FirstRand has hired Bank of America (BofA) Corp and its own investment-banking arm, Rand Merchant Bank (RMB), as advisers to help it sell its UK-based Aldermore Group and exit the European market, a spokesperson for the South African lender said this week.
The bank, among the continent’s biggest, is using a dual-adviser structure in an effort to widen the pool of potential buyers for the UK-based specialist-banking subsidiary that it bought in 2017.
FirstRand said in April that it would work on “an orderly ownership transition” from Aldermore after it was forced to more than triple how much it set aside to cover compensation for customers over claims they were missold car loans in the UK.Representatives from BofA declined to comment while RMB didn’t respond to queries from Bloomberg.
FirstRand increased a provision to cover such costs by £510 million ($694 million) to £750 million after the UK Financial Conduct Authority finalised its redress plan in March.
Collectively, the industry has to pay about £9.1 billion to consumers, with 12.1 million loans eligible.
Lenders in the UK motor-finance industry, including Lloyds Banking Group Plc and Close Brothers Group Plc, had argued the regulator’s proposals were too strict and failed to take proper account of a Supreme Court ruling.
FirstRand has reiterated its view that the FCA plan is “unfair and disproportionate,” but has decided it would not legally challenge the redress plan.
Aldermore Group comprises Motonovo Finance – a major provider of motor finance in the UK – as well as Aldermore Bank, which focuses on small- and medium-sized enterprise lending as well as residential mortgages, and has been part of FirstRand’s UK growth strategy since its acquisition.
Rising funding costs, regulatory pressures and increased competition in specialist lending markets have prompted several European and African banking groups to reassess their overseas holdings.
The lender’s overall business in the UK comprises about 10% of its company-wide earnings and represents about 20% of its balance sheet, FirstRand has said previously.
BLOOMBERG
