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Media release
10 September 2020
RMB remains resilient in a tough economic environment
Rand Merchant Bank (RMB), the corporate and investment banking arm of FirstRand Limited, took a proactive view in its provisioning against its credit book to safeguard for times to come. While the bank’s results, that were released today, show the impact of the current macro environment, they also reflect the strength of the franchise and underlying businesses.
Says RMB CEO James Formby: “Despite the challenging environment compounded by global uncertainty, our results show that we remain resilient, growing our pre-provision operating profit by 14%.” Due to the significant impact of COVID-19 on credit provisions, normalised earnings were down 17%.
Partnering our clients to rebuild the economy
RMB recognises the important role that our clients play in keeping the wheels of the economy turning and pro-actively partnered with clients impacted by COVID-19 to develop funding, liquidity and risk management solutions to service each client’s needs. “RMB provided R40bn in support to our clients through direct funding, payment holidays and covenant waivers. We have strong capital and liquidity levels and will continue to partner our clients as we collectively rebuild the economy,” says Formby.
Says Formby: “Our results were delivered against a challenging backdrop, but we will continue to do good business for a better world and make a meaningful contribution to our clients and society to address the immediate and future impact of COVID-19. Throughout the pandemic we have also provided support on healthcare, food security and elderly care through various partnerships.”
Performance impacted by challenging environment
RMB’s decline in profits was primarily due to additional credit provisions of R2.3 billion. These provisions were mainly taken against the performing book, with more than half arising from a more conservative forward-looking view, as required by IFRS9. The performing book coverage ratio increased from 96bps in June 2019 to 175bps, again reflecting the proactive and conservative provisioning approach. Non-performing loans remained relatively flat.
RMB showed an increase in net interest income from increased utilisation of working capital facilities, term lending growth from the prior year and higher average deposit balances. It also benefited from solid fee generation driven by arranging and capital market mandates. South African transactional volumes were under pressure in the last quarter due to the lockdown.
The Markets business was up 21% year on year. This was driven by a robust performance in the Broader Africa, specifically in Nigeria, as well as increased market activity on the back of dislocations arising from COVID-19. The commodities business delivered a solid performance benefiting from increased client volumes and commodity prices and credit trading continued to deliver good growth.
RMB’s investing activities’ performance was negatively impacted by impairments totalling R1bn raised on certain equity exposures. The private equity portfolio remains healthy with its estimated market value R3.3 billion above book value.
The Broader Africa portfolio continues to deliver growth, with a 9% increase in pre-tax profit as a result of strong in-country growth. Says Formby: “RMB in Nigeria, Botswana and Namibia delivered robust growth in their respective markets.”
End.
Note to Editor:
Follow this link to view FirstRand Limited’s results for the year ended 30 June 2020:
Contact:
Joandra Griesel, Rand Merchant Bank
082 462 6741
Sam Moss, FirstRand
082 490 9985
