FirstRand Ltd. (FSR), Africa’s biggest bank by market value, is setting aside 10 billion rand ($924 million) for expansion across the continent as profit increases from regions outside its home market of South Africa.
“We’ve got a provisional license in Ghana and should be up and running there in early 2015,” Sizwe Nxasana, chief executive officer of the Johannesburg-based bank, said by phone today. “In time we’ll set up operations in Kenya and Angola.”
South African and international banks are targeting expansion in west and east Africa to take advantage of accelerating economies and population growth. Robert Diamond’s Atlas Mara Co-Nvest Ltd. last week increased its stake in Union Bank of Nigeria Plc after buying lenders in Botswana and Rwanda, while Qatar National Bank QSC acquired a 12.5 percent of Togo-based Ecobank Transnational Inc. (ETI) on Sept. 4.
FirstRand has representative offices in Angola and Kenya, full service operations in countries including Botswana and Zambia, and investment banking in Nigeria. While the lender last year considered buying Nigeria’s Mainstreet Bank Ltd. or Keystone Bank Ltd., it now favors organic growth, Nxasana said.
Automobile financing and investment banking recorded “strong growth” outside of South Africa in the year through June, FirstRand said in its annual earnings statement today, without giving more detail.
Net income in the period rose to 18.4 billion rand, from a restated 14.8 billion rand a year earlier. Earnings per share excluding one-time items increased 22 percent to 3.36 rand, beating the 3.20 rand median estimate of 13 analysts surveyed by Bloomberg.
It was “another good set of results which were marginally ahead of our above market expectations,” Greg Saffy, banks analyst at RMB Morgan Stanley, said in an e-mailed note today. “Very good topline growth is a stand out feature.”
The final dividend per share was 97 cents, a 20 percent increase from 81 cents a year ago. With capital adequacy ratios above regulatory minimums, FirstRand ruled out special dividends with Nxasana saying the lender would prefer to increase payout ratios.
South Africa’s gap on the current account, the broadest measure of trade in goods and services, expanded to 6.2 percent of gross domestic product from 4.5 percent in the previous three months, the Reserve Bank said in its Quarterly Bulletin released today in the capital, Pretoria.
“Economic headwinds are increasing,” the lender said today in a statement. “The group believes its franchises have the appropriate strategies in place to deliver good operational performances” and returns should be sustainable, it said.
FirstRand fell 2.8 percent to 45.30 rand as of 10:44 a.m. in Johannesburg trading, its biggest drop more than a month, giving the lender a market value of 255.5 billion rand.
“The earnings outlook is becoming relatively less certain,” Saffy said. Results were boosted by profit not allocated to operating units and “a much higher base and tough domestic economy.”