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FirstRand warns profit could fall more than 20%

FirstRand, which runs South Africa’s largest retail bank, is the latest of the country’s four big lenders to warn on profits as the coronavirus outbreak takes it toll on an already shrinking economy.

FNB logo.

JOHANNESBURG - South African lender FirstRand said on Thursday its full-year profits were likely to be more than 20% lower than in 2019 due to falling revenues and a spike in bad debts, pushing its shares down almost 2.5%

FirstRand, which runs South Africa’s largest retail bank, is the latest of the country’s four big lenders to warn on profits as the coronavirus outbreak takes it toll on an already shrinking economy.

The bank expects its headline earnings per share - the main profit measure in South Africa - for the year to 30 June to be more than a fifth lower than the 497.2 cents it reported last year.

“The main driver of this slowdown in earnings growth is the materially higher credit impairment charge for the period,” the bank said.

It said it does not have a full view of the performance of its lending books for May and June, but had estimated the stress its customers were likely to face for the next 12-18 months.

This had been incorporated into its expected credit losses now, resulting in “a material increase in provisioning”.

Other factors contributing to the decline in earnings include the impact of a series of interest rate cuts in South Africa and lower fee income during a lockdown to stem the spread of the virus.

The bank said it is well capitalised and both its capital and liquidity ratios were expected to remain well above regulatory minimums.