RMB delivers strong interim results

MEDIA RELEASE

3 MARCH 2022

RMB delivers strong interim results; expects increase in corporate investment, borrowing and ESG activity  

Rand Merchant Bank (RMB), the corporate and investment banking arm of FirstRand Limited, delivered strong interim results to December 2021. A return on equity of 20.1% was achieved up from 16.3% at December 2020. Normalised profit before tax (PBT), which increased by 15%, benefited from lower credit provisioning - reflecting a normalisation of the credit cycle post-COVID 19.

Resilient performance across businesses and regions

The Markets business delivered solid PBT growth of 6%, underpinned by a robust performance from the equities and offshore secured financing activities. The Banking business’s profits grew 17%, benefitting from improved credit risk in the lending book, which remains conservatively provided.

Portfolio companies that experienced improved operational performances resulted in annuity income growth of 5% for the private equity business.

Ashburton Investments was incorporated into RMB from 1 July 2020 to improve the investment product offering to corporate and institutional clients. This business continues to grow with positive momentum in AUM, up 25% to R121bn. 

The broader Africa portfolio remains key to RMB’s growth. This portfolio’s performance was characterised by ongoing deposit margin compression related to multiple rate cuts over the last 18 months in various jurisdictions. Pre-tax profits (which represent 24% of RMB’s overall PBT), were down 10%. There was stronger contribution from the in-country operations which increased 23%.

Accelerated investment and borrowing expected from corporate South Africa

After having contracted sharply in the second quarter of 2020, private sector capex spend has recovered to 95% of its pre-Covid-19 level (fourth quarter of 2019).

Says RMB CEO James Formby: “We have seen this start to translate into an uptick in credit demand from the corporate sector, resulting in year-on-year core advances growth of 6%. Given the low growth outlook and some sectors still with excess capacity, we expect companies to remain cautious, but to start increasing investment and borrowing in 2022.”

RMB also expects South African mergers and acquisitions to accelerate this year. Local firms are likely to tap their large and growing cash piles to invest in attractive local opportunities in 2022. Also, in the recent past several well-known South African companies were acquired by foreign investors.

Notes Formby: “SA equities remain relatively cheap compared to large global companies and we expect that, on the back of the landmark Heineken Distell transaction announced last year, the trend of international buyers acquiring attractive SA corporates will continue in 2022.”

Greater corporate efforts drives ESG and sustainability

Increased ESG activity in the 6 months to December 2021 resulted in RMB’s Sustainability Finance and ESG Advisory team facilitating transactions to the value of R15.5bn.  

Formby considers this an important role for RMB: “We place huge emphasis on not only advising our clients on ESG strategies, but also helping them to execute, either by enabling them to raise money efficiently through capital markets or by lending directly.”

Notably, RMB arranged an Africa record-sized R8.45bn syndicated sustainability loan for Mediclinic last year, and more recently acted as co-arranger and sustainability coordinator in Helios’s ESG-linked capital call facility, the first of its kind in Africa.

Formby adds that South Africa is uniquely positioned to transition its energy production towards renewable energy: “We believe that there is ample scope for additional supply through REIPP and are actively engaging our corporate client base on the private production of power, given the relaxation of the regulations to allow production up to 100MW without a lengthy permitting process.”

Concludes Formby: “As economies start to normalise, we are well positioned to support our clients and enable their growth. Our diversified business portfolio across business lines and geographies, coupled with a disciplined approach to balancing risk, return and growth and our balance sheet resilience, ensure that we deliver sustainable earnings and market-leading returns.”

End

Note:

Follow this link to view FirstRand Limited’s interim results to December 2021: https://www.firstrand.co.za/investors/financial-results/

Contact:

Joandra Griesel l RMB l joandra.griesel@rmb.co.za

Sam Moss l FirstRand l sam.moss@firstrand.co.za