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FirstRand Limited – Potential for South African Investors

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FirstRand Limited (JSE: FSR), also known as FirstRand Group, is the holding company of FirstRand Bank and a South African financial services provider. It is one of the financial service providers authorized by South Africa’s national banking regulator, the Reserve Bank of South Africa.

FirstRand Limited operates in South Africa, some sub-Saharan African markets, the United Kingdom, and India through its portfolio of integrated financial services businesses.

The group’s track record of achieving superior shareholder returns has been accomplished through a combination of organic growth, acquisitions, innovation, and the development of new companies.

About FirstRand

FirstRand Limited offers retail, financial, business, and public sector customers in South Africa and other African countries banking, insurance, and investment products and services.

The FirstRand Group emerged in 1998 from an investment bank that had been in operation since the 1970s. First National Bank, Rand Merchant Bank, and Momentum Insurance and Asset Management merged to create the group. The South African Reserve Bank, the country’s banking regulator, classifies it as a “locally controlled bank.”

First National Bank (FNB), a retail and commercial bank; Rand Merchant Bank (RMB), a corporate and investment bank; WesBank, its instalment loan firm; and Ashburton Investments, its investment management business, comprise the company’s portfolio of financial services subsidiaries.

FirstRand has the following listings:

FirstRand IPO

On May 25, 1998, FirstRand listed itself on the JSE. The new group was formed on April 1, 1998, due to a merger of the financial services interests of RMB Holding and Anglo American Corporation of South Africa Limited to achieve the aim of a single financial services grouping.

Momentum Life Assurers Limited, First National Bank Holdings, and the Southern Life Association Limited were all listed on the JSE.

Momentum, the vehicle used to effect the merger, formed FNB and Southern Life as wholly-owned subsidiaries.

Momentum was renamed FirstRand Limited and listed on the Johannesburg Stock Exchange on May 25, 1998, with Anglo American and RMB Holdings each owning 20.43 percent and 25.03 percent of FirstRand’s approved capital. Anglo American has since sold its entire stake.

Following the merger, Rand Merchant Bank and FNB merged to create FirstRand Bank Limited, with the two units continuing to trade as subsidiaries of FirstRand Bank Limited, and Momentum’s insurance company was transferred to Southern Life to form FirstRand Insurance Limited.

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FirstRand Investments

FirstRand Group invests through five major subsidiaries. As a result, these subsidiaries and their subsidiaries are part of the FirstRand Group.

1. FNB

FNB represents FirstRand’s retail and commercial operations in South Africa and around the African continent. Its franchise is expanding as a result of a compelling customer proposition that includes a wide variety of creative financial services products.

2. RMB

RMB represents the group’s operations in corporate and investment banking in South Africa, the African continent, and India.

It provides clients with value-added consulting, funding, trading, corporate banking, and principal investment strategies.

RMB has ties to a network of retail banks in 25 African countries, as well as divisions and representative offices in Namibia, Botswana, Nigeria, Angola, Kenya, the United Kingdom, India, China, and the Middle East, as the corporate and investment banking arm of FirstRand Bank Limited (which is wholly owned by FirstRand Limited).

3. WesBank

WesBank represents FirstRand activities in instalment credit, fleet management, and related services in South Africa’s retail, financial, and corporate sectors. WesBank’s market-leading position is the result of long-standing relationships with leading automakers, suppliers, and distributor groups, which provide WesBank with a market-leading point-of-sale presence.

4. Aldermore

Aldermore is a UK-based specialist lender and savings bank that has expanded substantially as a result of a straightforward strategy to provide easy financial products and solutions to underserved small and medium-sized enterprises (SMEs), as well as homeowners, skilled landlords, and savers.

Aldermore specializes in five types of lending: asset financing, invoice finance, SME commercial mortgages, residential mortgages, and buy-to-let mortgages. Deposits from UK savers largely back it. With no branch network, it serves consumers and intermediary partners online, over the internet, and in person through a network of regional offices across the United Kingdom.

a. MotoNovo

MotoNovo, a member of the Aldermore Group, is one of the UK’s fastest-growing independent vehicle finance firms, specializing in financing solutions such as hire purchase (HP) and personal contract purchase (PCP).

5. Ashburton Investment

Ashburton Investments, which was introduced in 2013 as part of FirstRand’s plan to tap wider financial services benefit pools, and represents the group’s asset management activities.

Ashburton Investments provide opportunities for investors to engage in private equity, green energy, and credit investments.

6. DirectAxis

DirectAxis provides a variety of items, including personal loans and life and short-term insurance.

DirectAxis also offers a free and safe financial wellness app, Pulse, that allows customers to check their credit score and learn how to improve it.

FirstRand business strategy

The FirstRand portfolio of leading financial services franchises offers a comprehensive range of transactional, leasing, savings, and insurance products and services.

The franchises operate in markets and segments where they can have sustainable and differentiated client-centric value propositions by leveraging the group’s related distribution networks, product expertise, licenses, and operating platforms.

FirstRand implements its business strategy by progressive and imaginative thinking, which is supported by an owner-manager culture and the disciplined distribution of financial capital.

FirstRand stock analysis

Currently, FirstRand is trading at 5366 ZAR. The stock has improved significantly from its lowest low of November at 4547. The stock dipped a bit at the start of May but is gaining strength.

According to market analysis, the stock has a bullish long-term trend; however, it can dip below 5000 ZAR.

In March 2021, it reported a 20% decline in half-year profit, at the bottom end of its forecast range, and restored its dividend, paying out 110 $0.0730 per share to investors.

Bottom line

FirstRand has a huge market potential for South African investors. The diverse investment portfolio makes it stand out. However, before jumping to any conclusion, study its market analysis.

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