SA banks make bruised exit from Covid-smothered second quarter | Citypress

FirstRand CEO Alan Pullinger on Thursday said the bank’s normalised earnings had decreased 38% to R17.3 billion and the group’s return on equity – a measure of the profitability of a business in relation to the equity – declined to 12.9%.

There are two sets of drivers for these broad declines. The first set of reasons are the negative endowment impact as a result of interest rate cuts and margin pressure, subdued non-interest revenue growth owing to lower absolute volumes during the lockdown period, and depressed new business origination. These line items impact top-line revenue growth.

In his presentation, Pullinger said FirstRand’s performance reflected the extremely difficult operating environment, particularly the last quarter of the year following the Covid-19 lockdown in March. Covid-19 and associated economic crises resulted in three simultaneous and profound shocks – to global trade; to global confidence, causing financial conditions to tighten significantly and abruptly; and to economic activity following the lockdown policies adopted by most of the world’s major economies. This translated into a once-in-a-generation economic stress event, Pullinger said.

Celliers said this was mainly driven by a significant increase in credit impairments. He said FNB still delivered a respectable ROE of 25.8% and a “flat” pre-provision operating performance. “This was driven primarily by the increased impact of IFRS 9 forward-looking information adjustments, following the sharp downward revisions to the group’s macroeconomic assumptions, as well as increased impairments to cater for the embedded credit strain of FNB’s debt relief portfolios.”

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