Rand Merchant Bank (RMB), the corporate and investment banking arm of FirstRand, delivered a solid set of annual results with pretax profit up 17 percent, however, its African operations took a knock in Nigeria.
For the year to the end of June 2022 RMB posted pre-tax profit or R11.6 billion from R9bn the prior year.
Profits before tax in Rand Merchant Bank’s Africa operations declined 17 percent during the full year to the end of June 2022 with the Nigerian market, battling foreign currency shortages and a plunge in the value of the naira unit of exchange, proving proved problematic for the financial services concern.
Despite this, the “Africa portfolio remains key to RMB’s growth” especially as a 5 percent quickening in pre-provision operating profit reflected “primary-banked client acquisition, solid advances growth and improving margins” on the back of interest rate increases.
“Market activity remained muted in Nigeria, reflecting investors’ ongoing risk aversion,” FirstRand Limited, the parent company of RMB reported yesterday.
Nigeria has been problematic for South African companies, with headwinds emanating from an uncertain regulatory environment that has hobbled entertainment firm MultiChoice and telco MTN.
The financial services sector has been volatile, with the naira currency drastically plunging in value and foreign currency shortages resulting in dollar transaction restrictions.
Nonetheless, the Botswana market for RMB “benefited from strong advances growth and increased term lending margins as well as an improvement in the markets business” segment.
The Zambian performance for RMB, on the other hand, performed well on the back of book growth and improved margins as the economy recovers and the kwacha currency appreciates.
However, RMB’s South African profits before tax for the same period leaped 32 percent to R9 billion, with overall normalised earnings for the period quickening by 17 percent to R8.1 billion.
James Formby, the CEO for RMB, said this shows “continued improvement in the credit quality of RMB’s core lending” portfolio.
“We advanced R126bn in new loans and refinancings across South Africa and broader Africa,” said Formby.
Despite a tough South African economy, RMB believes the rise in client demand is a sign of “improving confidence”. The bank acted as adviser to transactions Heineken’s acquisition of Distell and Grindrod Shipping’s expected sale to London-listed Taylor Maritime Investments.
Moreover, sustainable and transition finance transactions remain key focus areas for RMB, which issued R8.45bn in syndicated sustainability-linked loan for Mediclinic.
This is in addition the sub-Saharan Africa region’s first real estate sector green loan for Equites Property Fund, bringing total sustainable finance transactions to 26 with a worth of R26bn.
RMB’s private equity segment benefited from strong annuity income growth of 32 percent as portfolio companies experienced improved operational performances.
This was complemented by “a small component of bad debt releases reflecting improved underlying performance of investee” companies. The unrealised value of the portfolio increased 32 percent for the period.
“The cautious optimism we are witnessing in corporate South Africa is an early signal of renewed investment opportunities,” added Formby, pointing to a rosy outlook for the economy.
BUSINESS REPORT