New FirstRand strategy lauded

Johannesburg - Analysts believe the appointment of Sizwe Nxasana as FirstRand CEO may herald a new strategic focus for a bank that has lagged its peers.

FirstRand is the listed parent company of First National Bank, Wesbank, Momentum and Rand Merchant Bank (RMB).

Earlier this week, FirstRand announced its headline earnings would fall by between 28% and 33%. RMB will again suffer losses, particularly in its offshore trading operations, with its headline earnings expected to slump by between 50% and 55%.

In announcing the trading update, Nxasana indicated he would shift the group's focus to South Africa and the rest of the continent.

RMB CEO Alan Pullinger also spoke about a "new game plan", with RMB getting out of many of its higher risk international businesses.

In a note to clients, Stephen Meintjes, head of research at Imara SP Reid, said: "We are pleased that the CEO-designate is planning to prioritise the Africa strategy - which will, however, take time to yield significant benefits."

FirstRand has been slow to expand in Africa, and analysts believe the group has fallen behind the likes of Standard Bank.

Asked whether FirstRand could still make up for lost ground, Meintjes told Fin24.com: "The Africa strategy will take time to bear fruit, but it is a big place with dozens of countries and will be a big story over the next 10 years."

Meintjes kept a "hold" recommendation on the stock.

Analysts at Deutsche Securities retained their "buy" rating on FirstRand, but cautioned clients that it would still be some time before the results of the new strategic focus will come through.

A third analyst, who declined to be named, agreed that the African strategy should become a priority.

He also expect FirstRand to adopt a more "centralised" management model in an attempt to improve risk management.

- Fin24.com

*Ashton holds ordinary and preference shares in Standard Bank.