IN SHORT: South Africa’s FirstRand has announced it will exit its UK challenger bank Aldermore after raising provisions for mis-sold British motor loans by £510 million to a total of £750 million ($993 million / R17.7 billion), more than 40% of the group’s 2025 full-year earnings. Full-year normalised earnings are now expected to contract 4 to 9%. FirstRand bought Aldermore for £1.1 billion in 2017.
South Africa’s most valuable banking group FirstRand will sell its UK challenger bank Aldermore after a British motor finance redress scheme it described as “deeply flawed” forced it to raise provisions to £750 million ($993 million), a figure that exceeds the cumulative £275 million profit Aldermore’s car lending arm MotoNovo generated over the past decade and approaches the £1.1 billion FirstRand paid to acquire the business in 2017. The group now expects full-year normalised earnings to contract between 4% and 9%.
- Total provisions raised for UK motor finance mis-selling: £750 million ($993 million / R17.7 billion). The increase of £510 million announced on April 7 is the largest single provision adjustment in FirstRand’s history.
- MotoNovo Finance, Aldermore’s car lending subsidiary, generated just £275 million in cumulative profit over the past decade — less than one-third of the total provision now facing the business.
- The UK FCA’s final redress scheme was triggered by a Supreme Court ruling finding that motor dealers received undisclosed commissions from lenders, entitling customers to compensation. The total industry bill has been estimated at £9.1 billion.
- FirstRand commands approximately 10% of the UK car finance market. Aldermore comprises around 10% of group earnings and approximately 20% of its balance sheet — meaning the exit will materially reshape FirstRand’s size and geographic mix.
- The group confirmed it will work with Aldermore’s board and respective regulators on an “orderly ownership transition.” FirstRand retains sufficient capital above targeted ratios despite the provision and confirmed a dividend will still be paid on pre-provision earnings.
- FirstRand’s market capitalisation stands at approximately R486 billion ($26.4 billion), making it South Africa’s most valuable bank, ahead of Standard Bank, Absa, and Nedbank. Its South African brands RMB, FNB, and WesBank are unaffected by the UK exit.
- Full-year audited financial results will be released on September 10, 2026.
The FirstRand-Aldermore story is a cautionary tale about the risks of international retail banking expansion. FirstRand entered the UK in 2006 through what became MotoNovo Finance, acquired Aldermore in 2017 for £1.1 billion to broaden beyond car finance, and spent nearly two decades building a business that has now generated less in total profits than the compensation it must pay for a mis-selling scandal it inherited. The “deeply flawed” redress scheme language reflects genuine frustration: FirstRand argued consistently that the FCA’s approach was disproportionate and that it violated the regulator’s own stated principles of proportionality.
The Bigger Picture: For South African institutional investors, the FirstRand-Aldermore outcome is a data point in the broader question of whether South African banks create value through international expansion or whether they are better deployed deepening their presence in African markets where they hold genuine competitive advantage. Standard Bank’s pan-African network, Absa’s 12-country footprint, and Nedbank’s Southern African franchise are all built on relationships and infrastructure that took decades to develop. FirstRand’s UK adventure generated modest returns in good years and catastrophic provisions in bad ones. The Aldermore exit frees capital and management attention for redeployment in markets where FirstRand actually has an edge.
Source: CNBC Africa / Business Day
