FirstRand to exit UK as car-loan charges hit R16.8bn

FirstRand plans to exit its UK motor-finance business after saying it will raise its provision to cover compensation for clients over claims they were missold car loans in the UK to £750 million (R16.79 billion).

The South African lender has increased the amount by £510 million (R11.4 billion) after the UK’s Financial Conduct Authority (FCA) published its final redress plan for the saga at the end of March, it said Tuesday.

Read:
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FirstRand flags possible extra UK provision amid redress scheme dispute [Nov 2025]
FirstRand’s UK future hinges on motor finance decision, CEO says [Jan 2026]
UK motor finance payouts set at R170bn [Mar 2026]

Collectively, the industry has to pay about £9.1 billion (R203 billion) overall to consumers, with 12.1 million loans eligible.

Given the watchdog’s decision, the business case for a UK consumer-finance entity is “not within” FirstRand’s risk appetite and it will work on “an orderly ownership transition” from Aldermore Group, which it bought in 2017.

Companies in the UK’s motor-finance industry – including Lloyds Banking Group plc and Close Brothers Group plc – spent months arguing that the regulator’s proposals were too strict and failed to take proper account of last year’s Supreme Court ruling, setting aside billions of pounds to pay affected customers.

FirstRand reiterated its view that the FCA plan “significantly and inappropriately diverges” from the Supreme Court ruling and that it reserves its legal rights.

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FirstRand shares rose as much as 2.3% and had gained 0.6% to R87.18 by 16:25 in Johannesburg on Tuesday.

Its provision is almost three times more than the £275 million (R6.1 billion) of profit the group extracted from motor-finance activities from over a decade of lending in the UK, it said.

The case centres on commissions that helped car dealers earn thousands of pounds for themselves while allowing banks to push up interest rates.

After the UK Supreme Court examined issues with disclosures on the payments, it ruled in August that banks should only pay compensation where the most serious cases of abuse were found.

About two months later, the FCA revealed that some of the biggest auto lenders will have to spend £8.2 billion on refunds plus £2.8 billion in running costs for the programme.

A final review announced on Monday estimates average redress per agreement at £829, and reduced the total compensation to £7.5 billion in compensation, down from the £8.2 billion previously estimated.

For its analysis, the FCA reviewed 32.5 million motor-finance agreements that consumers entered into between April 2007 and October 2024. It estimated that 14.2 million of those – 44% – would be considered unfair.

After originally setting aside £127.4 million in provision linked to UK car loans last year, FirstRand added £115.1 million to that in September.

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History, and impact

FirstRand can trace its involvement in the UK motor-finance industry back to 2006, when it acquired what is now known as its MotoNovo Finance business from Julian Hodge Bank.

Today, the company commands about 10% market share in car finance in Britain.

Its 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.

FirstRand now expects its full-year normalised earnings to contract as much as 9% after the motor provision, it said in a separate statement. Return on equity will be at or just below the bottom-end of its stated range of between 18% to 22%, the lender said.

© 2026 Bloomberg

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