Rand Merchant Bank Annual Report

Rand Merchant Bank Annual Report

Rand Merchant Bank (RMB), the corporate and investment banking arm of FirstRand Bank Limited, delivered a resilient performance in the 2021 financial year, despite a challenging macro-economic environment. Disciplined origination and a resilient credit portfolio resulted in lower credit provisions raised compared to the previous year, which was the main driver of the performance.

RMB’s pre-tax profit is up 24% from June 2020, resulting in an ROE of 18.7%, up from 15.4% at June 2020.

Says RMB CEO James Formby: “We are pleased to see our profits back above pre-Covid June 2019 levels. We have achieved this despite increasing credit provisions and other reserves which means we enter the 2022 financial year with confidence to capitalise on growth opportunities.”

Solid business performance

RMB’s banking business (which incorporates corporate transactional banking and investment banking and advisory activities) had a solid year in a market characterised by lower corporate activity and appetite to borrow. Profit before tax is up 19%, driven by lower year-on-year credit provisions raised and a principal investment realisation.

The markets business delivered an excellent performance growing profit before tax 28%, driven by a significant rebound from fixed income and specifically the inflation desk which benefited from a normalisation of market conditions, market making and client facilitation.

Private Equity rebounded with profit before tax up 56%, benefiting from strong gross annuity income and a limited number of realisations. 

The rest of Africa business continues to deliver growth, with a 39% increase in profit before tax, and is now contributing 30% to RMB’s overall profits. This performance was largely driven by provision releases and good transactional volume growth given new client acquisition, partially offset by a muted contribution from the Nigeria-London corridor flows due to lower risk appetite from international clients.

Deposit margins came under pressure because of the numerous rate cuts introduced locally and in most of the African jurisdictions in which RMB operates.

Rebuilding the economy with our clients

Overall, RMB’s performance demonstrates that its strategy to put clients at the centre of the business is working with primary banked clients showing good growth during the year. 

“I would like to thank our clients for continuing to choose RMB as their trusted banking partner,” says Formby. “As economies start to normalise, we are well positioned to support our clients and enable their growth. We are particularly pleased to be at the forefront of supporting and advising our clients on the transition to a more climate friendly, lower carbon and sustainable, socially inclusive economy through our Sustainable Finance and ESG Advisory teams.”

In the past year RMB arranged a R1bn sustainability-linked bond for Redefine Properties – the largest amount raised so far by a South African Real Estate Investment Trust in the growing sustainability-linked bond market in South Africa. RMB also arranged the first African State-Owned Company (SOC) sustainability-linked bond for Rand Water, valued at R1.2bn. This bond marked several African firsts, including becoming the largest South African rand denominated sustainability-linked bond issued, and the first ever to an African SOC.