Table of Contents
Key Points
- FirstRand faces higher loan provisions after UK court ruling on mis-sold car finance, potentially impacting 2025 earnings outlook.
- Analysts estimate FirstRand needs to raise provisions by $53 million to meet new unfair commission thresholds flagged by UK regulator.
- FirstRand expands footprint with HSBC South Africa takeover, while legacy UK legal risks mount under CEO Mary Vilakazi’s leadership.
FirstRand, a leading financial services group led by South African banker Mary Vilakazi, may be forced to boost provisions for mis-sold car loans in the UK after a key legal setback. The Supreme Court partly upheld findings against the group’s UK motor finance unit, spotlighting high commission structures that could qualify for compensation under new redress rules.
The Financial Conduct Authority (FCA) said on Sunday that it will launch a consultation on a potential compensation program for affected UK car finance customers. If approved, the scheme could cost lenders more than £9 billion ($12 billion). FirstRand has already made provisions of £127.4 million ($169.3 million) but may now need to revise those figures ahead of its financial year ending June 30, 2025.
FirstRand faces $53 million provision hit
One case, in particular, caught the regulator’s attention. The commission paid to the car dealer in that instance reached 55 percent of the total credit charge — a rate well above common benchmarks. FirstRand has stressed that such high commissions were rare, accounting for just 4 percent of all agreements across 18 years.
Still, the pressure is mounting. Analysts at Avior Capital Markets estimate the bank may need to increase its provisions by another £40 million ($53 million), to fall in line with the FCA’s potential “unfairness” threshold. In a statement, the bank acknowledged the impact this could have on its bottom line: “If the redress scheme materializes as expected, normalized earnings growth may land at the lower end of our low double-digit to mid-teens guidance range.”
Mary Vilakazi reshapes South African banking
FirstRand was founded in 1977 by Laurie Dippenaar and has since grown into a $23.6 billion financial institution. Dippenaar’s legacy continues through programs like the Laurie Dippenaar Scholarship, which supports promising African students pursuing studies abroad.
Under the leadership of CEO Mary Vilakazi, the bank has been actively growing its footprint. In June, it received regulatory approval to take over HSBC’s South African business — a move that includes absorbing client portfolios, staff, and assets. The acquisition reflects both FirstRand’s scale and HSBC’s gradual exit from markets where local banks are gaining ground.
Back in the UK, the latest court ruling follows last year’s decision that required MotoNovo to disclose more details about how dealer commissions were structured. Even with these legal challenges, investor sentiment has held firm.
