FirstRand Braces for UK Regulatory Hit with R5.8 Billion Provision Amid Strong Profits

FirstRand sets aside £240 million for UK motor finance claims while reporting an 11% rise in normalized earnings and 18% dividend growth in its latest results.

By: AXL Media

Published: Mar 7, 2026, 4:42 AM EST

Source: BusinessTech

The MotoNovo Legal Challenge and UK Supreme Court Ruling

FirstRand is currently navigating a complex legal landscape in the UK involving its motor finance subsidiary, MotoNovo. The dispute centers on "unfair practices" regarding commission arrangements between motor dealers and the lender. While the UK Supreme Court recently ruled that dealers do not necessarily owe a fiduciary duty to explicitly highlight these commissions, it nonetheless found FirstRand liable for non-disclosure. In response, the group has set aside a R5.8 billion provision—their "best estimate" of the compensation due—though the final figure remains subject to an ongoing industry-wide consultation by the Financial Conduct Authority (FCA).

Resilient Financial Performance Despite Legal Headwinds

In its interim results for the six months ending December 31, 2025, FirstRand demonstrated remarkable balance sheet strength. Normalized earnings rose by 11% to over R23.2 billion, while economic profits saw a significant 26% surge. CEO Mary Vilakazi attributed this growth to robust momentum in deposits and advances, alongside strategic capital and liability optimization. This financial health allowed the board to declare an 18% increase in the interim dividend, signaling to shareholders that the UK legal troubles, while significant, do not currently threaten the group's overall stability.

FNB South Africa Surges While Regional Portfolio Falters

FirstRand’s core retail brand, FNB, remains the group’s primary engine, delivering a 10% increase in profit before tax (PBT) within South Africa. This was supported by an impressive Return on Equity (ROE) of 41%, driven by improved retail credit performance and non-interest revenue growth. However, the broader African portfolio faced headwinds, with PBT declining by 12%. Constrained client activity and rising funding costs in Botswana, alongside technological upgrade costs in Ghana, weighed heavily on regional results, highlighting the volatility of expanding into diverse African markets.