FirstRand CEO Laurie Dippenaar believes the financial services group is more focused after a recent brand alignment, and that, barring any “unforeseen external shocks”, it is also well positioned to achieve its stated objective of 10% real growth.
This he bases on the current strong economic growth, the existing strategies of the business units and divisions of the group, and the diversified income streams generated from a premium portfolio of businesses.
The favourable economic climate, which has provided strong growth opportunities for the banking group, saw FirstRand lift attributable profits by a whopping 23% to R2,8-billion for the six months ended December — a performance the group hopes to see emulated in its results for the full year.
Although a sustained lower interest-rate environment continues to exert pressure on margins, increased new business volumes for the half-year have partly offset this impact.
And Dippenaar expects much the same scenario for the second half of the year.
“Interest rates are expected to remain at current levels for the remainder of the financial year, and whilst this will result in continued margin pressure for the banking group during the second half, it is also expected to positively impact on credit demand and consumer spending,” he says.
Add to this the fact that the group’s subsidiaries all continue to perform strongly and that its black economic empowerment (BEE) deal with four broad-based BEE partners — said to be the biggest yet in the industry — should be completed by May, the group feels it is poised for further growth.
New pockets of growth are also being created through some of the group’s innovative offerings such as the newly launched Discovery card, which has already been taken up by 60 000 clients, and its One Account, which is growing at about R100-million per month.
The group’s latest offering, the Million-a-Month Account, fondly referred to as Mama, has already garnered 50 000 new account-holders.
The group also has R4,5-billion in surplus capital at its disposal. But Dippenaar says R2,3-billion of this will be used to fund the vendor portion of the proposed BEE transaction, while R2,1-billion will be used to reduce existing gearing in FirstRand and/or be returned to shareholders.
However, Dippenaar feels the future is not without its challenges. He reckons that the bad debt improvement experienced by the group in recent times is “as good as it gets” and is mindful of the fact that greater cost efficiency is required. He is also acutely aware of the foreign competition facing the local industry.
But his response to this is pragmatic: “We’ll just have to lift our game.”
The group is also hoping to up its game in the areas of commercial property, micro finance and credit — areas in which it feels it might be lagging behind its competitors.
“I think our sales culture could also do with some improvement,” Dippenaar adds.
Another area that has been receiving attention is the group’s Africa operations.
“Significant management time and effort has been focused on the banking group’s African strategy, which has included assessing the existing operations and increased synergies with FNB’s South African activities. The group is also actively evaluating a number of other medium-term growth opportunities in Africa,” Dippenaar says.
FirstRand, he says, has always stated that it “wants to enter Africa on both a conventional or unconventional basis”.
“We are currently closing two new deals which fall into the unconventional or alternative entry strategy, the details of which will be announced sometime soon,” he adds.
The group’s branding alignment has also been successfully concluded.
In October last year, the retail, corporate and wealth clusters were dismantled and FNB Corporate and FNB Retail were merged under one FNB management team. This resulted in the merger of the business and medium corporate segments, which were previously separately housed in FNB Retail (business segment) and FNB Corporate (medium corporate segment).
“This adjustment to the structure reinforces and strengthens the group’s segment focus, and allows the group to maximise growth opportunities in the mid-corporate and business segments. In addition, any dilution of the FNB brand that may have occurred by having two separate entities operating in the same markets has been eliminated,” Dippenaar says.
He adds: “The group is confident that, barring any unforeseen external shocks and in the context of the current strong economic growth, the existing strategies of the business units and divisions of the group, and the diversified income streams generated from a premium portfolio of businesses, the group is well positioned to achieve its stated objective of 10% real growth.” — I-Net Bridge