‘SA needs to grow economy in face of virus, downgrade threats’
JOHANNESBURG - First National Bank (FNB) chief executive Jacques Celliers said yesterday that the country needed to grow its economy in the face of the threats posed by a possible downgrade by ratings agency Moody’s and Covid-19, which has had a negative impact on global and local markets.
“We are experiencing a tough economic environment at the moment, and it will continue to be so going forward. The impact of coronavirus is having a negative impact on the markets. However, we need to grow the economy and create more jobs,” Celliers said.
FNB was eyeing some opportunities for growth in insurance and investment as it continues to grow its market footprint in these areas, it said as the bank reported excellent growth in both areas in the six months to the end of December.
FNB said its insurance revenue growth of 14 percent benefited from strong growth in standalone products, but this was partly offset by lower growth in credit life due slowing advances growth. In the results, FNB reported 5 percent growth in pre-tax profits to R13.2 billion and a return on equity of 39.9 percent. The cost-to-income ratio improved marginally to 49.9 percent.
Its normalised earnings increased by 5 percent to R9.17bn. FNB represents FirstRand’s activities in the retail and commercial segments in South Africa and the broader African continent. FNB’s South African business experienced a slowdown in some of its key growth drivers as the macroeconomic environment placed further pressure on customers, growing pre-tax profits 5 percent period-on-period.
“The rest of Africa portfolio’s performance continued to improve, growing pre-tax profits by 7 percent, although profitability continues to be impacted by in-country macroeconomic environment and ongoing investment in the build-out of the sub-scale subsidiaries. Namibia, Botswana and Ghana saw some advances in growth. However, this was offset by the impact of a tough macroeconomic environment, cautious lending and risk cuts in the rest of the subsidiaries,” the group said.
The bank’s net interest income increased by 9 percent to R31.9bn, driven by strong growth in deposits and advances, which rose by 10 percent and 8 percent, respectively.
Its normalised non-interest revenue (NIR) increased by 5 percent to R25.9bn, with growth reported in all segments. However, the group said NIR in both consumer and premium was negatively impacted by fee concessions, slowing volume growth and pricing pressures due to increased competition. Celliers said: “We are pleased with our performance during the period, and we have seen a stable customer growth, with our digital platforms recording growth of 120 000 clients a month.”
The group said the investment in platform distribution was starting to gain traction with good digital distribution of wills, online share trading and Horizon unit trusts resulting in 38 percent growth in the account base to 428 729 accounts.