FirstRand Provisionally Reserves R5.8 Billion For UK Motor Finance Litigation Despite Strong Interim Earnings Growth

FirstRand reserves R5.8 billion for UK motor finance legal claims but reports 11% earnings growth and 18% dividend increase in 2026 interim results.

By: AXL Media

Published: Mar 5, 2026, 6:03 AM EST

Source: The information in this article was sourced from BusinessTech

Weathering Legal Headwinds In The United Kingdom

FirstRand is currently navigating a complex legal landscape in the United Kingdom centered on its motor finance subsidiary, MotoNovo. The group has proactively set aside a provision of R5.8 billion to address potential liabilities arising from a dispute over dealer commission arrangements. While the UK Supreme Court recently ruled that motor dealers do not hold a fiduciary duty to disclose specific commission details, it nonetheless found FirstRand liable for "unfair practices" regarding how those arrangements were structured. This legal hurdle has introduced significant operational expenses, including R333 million in legal fees during the most recent interim period.

Resilient Financial Performance Amid Provisions

Despite the multi-billion rand provision, FirstRand’s interim results for the six months ending December 31, 2025, demonstrated significant institutional resilience. CEO Mary Vilakazi reported that normalized earnings grew by 11% to R23.2 billion, while economic profits surged by 26%. This growth was primarily driven by strong momentum in deposits and advances across the group’s primary franchises, including FNB, RMB, and WesBank. The group’s diversified portfolio allowed it to maintain a high normalized Return on Equity (ROE) of 21.1%, enabling a substantial increase in the interim dividend to 259 cents per share.

Strategic Response To FCA Consultation

The future financial impact of the UK motor commission matter remains subject to an ongoing consultation by the UK Financial Conduct Authority (FCA). In October 2025, the FCA proposed an industry-wide compensation scheme, to which FirstRand has submitted a comprehensive response supported by economic specialists and King’s Counsel. The group expects a final determination from the FCA by the end of March 2026. Management has assured shareholders that even if the final compensation requirements exceed the current R5.8 billion estimate, the bank’s strong capital position will ensure the continued declaration of final dividends.