Mary Vilakazi-led FirstRand flags extra UK provision risk

FirstRand, a leading financial services group led by South African banker Mary Vilakazi, warned that it may need to increase its UK provision linked to the ongoing motor finance redress process, as tensions rise with the Financial Conduct Authority in London. 

In a voluntary investor update, the bank said it is still analyzing the FCA’s Oct. 7 consultation paper on UK motor finance commission models and potential consumer compensation. FirstRand said the FCA proposal appears materially wider than it expected and may have a more extensive financial impact on banks and lenders operating in the UK. 

The group stated that it disagrees with several outcomes outlined by the regulator and flagged that a broad interpretation could restrict supply of consumer credit across the UK banking market, adding another risk layer for the UK economy heading into 2025.

Possible hit to earnings 

FirstRand said it could be forced to take an additional charge in the current financial year if the final FCA scheme includes most pre-2021 motor finance loans with discretionary commissions, and part of the period post-2021 where fixed commission models were used. 

However, the bank stressed that no additional provision will be raised until the FCA publishes its final framework. Management also said it is actively engaging the FCA and will consider its legal options if the plan is deemed unfair or punitive.

Background and performance

FirstRand, founded in 1977 by Laurie Dippenaar, is Africa’s largest financial services group with a market value of about $19.8 billion. The group owns First National Bank, Rand Merchant Bank, WesBank, and the UK-based lender Aldermore. It operates in South Africa, the UK and several African markets. 

Vilakazi became CEO in April 2024, making her one of the highest-profile women in global banking. Under her leadership, the lender has maintained capital discipline while selectively pushing growth in South Africa, the UK and sub-Saharan Africa. 

For the year ended June 30, annual profit rose 10.05 percent to R45.1 billion ($2.6 billion). In August, FirstRand cautioned that UK provisions could rise following a court ruling on mis-sold car finance — now among the biggest regulatory risks facing UK lenders into 2025.