FNB customers continue to experience challenges paying off their debts despite signs of improvement in the macroeconomic environment.<\/p>\n\n\n\n
For the six months ended 31 December 2024, FNB’s normalised profit before tax (NPT) grew by 5% to R17 billion, while its ROE stood at 39.0%. <\/p>\n\n\n\n
FNB’s net interest income grew by 5% period on period and was primarily driven by the strong performance from the deposit franchise, with deposits increasing 10% domestically and 11% in Africa.<\/p>\n\n\n\n
Although customer affordability levels remained under pressure, FNB grew advances by 6%. Retail advances required risk cuts as arrears manifested across portfolios, leading to 4% growth. <\/p>\n\n\n\n
There was an origination tilt to commercial and SME customers, anchored by the bank’s expectations for improving business confidence and capacity investments in these segments. <\/p>\n\n\n\n
The advances margin reduced slightly to 3.75% period-on-period but remained flat from June, highlighting the origination tilt to commercial and low-to-medium risk in retail. <\/p>\n\n\n\n
The group said its credit performance is also reflected by its origination strategy and the changing economic environment.<\/p>\n\n\n\n
“The macroeconomic pressures experienced in the past year have shown some signs of easing,” said the ‘Big Four’ bank. <\/p>\n\n\n\n
“This is evident in the slowing momentum of impairments, which are trending better than expectations, especially in the retail portfolios.”<\/p>\n\n\n\n
“However, period-on-period impairments remain elevated as credit impairments were more benign in the comparative period to December 2023.” <\/p>\n\n\n\n
FNB’s credit impairment charge increased by 21%<\/strong> to R5,034 million (December 2023: R4,177 million), and the credit loss ratio jumped to 176 bps (December 2023: 155 bps)<\/p>\n\n\n\n
Despite the year-on-year increase, FNB said that the credit loss ratio trended down from June 2024. The credit loss ratio stood at a staggering 185 basis points in the year ending June 2024.<\/p>\n\n\n\n
Parent group FirstRand said that the period-on-period movement was driven by:<\/p>\n\n\n\n
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The aforementioned strong growth in the SME subsegment and transactional lending products in commercial at higher coverage ratios, creating front book strain;<\/li>\n\n\n\n
Accelerated NPL formation, especially in retail mortgages and in the retail unsecured lending books on the back of the higher interest rates and inflation;<\/li>\n\n\n\n
Increase in arrears and a significant increase in credit risk (SICR);<\/li>\n\n\n\n
Direct customer interventions in the period under review have resulted in slowing growth in debt counselling inflows, however, they remain elevated compared to historical averages.<\/li>\n\n\n\n
Responding to improvements in macroeconomic outlook, releases from forward-looking information (FLI) models benefited performing coverage;<\/li>\n\n\n\n
Despite an improving trend, FNB\u2019s internal house price index growth remains subdued, impacting coverage ratios in the residential mortgage portfolio; <\/li>\n\n\n\n
There was an increase in write-offs and a marginal reduction in post-write-off recoveries period on period.<\/li>\n<\/ul>\n\n\n
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