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Voluntary update to shareholders on the UK motor commission matter
FIRSTRAND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1966/010753/06)
JSE share code: FSR; ISIN: ZAE000066304
NSX share code: FST
JSE company code interest rate issuer: FSDI
LEI: 529900XYOP8CUZU7R671
(FirstRand or the group)
Voluntary update to shareholders on the UK motor commission matter
The group refers shareholders to its statement on the UK motor commission matter as part of the
publication of its interim results on 5 March 2026.
FirstRand undertook to reassess next steps and the corresponding provision only once the UK's
Financial Conduct Authority (FCA) had published its final proposed redress scheme. The FCA's policy
statement (the statement) was issued on Monday 30 March 2026.
The group has now undertaken a comprehensive assessment of the statement. The legal teams and
economic specialists that provided input to the FCA's consultative process have also reviewed the
Statement.
FirstRand acknowledges that whilst the FCA has made some changes to the scheme, that can be
viewed as responses to issues raised by the group and other lenders during the consultative period,
any mitigation arising from these changes has been more than offset by other amendments. These
amendments are problematic in that they result in a financial impact above the group's expectations.
Therefore, FirstRand remains firmly of the view that for the group the final redress scheme proposed
by the FCA is disproportionate and unfair. The group's position on some of the remaining material
flaws in the redress scheme is outlined below:
- The UK Supreme Court (SC) was noticeably clear in its judgment on unfairness, as it
pertained to the Johnson case, stating that multiple factors on a case-by-case basis must be
taken into account for "unfairness" to be applied. The FCA however is applying a different
legal interpretation, listing the non-disclosure of Discretionary Commission Arrangements, a
commercial tie or a high commission as unsubstantiated standalone factors which separately
result in unfairness. This results in a much larger number of the groups' contracts now
included in the redress scheme compared to the group's original estimate which had been
mapped against the SC ruling.
- The FCA has applied an unsubstantiated hybrid redress calculation in the final scheme, which
is not loss based, resulting in instances whereby, once applied, the effective rate charged for
lending to customers does not cover operational costs, bad debts and cost of funds.
- Previously the FCA proposed to apply the Bank of England base rate plus 1% per year but has
now introduced a minimum floor of 3%. Due to the length of lookback of the scheme, this
has a material impact to the expected redress cost for the group.
The outcome of management's professional judgment and modelled best estimate of the expected
redress and operational costs requires the group to raise a further pre-tax accounting provision of
£510 million (c R11.9 billion). This brings the total accounting provision raised to £750 million (c
R17.7 billion). A considerably larger portion than expected of the £510 million raised is for the
business written post the FCA's regulatory changes in 2021. This total provision compares to the £275
million of profits the group extracted from motor finance activities from over a decade of motor
lending in the UK.
The group has done everything in its power to protect shareholders from a redress scheme that it
considers deeply flawed in its construction and which goes against two of the FCA's original guiding
principles; namely principle 2: fairness "ensures the approach to determining breaches and
calculating redress are fair to consumers and lenders" and principle 7: market integrity. The group is
extremely disappointed with this outcome.
The group has consistently shared with all UK regulators its concerns that should the redress scheme
result in the level of provisioning that has now transpired, it would be forced to consider whether it
can continue to participate in motor finance lending in the UK market on a sustainable basis.
Given the provision amount facing MotoNovo in meeting the requirements of the redress scheme,
the business will require further recapitalisation from the group's existing available resources in its
UK operations. This may mean financial resources available for allocation to motor finance in the UK
will be severely constrained, resulting in capital not being available to fund growth in the MotoNovo
business.
This will have a negative impact for FirstRand's excess capital position. However, the capital positions
of FirstRand Limited, FirstRand Bank Limited and Aldermore Group remain above their respective
targeted capital ratios, and all have sufficient capital to fund their growth strategies. The group stated
on 5 March 2026 that given its strong capital position, should the provision meet its worst-case
scenario it will still be able to pay a dividend calculated on earnings before the post-tax impact of the
provision and within its cover range. This position has not changed, and the group's pre-motor
provision normalised earnings guidance remains intact. The group now expects full year normalised
earnings post the motor provision to contract between 10% to 15% and the ROE to be below the
bottom-end of its stated range.
Whilst the group believes that Aldermore Bank is a resilient and sustainable business serving an
important need in the UK market, with a management team that is executing on a sensible strategy
to diversify asset classes and funding, extract greater operational leverage and improve the current
ROE, the UK as a consumer finance jurisdiction will not deliver the returns the group requires.
Therefore, the business case for FirstRand to own and operate a UK consumer finance entity,
particularly given its disciplined financial resource allocation principles, coupled with the legal and
regulatory look-back risk, is not within the group's risk appetite. Cognisant of protecting shareholder
value and ensuring Aldermore's future success the group will work with the Aldermore board and
respective regulators to facilitate an orderly ownership transition.
FirstRand reiterates its view that the FCA scheme significantly and inappropriately diverges from the
SC ruling and therefore the group's legal rights remain reserved.
Shareholders are advised that the financial information on which this voluntary trading update and
information is based has not been reviewed or reported on by the group's external auditors. The
group will announce audited financial results for the full year to 30 June 2026 on Thursday, 10
September 2026.
Sandton
7 April 2026
Sponsor
Rand Merchant Bank (a division of FirstRand Bank Limited)
Debt sponsor
FirstRand Bank Limited
Date: 07-04-2026 03:19:00
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