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South Africa’s FirstRand posts 56% full-year profit jump

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JOHANNESBURG, Sept 16 (Reuters) – FirstRand, Africa’s largest bank by capitalisation, on Thursday reported a 56% rise in full-year profit, with credit losses easing as it recovers from the impact of the COVID-19 pandemic.

The banking sector’s profits have been bouncing back after being forced last year to book hefty provisions for souring debts in the face of the coronavirus crisis.

FirstRand’s headline earnings per share – the main profit measure in South Africa – stood at 480.5 cents in the year to June 30, against 308.9 cents a year earlier.

That was in the middle of its forecast range – an outlook it improved twice since March as the economy and its own business performed better than expected.

“The level of improvement in the group’s performance demonstrates the quality of FirstRand’s portfolio of businesses and their ability to capitalise on the economic rebound that is taking place,” Chief Executive Alan Pullinger said in a statement, adding that the bank’s return on equity (ROE) was back within its target range at 18.4%.

ROE is a key measure of bank profitability.

A 55% reduction in charges for bad debts was the main driver of the banks performance, but even pre-provision profits were up 5%, which it said represented a resilient performance by its various business units.

The bank also announced a new lending policy that will end its financing of new coal-fired power stations immediately and cut off new coal mines by 2026. South Africa is hugely reliant on coal for power.

Robyn Hugo, director of climate change engagement at shareholder activist group JustShare, commended the move but also said its decision to accept coal as South Africa’s core energy source until 2049 demonstrated insufficient ambition.

She called on the bank to set short, medium and long-term targets to reduce the climate-warming emissions it finances. (Reporting by Emma Rumney Editing by Olivia Kumwenda-Mtambo and David Goodman)

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