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FNB CEO Jacques Celliers says that while the FirstRand group as a whole is in a “very good place from a franchise perspective” as it has been able to get to the “other side without causing significant damage to our base of core customers, “there is still a need to” Get the economy going again. “
The bank’s main banking strategy, in place for many years, means that it has a huge market share when it comes to economically active clients. It also “stores all industries in the business segment,” so it has been able to “track any business activity that makes sense and seems viable.” With this data-driven approach, you also have a good idea of who might be affected, which means you’ve been able to provide the right support to the right retail customers.
In its retail loan book, R105 billion (or 24%) is described as “Covid-19 impacted”. Of that amount, it granted relief for a total of R67 billion in loans. R329 billion in retail loans are working. The trade book is more affected, with 40% or R50 billion affected. From that, it has granted R30 billion in loan relief.
| Retail | Commercial | Corporate | |
| Covid-19 impacted | R105 billion (24%) | R50 billion (40%) | 76 billion rand (21%) |
| – Relief granted | R67 billion | 30 billion rand | R56 billion |
| – no relief | R38 billion | 20 billion rand | 20 billion rand |
| Make book | R329 billion (76%) | 76 billion rand (60%) | R280 billion (79%) |
Celliers says the banking group has been actively “looking for opportunities in our customer bases” that arise as a result of moments of massive disruption.
Some of the bank’s clients found opportunities, even in sectors that had been truly devastated.
It offers examples of how some restaurants, manufacturers, and bed and breakfasts somehow managed to negotiate and “make another plan.”
This speaks to the quality of these companies and these entrepreneurs.
In the commercial business, it has granted substantial relief in the automotive retail, impacted real estate, transportation and aviation, and leisure and hotel sectors. The total relief granted to other affected sectors is R 16 billion, slightly higher than the R 13 billion granted to the specific sectors listed.
Transactional activity recovered rapidly in July and August (after FirstRand’s year-end) and is now above 90% of normal levels.
Celliers admits that some of this may have been a pent-up lawsuit. Gauteng “is not yet running full blast” and the Western Cape, given its dependence on the inbound tourism market, has one of the weakest levels of activity of any province.
Confident but cautious
Although confident, he says that we simply “will not see the holiday season that we have seen in previous years,” with bonuses or checks number 13 very unlikely. He adds that people and companies remain “understandably cautious.”
The group expects the recovery to be slow and that real GDP will contract 8% this year. By 2023, the South African economy is likely still below 2019 levels.
How does this change?
Much depends on the infrastructure development program planned by the government.
The group says that a “real recovery” requires the “urgent” implementation of the structural reform initiatives identified by the National Treasury, which include:
- Ensure a stable and sufficient electricity supply (modernize network industries);
- 5G spectrum allocation (modernization of network industries); and
- Attract highly qualified professionals to South Africa by relaxing visa requirements (alleviating skill limitations).
“He has previously appealed to the government to attract the private sector [with] financial capacity and skills to enable delivery ”.
Relief measures
He adds that Covid-19 initiatives such as FirstRand’s Solidarity Fund and ‘Spire’ Fund (SA Pandemic Relief and Intervention Effort) “demonstrate the effectiveness with which South African companies partnered with the government to address challenges. large-scale social and economic ”.
He says that “implementation could be quick, it should be inexpensive and it will stimulate business confidence and private sector investment.”
Responding to criticism from President Cyril Ramaphosa on Wednesday night that banks had not lent enough under the R200 billion loan guarantee scheme and that the thresholds and criteria may need to be adjusted downward, Celliers says that the banks did a “great deal of voluntary relief on our own.” .
In contrast to immediate government support in other markets, there was no certainty that government aid would arrive.
“By the time the warranty scheme came in, we had already dealt with a lot of volume,” says Celliers, adding that FNB had “done an incredible job” of providing relief to customers. And because the crisis is “not over yet,” the loan guarantee scheme provides banks with an “additional lever that we can pull.”
Digital capture
He says the bank appreciates that the strategies it has been working on for years, specifically in the digital space, have “landed almost perfectly for what we need right now.”
If anything, Covid-19 and the lockdown “accelerated their strategy,” where customers who had been resisting “suddenly had no choice” but to use electronic channels. It could serve more than 100,000 requests for help through its in-app process. Celliers says this simply would not have been possible in the “normal” way of doing things, such as using email or call centers. The blockade required a completely different scale of operations.
In his credit life business, for example, he went from 50 to 4,000 requests a day.
“How does that normally operate without the digital platforms already in place?”
Results
The banking group reported a 38% decline in normalized overall earnings for the year through June 30, helped by the fact that its first half (through December) was unaffected.
Return on equity was reduced to 12.9% (from 22.8%) and, according to guidance from the regulator, no final dividend was declared. Its credit loss ratio more than doubled to 1.91% (from 0.88%), and the bank assumed an impairment charge of R18,449 million in the second half (compared to R5,900 million in the first six months of the year).
For now, the situation looks “very positive”, says Celliers, as the bank can see the “profile of incomes that are returning” in most of its clients. “The data shows that there is a lot of sustainability in the way we came out of this.”
In the most affected sectors, such as hospitality and entertainment, he says that “dependence on relief should be reduced over time.”
He expects the job market to remain “fairly stable.”
The big question, however, is “what is the government going to do with its wage bill.”
