South Africa’s FirstRand rewards investors with record payout despite UK hit

FirstRand Limited posted strong operational performance for the financial year ended June 30, 2026, driven by double-digit profit expansion across its primary retail and corporate banking franchises in South Africa and the wider continent. Despite absorbing a material provision related to historical UK vehicle financing commissions and navigating the planned sale of Aldermore Group, the Johannesburg-based lender declared its highest-ever annual dividend payout to shareholders.

Record dividend backed by capital strength

Headquartered in Sandton, Johannesburg, the group declared a final ordinary cash dividend of R2.8 ($0.17) per share. The distribution brings the total ordinary payout for the 2026 financial year to R5.39 ($0.33) per share, up 16 percent from the R4.66 ($0.28) per share distributed in 2025. The payout was supported by consistent capital generation, with the Common Equity Tier 1 ratio reaching 13.9 percent, well above the internal target band of 11.5 percent to 12.5 percent.

Headline earnings slipped 5 percent to R39.69 billion ($2.46 billion) from R41.88 billion ($2.6 billion) a year earlier, driven by an additional post-tax charge of R8.72 billion ($541.3 million) tied to the UK motor commission remediation review. Excluding the UK charge, total normalized earnings climbed 10 percent to R48.41 billion ($3 billion). Normalized earnings from continuing operations rose 13 percent to R44.46 billion ($2.76 billion) from R39.42 billion ($2.44 billion), yielding a return on equity of 24.9 percent.

Franchise performance and portfolio shifts

Operating performance across continuing operations drew significant momentum from First National Bank and Rand Merchant Bank. Normalized earnings from FNB rose 12 percent to R26.44 billion ($1.64 billion), lifted by high customer transaction volumes, resilient card turnover, and a 6 percent rise in net interest income. RMB’s normalized earnings advanced 15 percent to R12.29 billion ($763.1 million), boosted by robust advisory activity, private equity realizations, and a rebound across global markets desks.

Vehicle and asset finance unit WesBank posted a 4 percent decline in earnings to R2.29 billion ($142.2 million) as elevated credit impairment provisions offset 14 percent growth in core advances. Group Treasury and central operations contributed R5.16 billion ($320.4 million), an 18 percent increase. Outside its African footprint, FirstRand initiated the formal sale of UK retail banking arm Aldermore Group, reclassifying the unit as a discontinued operation alongside a non-cash goodwill impairment of R3.74 billion ($232.2 million).

Lending growth and credit quality

FirstRand expanded its underlying lending and funding footprint across core African markets during the year. Total core lending advances from continuing operations grew 7 percent to R1.37 trillion ($85.1 billion), up from R1.29 trillion ($81 billion) in the prior period. Deposit franchises and debt funding expanded 10 percent to R1.40 trillion ($86.9 billion), fueled by steady retail transactional deposits and institutional mandates.

Credit quality across the loan book remained resilient despite broader macroeconomic pressures. The credit loss ratio for core lending operations improved to 1.05 percent from 1.08 percent, settling below the midpoint of the bank’s target range of 1.00 percent to 1.3 percent. Non-performing loans dropped to 4.62 percent of total core advances, down from 4.7 percent in 2025, allowing the lender to protect capital reserves while investing heavily in digital infrastructure and artificial intelligence capabilities.