulting in positive jaws.

FNB’s digital channels also saw growth, with the app volumes on the FNB app up 14%.

The bank has also increased its total number of retail customers to 8.45 million – an increase of 5% (year-on-year).

Notably, the group’s private client base (those who earn R600,000 plus) also increased by 8% from 1.58 million in H1 2022 to 1.71 million.

FirstRand results

FNB-owner FirstRand also recorded strong results, with strong topline growth, particularly net interest income (NII), driving the 6% increase in normalised earnings to R19.1 billion.

“The shape of these results continues to demonstrate the positive outcomes of strategic calls made by the group,” said FirstRand CEO Alan Pullinger.

“Once again, the pleasing credit performance stands out, with the credit loss ratio well below the midpoint of the group’s through-the-cycle (TTC) range.”

Unlike FNB, FirstRand’s credit performance performed better than expected, with a credit loss ratio of 83 bps – below the midpoint of the 80-110 bps TTC range.

“This is a commendable result given the prevailing inflation and interest rate cycle, and has enabled continued advances growth as the group services the needs of customers through judicious and tactical origination,” Pulligner added.

The group upped its interim dividend to 200 cents per share. FirstRand’s key financials can be found below:

FinancialDec 2022 Dec 2023Change
Earnings Per Share (cents)319.7348.1+9%
Headline Earnings Per Share (cents)321.7341.4+6%
Credit loss ratio (%)0.740.83
Interim dividend (cents)189200 +6%

Read: Big changes for FNB – new CEO announced in major leadership shuffle

Show comments
Subscribe to our daily newsletter