FRII FRD FRLE FRTN - Trading statement by FRB’s Parent in respect of the six months ending 31 December 2020
FirstRand Bank Limited
(Incorporated in the Republic of South Africa)
(Registration number 1929/001225/06)
JSE company code interest rate issuer: FRII
JSE company code debt issuer: FRD
JSE company code ETF issuer: FRLE
JSE company code ETF issuer: FRTN
LEI code: ZAYQDKTCATIXF9OQY690
(FRB or the bank)
TRADING STATEMENT BY FRB’S PARENT IN RESPECT OF THE SIX MONTHS ENDING 31 DECEMBER
FRB is a wholly owned subsidiary of FirstRand Limited (FirstRand or the group), which is listed on the JSE
Limited and the Namibian Stock Exchange. The bank represents approximately 80% of the group’s earnings
base and 73% of group assets. FRB noteholders are therefore referred to the announcement released by
FirstRand on the JSE Stock Exchange News Service (SENS) on 26 November 2020, in which it advised
FirstRand shareholders that it was reasonably certain that group earnings and/or headline earnings per share for
the next period to be reported on are expected to differ by at least 20% from those of the previous corresponding
As set out in the prospects section of FirstRand’s results announcement for the year ended June 2020, the group
expected its earnings for the six months to December 2020 (a post-COVID period) compared to the six months to
December 2019 (a pre-COVID period) to be impacted given the base effect.
FirstRand advised shareholders that IFRS headline earnings per share (HEPS), earnings per share (EPS) and
normalised earnings per share for the six months to 31 December 2020 (current period) are expected to decline
by between 20% and 25% from the reported 2019 comparatives.
Whilst this performance remains in line with guidance, the group’s earnings trend for the four months from 1 July
2020 to 31 October 2020 is reflecting a better than anticipated rebound.
In terms of group revenue, period-on-period (October 2019 to October 2020) net interest income (NII) increased
2% whilst non-interest revenue (NIR) was down marginally. NII remained resilient despite muted growth in
advances, pressure on margins, and the impact of endowment and excess liquidity levels, however, the deposit
franchise continued to show good growth through the period (+18%). Retail and commercial deposits grew 13%
and 20%, respectively, with large corporate deposits increasing 17%. The UK deposit franchise saw strong
growth of 25%.
Group NIR declined 2%, with fee and commission revenue reducing 1%, reflecting decreased levels of activity
across the retail and commercial segments as well as the lower price increases effective 1 July 2020.
The group’s revenue growth for the four months to October 2020 has been more resilient than initial
expectations. NII has been supported by ongoing growth in the deposit franchise (+4% since June 2020) and
some advances growth. Retail advances are flat compared to June 2020. This reflects risk cuts in certain
unsecured portfolios, although origination in residential mortgages and VAF is almost back to pre-lockdown
levels. Commercial and large corporate advances declined marginally due to lacklustre lending activity and lower
utilisation of facilities. Advances in the UK operations were flat, with MotoNovo origination trending above pre-
The group’s NIR trajectory has rebounded strongly, supported by payroll recovery which, on an aggregate basis,
is back to pre-COVID levels. October 2020 volumes are up compared to June 2020, in particular:
• total financial transactions up 22%;
• banking app transactions up 16%;
• point-of-sale swipes (merchant acquiring) up 38%; and
• swipes by FNB card holders up 29%.
The group’s period-on-period credit loss ratio showed a marked increase, with the impairment charge increasing
44%. For the four months to October 2020, the group’s credit loss ratio improved compared to the 1.91%
reported at 30 June 2020. The four months’ build-up in NPLs is marginally better than expectations.
Collections are back at pre-COVID levels and continue to trend better than expected, with a small cohort of
customers entering extended relief. Despite the better than anticipated rebound, given the prevailing uncertainty,
the group has not adjusted its provisioning assumptions and methodology.
Operating expenses continue to trend at inflation, resulting in a deterioration in the group’s cost-to-income ratio
compared to 30 June 2020.
The group and bank have remained capital generative and their CET1 ratios (including unappropriated profits)
have increased from the 11.5% (group) and 12.3% (bank) reported at 30 June 2020.
With regard to the outlook, whilst the first four months of the financial year are better than expected, the group
remains cautious on the sustainability of this rebound. Significant uncertainties remain in the system which may
play out in the first six months of 2021; the COVID-19 pandemic is not over and South Africa could experience a
second wave. In addition, the long-term impacts of the lockdown are not yet fully known. The South African
medium-term budget confirmed the ongoing fiscal and macroeconomic challenges which the group believes will
continue to weigh on economic activity and constrain growth.
The estimated financial information on which the group’s trading statement is based has not been reviewed or
reported on by the group’s external auditors. FirstRand’s and FirstRand Bank’s results for the current period will
be released on SENS on Thursday, 4 March 2021.
26 November 2020
Rand Merchant Bank (a division of FirstRand Bank Limited)
Date: 26-11-2020 05:30:00
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