FirstRand plans Africa growth

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JOHANNESBURG — FirstRand, South Africa’s No 2 bank, reported a 26% rise in first-half profit on strong loan growth and said it would keep pursuing expansion in other African countries such as Nigeria and Ghana.

FirstRand, which already has operations in seven African countries, said it aimed to build an investment banking operation in Nigeria from scratch and buy a smaller retail and commercial bank there.

“If we do acquisitions, they will typically be small to medium size,” chief executive Sizwe Nxasana said in an interview following the bank’s results.

“We wouldn’t want to spend more than, I would say, 10% of our capital on new acquisitions or new opportunities.”

The bank ended talks to buy a stake in Nigeria’s Sterling Bank last year after failing to agree on price. Its expansion was also knocked back in Zambia after the government there reversed the sale of State-controlled Finance Bank to FirstRand.

FirstRand would focus on scaling up its smaller operations in Mozambique, Tanzania and Zambia, while also seeking opportunities in Ghana, Nxasana said.

FirstRand is the best performing bank on South Africa’s blue-chip Top 40 index this year, as it focuses on expanding its loan book.

“It is our favourite pick at the moment,” said Darren Coulter, an analyst at Imara SP Reid.

“They are showing some growth in loans and advances which was absent in (rival) Absa results,” he said.

Absa Group posted a 1% decline in its loan book in full-year earnings earlier in February. South African banks are recovering after a 2009 recession-lowered interest rates and sapped earnings from lending.

Banks are back to profitability, helped mainly by a steady decline in bad debts, though demand for credit remains muted.

FirstRand has bucked the weak lending trend with a push in unsecured loans. Net interest income for continuing operations, a measure of earnings from lending, increased 26% to R10,53 billion in the six months to end-December.

Nxasana said FirstRand was aiming to increase unsecured lending from the present 3% of total loans.

The shift to uncollateralised personal loans had allowed the bank to get better margins, he said.

FirstRand said normalised earnings per share totalled 102,4 cents in the six months to end-December, up from a restated 81,1 cents a year ago.

It had said its diluted normalised earnings per share would rise by as much as 28%.