FirstRand Dodges Credit Loss Bullet
South Africa’s FirstRand Ltd. has managed to dodge a credit loss bullet, thanks to its choosy lending practices. The Johannesburg-based banking group reported a 4.2% increase in full-year profit, despite the economic downturn caused by the coronavirus pandemic.
Impact of the Pandemic
The pandemic has had a devastating impact on the global economy, with South Africa being no exception. The country has been in a recession since the start of 2020, and the unemployment rate has risen to over 30%. This has put immense pressure on the banking sector, as consumers and businesses struggle to make loan payments.
FirstRand’s Strategy
FirstRand has managed to weather the storm by taking a cautious approach to lending. The bank has been selective in its lending, focusing on customers with strong credit profiles and avoiding those with weaker ones. This has enabled the bank to maintain a low level of bad debt, which has helped to offset the impact of the pandemic.
Results
The bank’s strategy has paid off, with the group reporting a 4.2% increase in full-year profit. This was driven by a strong performance in its retail banking division, which saw a 7.3% increase in profit. The group’s corporate and investment banking division also performed well, with a 5.2% increase in profit.
Outlook
Despite the positive results, FirstRand is not out of the woods yet. The bank is still facing headwinds from the pandemic, and the economic outlook remains uncertain. The bank is also facing increased competition from digital banks, which are offering more attractive products and services.
Risk Management
To ensure that it remains competitive, FirstRand is focusing on risk management. The bank is investing in technology to improve its risk management capabilities, and is also looking to diversify its loan portfolio. This will help the bank to better manage its exposure to risk, and ensure that it remains profitable in the long-term.
Conclusion
FirstRand has managed to dodge a credit loss bullet, thanks to its choosy lending practices. The bank’s strategy has paid off, with the group reporting a 4.2% increase in full-year profit. However, the bank is still facing headwinds from the pandemic, and the economic outlook remains uncertain. To ensure that it remains competitive, FirstRand is focusing on risk management and investing in technology to improve its risk management capabilities.