Half a million new customers: FNB reports big jump in headline earnings
First National Bank saw headline earnings in the financial year ended June 2021 rise by 54% to R26.9-billion from R17.3-billion last year, adding around 500,000 new customers and posting an economic profit of nearly R5-billion. This, despite higher impairments driven by the economic impact of the Covid-19 pandemic which saw more consumers defaulting on debt.
FNB, the country’s second-largest bank by assets behind Standard Bank, said on Thursday the big jump in earnings and profit was relative to the deep slump in the first six months of 2020, the worst period of the coronavirus lockdown, so the increase could partly be attributed to “base effects”.
The impairment charge on non-performing loans (NPL) fell to R13.7-billion from R24.4-billion last year, FNB said, 6% better than expected, although a large chunk of that was due to a 35% increase in write-offs.
“SA retail NPLs as a percentage of advances grew to 9.05%, driven in the main by the increase in residential mortgage NPLs given the ongoing pressures on consumers,” FNB said.
Corporate and commercial NPLs decreased marginally.
Headline earnings per share increased to 480.5 cents from 308.9 cents in 2020, a 56% jump. Normalised return on equity (ROE) was up 18.4%.
“The group’s normalised earnings increased 54%, with this performance also reflecting the sharp rebound in economic activity levels across the jurisdictions in which the group operates,” FNB said.
On the other side of the balance sheet, advances, net of impairments, grew by only 3%.
“Looking forward, in South Africa the group expects a modest credit cycle to emerge, mainly driven by recovery in consumer and corporate incomes, a gradual lift in business and consumer confidence and pent-up private sector demand,” the bank said.
In August, Stats SA rebased gross domestic product upwards by 11%, meaning real GDP is now estimated at R5.521-trillion from R4.973-trillion previously. This means that the 2020 GDP contraction of 7% is now revised to -6.4%.
Second quarter GDP was up 1.2%, but on Wednesday, data showed retail sales for July plunged 11.2%, suggesting third quarter economic activity – and consumer and business confidence along with it – will reflect the impact of the July riots, and ultimately the ability of banks to gain new clients and roll-out new loans. BM/DM