Improved demand for loans, higher net interest income as interest rates rise, and higher insurance premiums collected by its businesses have put FirstRand on track to deliver a double-digit increase in its profits this year.
The owner of FNB and RMB said it expects its headline earnings per share (HEPS) and normalised earnings per share to increase by more than 20% for the year ending 30 June 2022.
The banking group posted HEPS of 480.5 cents at the end of June 2021 and normalised earnings per share of 473.3 cents. Now it expects those to climb to at least 576.6 cents and 567.9 cents, respectively.
"Activity levels in the domestic retail, commercial and corporate customer segments have increased, with fee and commission income in particular showing a higher growth trajectory," said FirstRand in the trading update on Friday.
It added that the strong insurance premium growth in its subsidiaries was also accompanied by lower claims this time around. Bad debts are also falling, and non-performing loans remain within FirstRand's expectations.
FirstRand said earlier this year that its retail businesses, FNB and Wesbank would start lending more again after adopting a "discerning credit origination approach" in 2020.
Whereas its advances were on a decline till June 2021, these bounced back significantly in the second half of 2021. By the time FirstRand presented its interim results for the six months ended on 31 December, its advances were up 6.4% compared to June 2021. And it seems that this momentum continued in the first few months of this year.
"The credit cycle in South Africa is incrementally gaining impetus, particularly in the retail and commercial segments. Corporate activity is also showing stronger momentum, particularly in the last quarter. These trends have continued to support advances growth, resulting in healthy net interest income," wrote FirstRand on Friday.
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