Africa’s biggest bank expects 20% profit hit from Covid-19

FirstRand Ltd., Africa’s largest bank by market value, expects full-year earnings to decline by more than 20% as the fallout from the coronavirus pandemic spurs a jump in impairments.

Normalized earnings per share for the 12 months through June will be lower than the 4.97 rand reported a year earlier, the Johannesburg-based lender said in a statement on Thursday. A full results report will be released on Sept. 10.

A “materially higher credit-impairment charge” is being driven mainly by forward-looking assumptions to model expected credit losses, while there has also been a deterioration in its lending books, it said. Lower interest rates weighed on lending income, while non-interest revenue growth “showed a marked decline” as a lockdown in South Africa resulted in a drop in transaction volumes.

The profit warning from FirstRand, the only of the big four South African banks to report earnings outside the calendar year, follows similar trading updates from its Johannesburg-based peers, which have all warned of a similar decline for the first six months of the year.

The economy could contract 7% this year due to shocks caused by the virus and a lockdown to curb its spread, according to the central bank. That would be the most in at least six decades,

FirstRand fell 2.3% as of 2:21 p.m. in Johannesburg, leading declines on the five-member South African banks index, which was down 1.4%.