A2B Strategy | Strategy Facilitation for Financial Services

Originally published on LinkedIn, January 15, 2026

It is a sign of unprofessional sentimentality that I ‘fess up to being super chuffed that FirstRand was the first SA bank to crack a R500b valuation late last year. It matters not that it has been a rising tide — of sector rotation chasing value after previous runs in other sectors and bonds — lifting all boats. When the tide recedes no-one cuts leadership much slack. It’s a good time to take the W. At the least, after several years of market price stagnation, banking managers and Execs will be looking at their option packages and feeling a bit better about life.

In the short term, market vagaries will be what they will. Ultimately, market performance is tied to the gravity of business performance. Just under a year ago, I decried the death of the “owner-manager” culture that had been the foundationstone of historical outperformance at FirstRand. I doubt this had ever been intentional, but the requirement for centralised “fly-in-formation” in support of a common platform and/or ecosystem probably threw up too many bottlenecks for a previously decentralized organization to digest. Whatever the cause, the outcome was slow execution, and more worryingly, a bare cupboard of growth options. This is/was not anything like an extinction-level outcome because sufficient headroom exists to manage costs gently down to keep the cost-income ratio at 50 for many, many years. The problem with that is that one does not “shrink oneself to greatness”.

The good news is that if one looks through the muddied waters of the provisioning for Motonovo, the core business has been performing better than FNB’s own dismal guidance that precipitated my first pointed criticisms. Surprise and delight all around.

What I have observed though in the past year, are two non-trivial interrelated changes that would have been inconceivable just a few years back and point to an unexpected maturity in leadership that offers both a path to growth and a path to operational stabilization. I am not sure that either are superficially obvious.

The first is existentially foundational — the letting go of the requirement to do everything in-house.

There have been several recent examples of this. It started with the extension of RMB’s partnership with Morgan Stanley, to Ashburton and FNB Wealth and Investments. Domestic investment competence within FirstRand’s asset management stable has become top notch with superb investment professionals guiding investment decision making. That had not been the case at the outset! In terms of international investing though, they have never had the intellectual heft and ability of a Hendrik du Toit (who I recall as an investment savant at Investec 35 years ago). Nor is there a need to. There is no need to cosplay at massively sophisticated international investing if you partner with someone bigger and better resourced than yourself. Like Morgan Stanley. And shutdown Jersey. Cudos!

But this has not been isolated. The opportunistic agreement to pick up HSBC business — and acquire a good leader along the way, together with the 20% stake in Optasia — gaining access to IP and a stake in a large, volume-heavy data-driven mobile microlender are starting to paint a picture of a different approach to business. If you go back 20 years and look at FirstRand’s Annual reports, you saw a growth beast holding sizable stakes in Outsurance, Discovery and Momentum. Whilst the current “dabbling” is not of the same scale, it is promising that FirstRand is looking beyond its navel.

Which brings me to the second and related point. If the above signalled a cultural shift, the sotto voce announcement a year ago that FirstRand was partnering with Fiserv to implement its cloud-native core-banking solution, Finxact, is positively seismic.

By-and-large software vendors (actually almost all third-party suppliers) have hated FNB. And with good reason. Historically, if you presented to FNB, they would listen, smile, wave and if the idea was good, it would be developed and implemented inhouse. This is not stupid. If you buy, you do not develop the necessary expertise yourself and are reliant on someone else’s toll road. You lose agency!

But the world is becoming massively more complex and fast-paced and legacy systems have become bottlenecks. This is especially true of FNB built on the cathedral that is the Hogan mainframe. Fintechs are at the payments door, enabled by the regulators pushing for greater financial inclusivity, open banking is coming, modularity is critical and cloud native solutions are attractive both in terms of managing for core business (ie specifically not infrastructure) and if there is to be any future adoption/implementation of AI. My gut tells me this will be the biggest platform change in this country since Standard Bank went onto SAP some twenty years ago. If they are able to land this transformation, they will be ahead of their peer group in terms of capability and product/service cadence. The modularity should reduce the bottlenecks that have hamstrung product factories. The complexity of lifting a moving freight train from one set of tracks to another cannot be overstated. Fortunately, in terms of bench strength, FirstRand has been able to turn to A-team “grizzled veterans” to lead the initiative.

In summary, if there has been a maturing and pragmatism infused into the FirstRand executive, then commenting definitively on the growth prospects of FirstRand becomes ambiguous. But something is better than nothing. If they continue to lean into purchases and partnerships for new or complementary products, services and business optionality, and leverage balance sheet strength and market size, they have a viable offset to organic growth limitations.

In terms of Business-as-Usual, I did think to comment on two business areas — Corporate and Investment-, as well as Private-banking.

Structural changes, bringing together enterprise and corporate banking cannot help but benefit the corporate banking leg of its CIB (or rather RMB) business. By some measures (comparing CIB earnings apples across the Big 4 is opaque) RMB is coming third in a four horse CIB race. There is no world in which that should be palatable! Standard Bank is twice as big. At current run rates, Global Markets alone matches RMB in its entirety. And Standard Bank’s unprecedented rise has really come in the past 5 years. My intuition is that a few ill-fated entrepreneurial failures over ten years ago led to a risk-averse loss of entrepreneurial vigour, which together with an underinvestment in systems and platforms (especially in forex) as the outperforming FNB gobbled up disproportionate resource has hamstrung growth. And the complementarity of conventional banking in Africa with CIB opportunities has not been realized.

One hopes the takeover of HSBC clients and the retention of their former CEO provides some spark and new relationships. The CIB space is an opportune area in which to set aggressive growth targets and is one of the few spaces in which outperformance will move the needle. If FirstRand continues to lean into partnerships and purchases (Chinese and/or Indian business banks or divesting US/European banks especially welcome) and platform (esp forex Market making) opportunities, RMB might realise the step-change that is needed.

The reason RMB needs to come right — and forget newish entrants/competitors for now — is that there is not much headroom left in South Africa in conventional retail and commercial banking. FNB dominates these spaces, not just in customer numbers, but in terms of profitability. To illustrate with an example — in the retail space FNB has 1.66 million active Private Banking customers. Is this good or bad? SA Treasury budget numbers show there to be 978k people earning over R750k. You do the math. The number of products held is high too. These are high value, high profit customers. Notwithstanding the missteps that are part-and-parcel of operating a complex business, this kind of performance is deserving of being a Harvard Business Review case study on entrenchment, upsell and x-sell success.

Nice as that might sound, the “so what” is “what next”. The challenge is to not be a Harvard Business Review study on the downside. (And for what it’s worth: unleash RMB private bank by dusting off the “two horses in a race” manual and getting it onto new platform tracks first. In addition, introduce AI layers — next best product (ML), overlain by annual client reviews (AI), overlain by annual financial advice review (AI) — not the calculator — to support the overwhelmed frontline!). Digressions aside, the point is that when you are so dominant in some areas, such as Private Banking and Commercial banking, it will be a massive achievement to just stand still.

Whilst I maintain my unease that FirstRand no longer has the certainty of identity that it once had, and that one sees today with Standard Bank, Capitec and Discovery, one does at least see a pathway to growth. 3Ps: Partnerships, Purchases, Platforms. If they get it right they could be the first to a R1 trillion valuation! One way or the other, this is going to be a critical year in their growth journey.