FirstRand eyes India expansion as law changes for bank investors

FirstRand Ltd, Africa's largest banking group by market value, said it will expand in India after receiving regulatory approvals.

"We have been given a wider jurisdiction by the Reserve Bank of India," Sizwe Nxasana, chief executive officer (CEO) of the Johannesburg-based group, said on Tuesday. Having been allowed just one consumer banking outlet in Mumbai, the lender can now expand in a 100-km radius from that foothold, and is also considering converting from a branch to a subsidiary licence.

India is encouraging investment to help fund improvements in infrastructure. This year alone, spending will increase by Rs 0.7 lakh-crore. The International Monetary Fund projects growth in India at 6.3 per cent this year compared with 2.1 per cent for South Africa. It has also applied for a licence in Ghana and "hopes to be up and running by mid year," said Nxasana, who departs as CEO in October. "We are still looking at opportunities in Kenya, but there's no license application yet."

FirstRand's net income for the six months through December rose 17 per cent from a year earlier to 10.3 billion rand ($847 million) after it increased loans to a growing customer base and fee income climbed.

The banking group, with operations in nine African countries, runs investment and consumer banking, asset management and vehicle financing businesses. It is expanding deeper into the continent to tap faster economic growth.

FirstRand's investment bank unit, Rand Merchant Bank helped sell more bonds than any other South African lender in the past year. Its WesBank unit is the country's largest provider of auto loans.

"Earnings growth momentum is slowing," said Greg Saffy, head of Cast Iron Capital, who left RMB's Johannesburg-based joint venture with Morgan Stanley at the end of 2014. "Stripping out one large private equity realization, Rand Merchant Bank's earnings fell year on year and Wesbank's results were flattered by currency translation. FirstRand, on our numbers, trades at a 40 per cent premium to Standard Bank which is no longer justified."