FNB lifted its earnings by 8% domestically with profit before tax increasing by 22% in the Premium segment and by 15% in the Business segment.
The bank’s Consumer segment reported a 6% decline and including the FNB Africa performance, overall FNB earnings increased 5%.
According to the bank, the performance is pleasing when considering the muted levels of credit demand, low levels of business and consumer confidence and subdued economic growth in the reporting period.
FNB remains deeply committed to expansion in Africa and as a result is incurring ongoing investment costs.
The product simplification and re-pricing in the Consumer segment has already had a positive impact and positions the business well for the year ahead. Customer numbers increased 4% from 7.48m in June 2016 to 7.8m in June 2017.
Deposits increased by 13% (SA) driven by strong customer support for the bank’s investment and deposit accounts. The bank’s lending to home buyers seeking lower-value mortgages from FNB’s Housing Finance business increased strongly by 11%.
These conditions placed greater emphasis on cost control with cost-to-income improved to 51.5% (SA).
Costs increased 6% in the South African business and 7% when combining FNB SA with the African operations.
Greater efficiencies through reconfiguration of branches were achieved across the branch network with transaction minutes falling by some 20%, whilst, sales and advice minutes are becoming a larger component of branch activity.
Efficiencies are further motivated by the bank’s strong leadership in digital and electronic banking. The bank’s e-race toward efficiencies is continuing to drive forward based on internal digitisation projects and customer-facing projects particularly in our App space.
FNB’s relatively new Insurance business already has over 3.2 million active policies. With its significantly lower-cost of acquisition, FNB Life has enormous potential to contribute materially to the bank’s performance in coming years.
FNB Connect is exceeding original expectations. Currently, Connect has acquired almost 10% of our customer base who meet product qualification criteria. This is a significant achievement as all qualifying customers have existing agreements with other service providers.
The number of customers using the FNB Banking App has increased from 1.4 million in June last year to just over 1.8 million in June 2017. However, the volume of financial transactions has significantly increased (up 68%) from 59 million in June last year to just under 100 million in June this year.
While income from our International operations accounts for less than 5% of FNB’s overall profit, strong negative macro-economic factors resulted in a 32% decline in profit before tax. There was a modest increase in advances of 3% with NPL’s and impairments higher in line with expectations given the prevailing credit cycle.
Looking forward, a recovery from the Consumer segment is anticipated as product sales increase. The Business and Premium segments remain well placed for growth.
Jacques Celliers, First National Bank Chief Executive Officer