FirstRand expects its underlying businesses to deliver a solid performance in the year ended June 30, 2026, despite a substantial provision linked to the UK motor finance commission redress scheme weighing on earnings. The financial services giant said the total provision related to the matter is expected to reach £750 million ($1.02 billion), including an additional pre-tax accounting charge of £510 million ($693 million) recognized during the financial year.

The provision is expected to reduce reported profitability, with normalized earnings forecast to decline between 4 percent and 9 percent. Return on equity is also expected to come in slightly below the lower end of the group’s target range. Excluding the additional UK charge, however, FirstRand said business performance remained in line with expectations, with previously issued guidance for normalized earnings growth and return on equity still supported by operations across its core markets.

The group said balance-sheet growth strengthened in the second half of the year as lending activity improved in South Africa and across the rest of the continent. Advances growth accelerated during the period, helping net interest income rise slightly ahead of guidance issued at the half-year stage.

Corporate lending returns to positive growth

Growth was broad-based across the franchise. At FNB, retail lending expanded at a faster pace than in the first half, while WesBank continued to post strong growth in vehicle asset finance. At Rand Merchant Bank, corporate lending returned to positive growth as client activity recovered, while operations outside South Africa maintained healthy advances growth despite the impact of a stronger rand on translated earnings.

Net interest income also benefited from the group’s sizeable deposit base and asset-liability management activities. Outside the UK business, net interest margins improved modestly from first-half levels. In the UK, however, margins remained under pressure as competition for customer deposits stayed intense.

Credit performance was stronger than management had anticipated. FirstRand said its credit loss ratio is expected to finish at the lower end of its through-the-cycle range. Retail credit quality continued to improve, commercial credit remained within target levels, and corporate credit losses are expected to come in below the group’s long-term range. In the UK, credit losses continued to normalize from unusually low levels recorded a year earlier but are still expected to remain slightly below the bottom end of the target range.

Non-interest revenue also held up well during the year. The group reported strong contributions from trading and fair-value income, investment income and knowledge-based fees generated by Rand Merchant Bank. Fee and commission income at FNB remained resilient, while private-equity investments continued to support earnings growth despite fewer realizations in the second half. Operating expenses are expected to exceed previous guidance, reflecting costs linked to the integration of the HSBC client franchise, investments in African platform projects and expenses associated with staff offshoring initiatives at Aldermore in the UK.

FirstRand UK divestment secures dividend plan

At the same time, FirstRand confirmed it will proceed with an orderly exit from its UK operations. The group expects the process to be substantially completed within the next 12 months, subject to regulatory approvals. As a result, the entire UK business will be reported as a discontinued operation in financial statements for the year ended June 30, 2026.

Despite weaker earnings from the UK, performance in South Africa and the rest of Africa more than compensated for the decline. FNB’s South African operations delivered solid revenue growth, careful cost control and improving credit quality. Rand Merchant Bank benefited from stronger lending activity, higher advisory and knowledge-based fees, improved market conditions and continued contributions from its private-equity portfolio, while WesBank maintained strong growth in vehicle finance.

FirstRand also said its capital position remains robust. FirstRand Limited, FirstRand Bank Limited and Aldermore Group all maintained capital ratios above targeted levels during the year. The group reaffirmed its intention to pay a dividend based on earnings before the post-tax impact of the UK motor commission provision and within its stated dividend cover range.