FirstRand has $1 bln to fund Africa growth plan

By Helen Nyambura-Mwaura JOHANNESBURG (Reuters) - South Africa's FirstRand, Africa's second-largest lender by stock market value, said it has a $1 billion kitty to pursue an expansion drive that helped boost earnings by 20 percent in the past year. Like its competitors, FirstRand has been keen to increase its presence across Africa, but has adopted a more cautious stance to purchases, failing in recent acquisition attempts in west African nations Nigeria and Ghana. But it is still keen to grow and although Africa outside its main South African market made up just 11 percent of its structured lending book, FirstRand said advances in the region grew 75 percent while revenue expanded by 26 percent. FirstRand said it has 10 billion rand in surplus capital that it would deploy over the next two years to expand its smaller African businesses. "We grow organically, just like we are growing organically in Zambia, Tanzania, India and Nigeria. Those platforms obviously take long to fully establish, but they are doing pretty well," Chief Executive Sizwe Nxasana told Reuters, adding FirstRand would consider small purchases where they made sense. Other South Africa-based lenders are also busy expanding their presence across the continent. Bigger rival Standard Bank has businesses in 18 African countries and Barclays Africa, formerly known as Absa, in August took up eight operations that were held by its British parent. Nedbank, fourth of the so-called "Big Four" lenders, is also expected to exercise its right to take up a 20 percent stake in pan-African lender Ecobank from as early as November 2013. FirstRand's deal to purchase Merchant Bank Ghana that would have given it a footprint in the oil-producing country fell through in July. But the bank still managed to grow its exposure in the west African country to 2.3 billion rand. MEASURED APPROACH "They still have a stated African strategy, but it's taking longer to play out," said Louis Chetty, a banks analyst at asset manager Momentum. "Building an African strategy is always going to be difficult and they are taking a measured approach." In Nigeria, where the lender is one of a syndicate of banks picked to provide Dangote Industries with $3.3 billion for a new plant and where authorities have relaxed regulations covering its merchant banking licence, Nxasana said FirstRand would be launching its FNB Commercial brand. It has in the past shown interest in acquiring one of three Nigerian nationalised banks that are up for sale. FirstRand has also been on a growth spurt at home, where its retail arm, FNB, added 1.1 million accounts over the year after a marketing plan targeting competitors' customers. FNB's earnings grew 20 percent while Rand Merchant Bank, the corporate and investment banking arm, increased by 23 percent - boosting group earnings by an expected 20 percent, propelled by loan income and earnings from fees and commissions. FirstRand said diluted normalised earnings per share, which exclude certain one-time items, came in at 271.8 cents in the year to end-June against 225.8 cents a year earlier. Net interest income climbed 13 percent to 24.7 billion rand, while impairments fell 5 percent to 4.8 billion. After several years of increased lending to low-income borrowers, South African banks are taking a more measured approach to unsecured loans - high-interest loans that are not backed by collateral. Nxasana said the bank was creating more provisions and pushing for better loan collections. "Given the tough economic environment ... we've created credit overlay provisions in anticipation of a deteriorating economic environment," he told Reuters. The central bank has said levels of unsecured credit - at slightly above a tenth of total banking assets - are unlikely to cause much harm to the wider South African financial system. FirstRand shares had gained 1.7 percent by 1133 GMT, bringing total gains so far this year to 2.7 percent, while the banking index is down 2.6 percent.