Africa’s Biggest Bank Expects 20% Profit Hit From Covid-19
FirstRand Ltd., Africa’s largest bank by market value, expects full-year earnings to decline by more than 20% as the fallout from the coronavirus pandemic spurs a jump in impairments.
Normalized earnings per share for the 12 months through June will be lower than the 4.97 rand reported a year earlier, the Johannesburg-based lender said in a statement on Thursday. A full results report will be released on Sept. 10.
A “materially higher credit-impairment charge” is being driven mainly by forward-looking assumptions to model expected credit losses, while there has also been a deterioration in its lending books, it said. Lower interest rates weighed on lending income, while non-interest revenue growth “showed a marked decline” as a lockdown in South Africa resulted in a drop in transaction volumes.
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The profit warning from FirstRand, the only of the big four South African banks to report earnings outside the calendar year, follows similar trading updates from its Johannesburg-based peers, which have all warned of a similar decline for the first six months of the year.
The economy could contract 7% this year due to shocks caused by the virus and a lockdown to curb its spread, according to the central bank. That would be the most in at least six decades,
FirstRand fell 2.3% as of 2:21 p.m. in Johannesburg, leading declines on the five-member South African banks index, which was down 1.4%.
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