FirstRand’s UK future hinges on motor finance decision, CEO says

FirstRand said the fate of its UK unit remains in the balance as it awaits a final ruling over the amount of compensation banks have to pay to consumers over claims they were missold car loans.

“We haven’t made the decision, because the Financial Conduct Authority ultimately has to come with a final redress,” chief executive officer Mary Vilakazi said in an interview from Davos. “If a number of the substantive issues that we raised are not addressed, the amount that we are looking at is such that our business going forward is not going to have the capital resources that are needed to support lending in motors.”

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The UK’s Financial Conduct Authority announced in October that it expects some of the country’s biggest auto lenders to spend £8.2 billion ($11 billion) to compensate customers who were missold car loans. Getting the refund program up and running will cost lenders another £2.8 billion, bringing the total cost to £11 billion.

FirstRand is among a raft of firms disputing the proposal, saying it fails to take proper account of a UK Supreme Court ruling that banks should only pay compensation where the most serious abuse was found.

The firm has set aside more than £200 million to cover any provisions and other related expenses linked to the saga but said in November that the proposed redress could require it to increase the provision even further.

The South African bank offers motor financing through its MotoNovo unit in the UK, which it acquired in 2006. FirstRand’s overall business in the UK comprises about 10% of its earnings and about 20% of its balance sheet, it has said previously.

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