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Strong interim results as RMB invests for impact via sustainable finance, infrastructure

Strong interim results as RMB invests for impact via sustainable finance, infrastructure
02-03-23 / Tau kaVodloza

Strong interim results as RMB invests for impact via sustainable finance, infrastructure

Johannesburg - Rand Merchant Bank (RMB), the corporate and investment banking arm of FirstRand Limited, delivered strong interim results to December 2022, as it ramped up its transition and infrastructure financing and continued to grow its broader Africa business.

“We are increasingly focused on making a positive, real-world impact by addressing South Africa’s most pressing needs. Working with our clients, through transition advisory and financial support, we want to make a meaningful contribution towards delivering socio-economic growth,” says RMB CEO Emrie Brown.

RMB delivered 25% growth in normalised profit before tax (PBT), reflecting a strong operational performance across the portfolio. A return on equity of 22.4% was achieved – up from 20.1% at December 2021.

Investing for impact and growth

RMB increased its infrastructure funding, facilitating investment predominantly in private power.

The changes in the regulatory environment have enabled a significant increase in the number of private sector-led power projects in South Africa. RMB has played a leading role in supporting its clients in this space by providing long-term funding to accelerate the implementation of projects ranging from rooftop solar solutions which can be owned and/or leased, long-term power purchase agreements with independent power producers, and short-term contracts with energy traders. 

According to Brown, the private renewable energy projects currently under development will go a long way to alleviate power shortages currently experienced. She adds that RMB at present has a pipeline of over 5 000MW. “This enables clients to have access to reliable power supply to ensure they positively contribute to our economy.”

In the six months to December 2022, RMB’s Sustainability Finance and ESG Advisory teams facilitated transactions to the value of R17.3bn, adding to the R26.41bn facilitated over the previous financial year.

Says Brown: “ESG client solutions remain a key growth area in South Africa, and RMB is committed to facilitating sustainable finance transactions of R100bn by next year, and R200bn by 2026.  We believe the opportunity also applies to our broader Africa jurisdictions, where the team has already started to engage with clients.”

The funding that RMB provides that has a real-world positive impact is wide ranging. From a social perspective, RMB arranged Africa’s award winning R1.143bn first gender-linked bond and a social loan to deliver affordable quality purpose-built student accommodation.

Resilient performance across businesses and regions

The results reflected an overall strong business performance.

The Banking business (incorporating investment banking and corporate transactional banking) grew by 18%. Investment banking benefited from robust core average advances growth of 21% and resilient fee income. The transactional banking business delivered 15% growth in average deposits and sustained growth in primary-banked clients in a highly competitive environment.

Private equity delivered strong growth of 18% in gross annuity income, and benefited from a material realisation.

The Markets business showed a mixed performance with resilient growth in revenues, driven by asset-class and geographical diversification, and overall performance impacted by investment spend. Client activities in broader Africa remained robust, offset by significant shifts in market dynamics and reduced client flows domestically. The business continued to invest in RMB London and has established a broker dealer in the US. These investments are key to RMB’s broader Africa strategy.

Ashburton Investments benefitted from increased inflows and an improved investment performance. Assets under management in SA grew 11%.

The broader Africa portfolio remains key to RMB’s growth and delivered a strong growth in PBT, which represents 25% of RMB’s overall PBT. Ongoing primary-banked client acquisition assisted average deposit growth, and deposit margins improved on the back of interest rate increases. Structuring and secured financing in West Africa provided a meaningful uplift – as did emerging-market distribution activities to the UK client base. 

An important focus remains the bank’s investment in the modernisation of core platforms to enhance RMB’s digital offering to clients, including growing the broader Africa franchise through platform investment.

Concludes Brown: “RMB is well positioned for sustainable earnings growth and future-focused to invest for positive impact in all our jurisdictions.”

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