FirstRand

Our domestic multi-asset and equity funds continue to have a sizeable holding in the banks with their low ratings and attractive high single-digit dividend yields. Recent bank results showed pleasing revenue growth from higher interest rates. Some of this benefit was offset by increased credit losses as pressure on consumers’ disposable income began to bite. We expect credit losses to stabilise as inflation subsides over the next 12 months. We continue to believe that banks with their low ratings and ability to grow their revenues in the mid-to-high single digits offer an attractive medium-term investment.

FirstRand has recently announced significant changes in its leadership structure, with the chairman, group CEO and CFO, and the CEO of the retail and commercial bank (FNB) all vacating their roles. Usually, an announcement like this would be a cause for concern. In the case of FirstRand, we take a different view. While the timing of the changes is slightly earlier than we may have expected, this is evidence of regular, thought-out succession planning and showcases the bench strength within the business. The COO will move to the CEO role, and no executive skills will be lost to the group, except the group CEO (who is retiring). The incoming chair is a highly rated previous CEO of the group, available to support the incoming CEO should this be necessary. Importantly, the CEO of FNB will be redeployed internally to head up the group’s fintech strategy. FirstRand is already an established leader in digital strategies in the domestic banking sector. We would view a dedicated focus on this part of the business by an individual of this calibre in a positive light, given the changing nature of retail banking globally and the growth challenges faced by domestic-facing businesses in a low-growth economy.