Firstrand CEO sees greens shoots of economic recovery for SA

FirstRand, one of South Africa's leading financial institutions, has reported a 20 per cent drop in basic and diluted headline earnings per share for the half year ended December 2020. The group attributes this decline to the challenging operating environment caused by the Covid-19 pandemic. Despite the difficulties, CEO Alan Pullinger remains optimistic about the future, citing green shoots of economic recovery. In a recent interview with CNBC Africa, Pullinger discussed the company's performance, the impact of the pandemic on their business operations, and the outlook for the South African economy. Pullinger highlighted the significant difference between the pre-pandemic period and the current environment. He noted that while the results may not be directly comparable, there has been a strong turnaround in the business from June 2020 to December 2020. This turnaround, particularly in the domestic market driven by First National Bank (FNB), has given the company optimism amidst the challenging conditions. Additionally, the company's operations in the rest of Africa have also shown improvement, with mature subsidiaries in countries like Botswana and eSwatini performing well. However, Pullinger acknowledged that smaller, younger subsidiaries in Sub-Saharan Africa faced tougher conditions. One of the key challenges FirstRand faced was the increase in non-performing loans, which rose by 36% compared to the prior reporting period. Pullinger explained that they had anticipated this increase due to the impact of relief measures on customer accounts. As these relief measures are phased out, the company expects the situation to normalize and non-performing loans to decrease. He emphasized the difficulty in resolving these loans amid the pandemic but expressed confidence in a turnaround in the near future. The discussion also touched on the government's loan guarantee scheme, which was aimed at supporting small businesses during the pandemic. Pullinger revealed that the banking sector had managed close to 20 billion rand under the scheme, but noted that it was reaching its end. He indicated that if the scheme were to be reintroduced or modified, it would require government intervention, as the banks had limited control over its continuation. Looking ahead, Pullinger commented on the government's efforts to reopen the economy and stimulate economic activity. He praised the targeted lockdown measures and the country's ability to adapt to living with Covid-19. He highlighted the January 2021 data, which showed the impact of adjusted lockdown levels on transactional activity. Despite these challenges, Pullinger expressed optimism about the economy, citing 'green shoots' particularly in the mining sector and infrastructure projects. He commended the government's focus on fiscal and structural reforms outlined in the recent budget, emphasizing the need for execution and monitoring of these initiatives. In conclusion, Pullinger's outlook remains positive, despite the challenges faced by FirstRand and the broader South African economy. The company is cautiously optimistic about the future and remains committed to navigating the recovery process with resilience and determination.