Top-line growth boosts FirstRand profit

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JIMMY MOYAHA: In the financial space FirstRand reported their results as well today. They reported interim results for the six months ending 31 December, much like some of the other participants that reported today.

This set of results that we’re looking at is particularly interesting. It’s almost a bittersweet reflection on not only FirstRand’s performance, but FirstRand’s performance under the leadership of the outgoing CEO, who joins me to take a look at this, Alan Pullinger.

Read: FirstRand posts 6% rise in half-year profit

Good evening, Alan. Thanks as always for the time. The numbers look good, but it’s almost sad to say goodbye. It’s a bittersweet moment to reflect on this, but let’s reflect on it nonetheless. It’s your last set of interim results as CEO.

ALAN PULLINGER: Yes, good evening, Jimmy, and hi to your listeners. Yes, it’s a surreal moment. It’s been a big part of my life, FirstRand, so I will miss it terribly. But as CEO I’m grateful I can tiptoe away and leave the business in decent shape. So pleasing for us in these numbers is lending came back strongly. We refer to lending as ‘advances’; our advances grew 11%. Our deposits were up 11%. We had a good top line.

The credit story is always a big thing for banks. You make all these loans, but it’s important that you can get the loans back. And that’s also been a really good outcome for us.

Better than we expected in an environment like we are in. I was really pleased to see that.

So a decent return on equity. We could pass a dividend back to our shareholders. And so I’m grateful for a lot. Of course, I’m eternally grateful for being part of FirstRand. I’ve been super lucky and I’ve learned from brilliant people, and I’ve stood on the shoulders of giants – and it made me look good.

But you must appreciate who taught me everything I know, and who guided me and held my hand. Those are real icons in the industry. And so, yes, I’m super grateful.

JIMMY MOYAHA: Alan, as you reflect on your time at FirstRand and you reflect on the set of numbers now, as you said, there is a time where growth happens quite rapidly, but then there’s also a time where businesses tend to slow down and it’s more about just making sure that you are not moving backwards, but continually pushing forward.

What would you say has been the highlight of being the CEO under this particular period, especially with all the challenges you’ve had to go through? CEOs very rarely get to reflect on global pandemics and logistics issues and all sorts of other conditions that we’ve all had to go through. What would you say has been something that stood out for you from your time at FirstRand?

ALAN PULLINGER: I’ve been here a long time, and I suppose if you’ve been in the market for a long time, you’re going to have seen lots of good and lots of bad.

I go back to the global financial crisis. I had just taken over at RMB, the investment bank, and then Bear Stearns hit the wall, Lehman’s hit the wall. There was real panic in the financial sector, for sure. And those [events] were a particularly difficult time for us.

And then Covid. Covid was very different. It was a different challenge, a human tragedy, and it was global.

I think in many respects that made it worse. And it also had a very long tail. I think we’re still dealing with some of the scars and after-effects of Covid.

But I suppose when I stand back and look at all of these things, the one thing that’s going to stand out for me is the team. If you have a good team around you, it’s an aligned team. They’re very focused, and you can actually get through a tremendous amount of challenge.

I think when you find yourself alone, that’s where you’re just not going to make it. I’ve been so lucky that I’ve had brilliant people around me. I’m thankful for the team and together as the team we’ve got through this stuff – and even in the results you see here today, there is a formidable leadership team in FirstRand.

So that’s why I can kind of look back with pride, but also with confidence, to say I’m still a shareholder in the business, and I’m confident that this team is out of the top draw. It really is an A-team.

I think that it comes down to that. Challenge is going to be there. You can never predict what it’s going to be, but make sure you’ve got good people around you.

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And then as a business make sure you’re bringing in great people all the time. We like to say we try to hire people better than ourselves. I had the privilege of chatting to the new intake every year, these new graduates – and if I stand back, I’m going to refer to them as kids because they’re younger than my kids.

But they are super-bright kids, and I look at them and I’m so grateful we’ve got them in the business. But then I say to myself: Am I going to be able to hang on to them for 20 years, like I’ve stuck around? And that’s our challenge. And if you can hold on to these kids, they really are streets ahead of where I was, for sure. As long as you have that in a business, bringing in great talent, you can keep them engaged, you can keep them excited.

Listen, the future looks rosy because [they are] the ones who are going to solve the growth problem and they are going to come up with new innovations for our customers. So yes, for me it’s always down to the people.

JIMMY MOYAHA: I think these are sentiments that are shared by Mary Vilakazi, the incoming CEO. I remember catching up with her as well when the announcement was made. She said the same thing about having stayed at the business for as long as she has. It’s about the quality of being able to see the business from a long-term perspective, and not having that short-term approach.

To that effect, as you said, the numbers speak to that as well. The businesses are doing exceptionally well in this interim period, growing from strength to strength and stabilising where they need to stabilise, but also rewarding shareholders – I mean still able to increase headline earnings and headline earnings per share and provide a better return on investment for shareholders.

Alan, are you seeing this as the consistent kind of projection for the second half of the year … I know you will be stepping away from the business very soon, but just prospects going forward? Or do you think the business is on a good footing at the moment from an operational point of view?

ALAN PULLINGER: Yes Jimmy, we gave some pretty clear guidance for the year to June. We would end our financial year in June, so for the next six months. And I think pretty much the same – if anything, a little bit of upside.

Of course lending is starting to slow down; we’ve had really good growth in lending. But we can already see unsecured lending in particular, I think, is starting to slow down. That’s not to say that demand isn’t there; demand is still very high. But increasingly customers are just not getting through the affordability checks that we have to do, so it kind of tells you approval rates are really low. But there’s pressure out there. So we’re seeing lending starting to slow down.

Hopefully we can see the volumes that we’ve seen, transactional volumes and customer growth. Hopefully we can keep that going. As for the credit story, from where we are and the provisions that we’ve got, it’s probably going to be a very similar story.

And more or less, just from an earnings perspective, what we guide is we could do something similar in the second half in terms of absolute quantum of earnings. So if we can sort of replicate that, that’s not a bad place to pencil it in as some sort of guidance.

And then we are going to obviously try and do better. We try to outperform, and we try to delight the market where we can. It is tough, but I know Mary and her team have their heads down and they’re very focused on running to June.

And then of course, it’s the longer-term story; it’s after that. And hopefully I think we’re setting up the business for a much better 2025 and 2026. We’ve got to get through elections. We’ve got to hopefully start seeing the period where interest rates get cut in the world, and for a lot of the problems in the world to get sorted out. There’s just so much.

I know we get gloomy in this country. But if you look around the world, I have to say there are a lot of problems in a lot of countries, Jimmy. Sometimes we can be grateful we’ve got our problems, and we are not dealing with some of these other countries’ problems.

JIMMY MOYAHA: There are bigger problems out there as well. I think, as you rightly mentioned, Alan, it’s a good place to leave the business on a high, and you’re leaving and handing things over to a strong and very capable team. I suppose that’s what we can hope for, what any CEO can hope for in reporting results. And having been at a business as long as you have, to leave on a high and leave the business in a strong position. And you’ve done both of those things.

We wish you all of the best, Alan, in your future endeavours. I look forward to catching up with you soon. And we will definitely keep an eye on FirstRand for the second half of the year and see how it performs for the full year when we reflect on that later in the year.

But we’ll leave it at that for now. That was Alan Pullinger, the outgoing CEO of FirstRand, reporting on the interim results for the first six months of the year.

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