FirstRand says there will be cost cuts, but no staff cuts
FirstRand has become the analysts' favourite among South Africa's "big four" banks. In a climate of rising costs and low credit demand, it's regarded as the bank with the best earnings momentum and considered poised to benefit the most from any improvement in local economic conditions.
FirstRand's cash cow is First National Bank, its retail division, which in the last six months has increased pre-tax profits by 16% and deposits by 8%. FNB has been accumulating "dry ammunition for a rainy day", CEO Michael Jordaan said recently, building up its capital reserves in order to expand its domestic retail franchise further and especially to grow in the rest of Africa.
"We believe the continent will have significant opportunities in the next 18 months", said Mr Jordaan. "Right now Tanzania and Nigeria are priorities, but we are also interested in Ghana and Uganda." FNB already has a presence in 6 African countries including Namibia, Zambia and Mozambique and it expects to be granted regulatory approval to operate in Tanzania as well very soon.
Expansion comes at a price. Both FirstRand and its subsidiary FNB have pledged to tighten spending this year and reduce their cost to income ratio, but not at the expense of jobs.
Mr Jordaan said there are no large-scale retrenchments planned at FNB. "We have got to continue to focus on cost-containment but we also have growth opportunities," FirstRand Ceo Sizwe Nxasana said. "We are able to mitigate against job losses by redeploying the people in the growth areas."
FNB had a similar message: the bank has been investing in new technology in order to "improve efficiency, streamline and refine processes", spokeswoman Virginia Magapatona said. Even when the changes "necessitate a review of staff or whenever positions are closed in the bank's drive for greater efficiency, FNB's policy is that every possible step will be taken to find alternatives and more mutually rewarding employment".
No redundancies coming
FirstRand group also moved to quash the rumours that have been going around of imminent staff cuts, despite the bank's growth prospects and upbeat forecasts.
It is a sign that the market is tense and has not yet recovered from Standard Bank's shock announcement late last year that it would retrench 2,000 people.
The pace is sluggish and "employers continue to report conservative hiring plans for the next three months," according to Peter Winn, managing director of Manpower SA. The latest Manpower Employment Outlook Survey shows that 11% of South African employers expect to hire more staff and 5% fewer, while the remaining 84% expect no change in the April to June quarter.
