FirstRand has appointed Bank of America and Rand Merchant Bank as advisers for the planned sale of its UK based Aldermore Group, as the lender moves to exit its European operations amid mounting pressure from Britain’s motor finance compensation crisis.
According to African Economy Inc, the South African banking giant said the decision to appoint two advisers was aimed at widening the pool of potential buyers for Aldermore, which it bought in 2017 during a push to expand internationally.
The planned sale comes months after FirstRand announced it would pursue what it described as an “orderly ownership transition” for the UK lender following a sharp increase in provisions linked to customer compensation claims in the British motor finance sector.
FirstRand recently raised its provisions for potential customer redress claims by £510 million, bringing the total amount set aside to £750 million after the UK Financial Conduct Authority finalised its compensation framework for allegedly mis sold motor finance loans.
The wider UK banking sector is expected to pay roughly £9.1 billion in compensation to affected customers, with an estimated 12.1 million loans potentially qualifying for payouts.
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Several lenders, including Lloyds Banking Group and Close Brothers Group, have argued that the regulator’s approach is too harsh and could place unnecessary pressure on the industry.
FirstRand has also criticised the framework, describing it as “unfair and disproportionate,” although the bank said it would not take legal action against the plan.
Aldermore Group owns MotoNovo Finance, one of Britain’s major motor finance businesses, as well as Aldermore Bank, which focuses on small business lending and residential mortgages.
The UK operation represents a significant part of FirstRand’s business, contributing around 10 percent of the group’s earnings and accounting for roughly one fifth of its balance sheet.
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Industry analysts say the move reflects broader changes across the global banking sector as lenders rethink overseas operations in response to rising funding costs, tougher regulation and growing competition.
A representative for Bank of America declined to comment on the deal, while Rand Merchant Bank did not immediately respond to requests for comment.
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