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FirstRand - which owns FNB and WesBank - sees profit rising more than expected after the South African economy rebounded strongly from the early stages of the coronavirus pandemic.
Africa’s biggest bank by market value sees earnings per share rising by at least 35% in the year through June, according to a statement on Monday. Impairments are significantly lower than anticipated and the cost of credit has improved, the Johannesburg-based company said.
"Current trends indicate that customers are utilizing discretionary savings as the economy has opened up," FirstRand said. "Consumer spending is now back at pre-Covid levels."
FirstRand shares rose 0.6% by 10:25 a.m. in Johannesburg, extending the year’s gains to 10%.
The lender joins other South African banks in seeing an improved outlook as the nation recovers from an economic contraction of 7% last year, largely caused by lockdown measures to contain the coronavirus. The Standard Bank Group said last week it anticipates headline earnings per share will rise by at least 40% for the six months through June.
The SA Reserve Bank sees a rebound to 4.2% growth this year, and first-quarter data due Tuesday will probably show an expansion from the previous three months. That said, the economy is still likely to have contracted from the mostly pre-lockdown period a year earlier, while power-supply shortages continue to weigh on the recovery.
South Africa’s banking regulator has also relaxed guidance on capital preservation, altered to make sure the industry continued to lend during the worst of the pandemic. That’s helped South Africa’s big four banks issue dividend payments earlier this year.
