‘Competition in banking is alive and well’ – FNB CEO


Competition for customers in the entry-level space is “alive and well” according to FNB CEO Jacques Celliers. The bank now has 5.95 million eWallet customers – who do not hold any other products with the bank – and another six million mid-market retail clients who earn under R37 500 a month.

TymeBank shareholder ARC Investments this week revealed that the start-up digital bank, which has a strong partnership with Pick n Pay, has crossed the five million customer mark.

Shoprite said last month that it had “almost two million” registered Money Market accounts. These are now fully-fledged bank accounts and can make and receive payments. The account uses Grindrod Bank’s licence and technology (earlier this year, African Bank announced that it would buy Grindrod Bank for R1.5 billion). Neither of these two accounts charge a monthly fee.

The aggressive but stealthy move by Shoprite into this space signals that it sees a clear opportunity to build a deeper relationship with its customers. There is also a clear profit motive as getting its customers to use the Money Market account means it does not have to pay bank interchange fees as it does when they tap their cards from another bank.

FNB’s challenge

Celliers does point out that the cost of acquiring customers in the entry-level segment is a “big problem”.

Its eWallet product has “a simple origination model” and provides it with a nice lever into the segment.

The number of eWallets (external to FNB customers) is up 6% in the past year. In addition, there are another 1.65 million eWallets belonging to existing FNB customers. Traditional rivals with less mature technology stacks have had to play catch-up to compete in the space.

He admits that the bank “can do better at quality identification in origination” and it wants to use its ecosystem more to improve this.

For example, people who bank with FNB may have ‘downstream’ employees who are paid using eWallet. If the bank begins to understand that relationship better, it would be able to grant a simple loan or offer a simple insurance policy to that person.

It will continue to pursue this approach of using a business’s salary float to fund eWallets. This gets money into the system. This gives it enough runway to build a sustainable, rewarding proposition for this part of the market.

Celliers says it is “very easy to get numbers, but not so easy to make money”.

In the premium or ‘private’ segment, the bank continues to take market share, with customer growth of 8% to 1.73 million. In this portion of its base, it grew deposits by 10% and advances by 8%.

He admits there are still “under-utilised credit opportunities” as well as “lots of opportunity” in the family construct. It has been pushing this hard in recent years as part of its eBucks rewards programme. Celliers says the market has and will “take some time to compete with us” in this space.


He is excited about the potential of exporting this private banking model into its other African operations where the “premier market is under-solutioned”. He says the bank will have “more efficient leverage in smaller markets especially” as it can use the platform it has built for its South African customers.

It now has retail customers using, on average, three of its products with the investments and insurance units both kicking on. Insurance income was up 29%.

Full-year results

Normalised earnings across the FirstRand group in the year to end-June 2022 are, at R32.7 billion, now firmly back above pre-pandemic levels.

This is 17% above the peak in 2019 (R27.9 billion). Before provisions, operating profit was up 6% from last year to R53.8 billion. These are also higher than the 2019 peak.

It says the group remains “cautious on origination, which resulted in lower year-on-year growth in advances relative to the sector”.

In FNB, “there was stronger momentum in retail advances growth in the last quarter of year, and this is expected to continue”. Its credit loss ratio halved to 0.56% and it says “all portfolios are now at or below through-the-cycle levels”.

Deposits grew quicker than advances, with 9% growth in the FNB’s retail business and 18% in its commercial one.

Its best-in-class return on equity of 20.6% is in the middle of its target range.

Read: FirstRand declares record dividend payout

It will pay its highest final dividend ever (185c per share), with the annual dividend up 30% to 342c.

It will also pay a special dividend of 125c per share.

In total, it will return R26.2 billion to shareholders.

Listen: FirstRand CEO Alan Pullinger discusses the results (read transcript)

Listen: RMB chief James Formby outlines FY results as he ponders his exit (read transcript)

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