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Voluntary shareholder update
FirstRand Limited
(Incorporated in the Republic of South Africa)
(Registration number 1966/010753/06)
JSE ordinary share code: FSR
Ordinary share ISIN: ZAE000066304
NSX ordinary share code: FST
LEI:529900XYOP8CUZU7R671
(FirstRand or the group)
Voluntary shareholder update
FirstRand provides an update to shareholders today following the judgment from the Supreme Court
of England and Wales (the Supreme Court) issued on 1 August 2025.
Background
On 11 December 2024, FirstRand Bank London Branch obtained permission from the Supreme Court
to appeal the UK Court of Appeal's judgment against it in respect of the Wrench and Johnson motor
finance commissions cases. The appeal was heard by the Supreme Court between 1 April 2025 and 3
April 2025.
FirstRand welcomes the clarity provided by the judgment. FirstRand Bank London Branch's main
ground of appeal (that car dealers do not owe their customers a fiduciary duty) was upheld, and it is
important to note that the successful ground was the most important and substantive issue that
required the Supreme Court's consideration following last year's UK Court of Appeal ruling.
In summary
With regards to fiduciary duties (relevant to claims for the tort of bribery, secret/half-secret
commissions) the Supreme Court found that motor dealers do not owe customers a fiduciary duty in
relation to their role as a credit broker arranging finance.
A fiduciary duty is required to bring a bribery claim against a lender; in addition, "disinterested" duty
is not sufficient for such a claim. Therefore, the Court of Appeal's findings against FirstRand Bank
London Branch of dishonesty around its disclosures are all superseded.
In the Johnson case only, the Supreme Court decided that there was an unfair relationship under
s140A of the Consumer Credit Act 1974 on the specific facts of the case. It is important to note that
the Supreme Court emphasised that wide discretion could be applied by the courts to award a
remedy and therefore the group's view is that although the Supreme Court ordered repayment of
commission (including interest at a commercial rate) in this particular case, based on the specific
facts, this does not necessarily create a precedent for other courts to follow. Further, unfairness
under s140A is considered on a facts specific basis and the Supreme Court has reinforced this. The
mere fact that there has been no disclosure or only partial disclosure of the commission will not
necessarily suffice to make the relationship between lender and customer unfair. It is a factor to be
taken into account in the overall balancing exercise.
In addition, it is also important to note that Mr Johnson's arrangement with the dealer and the
commission paid of 55% was due to a number of specific characteristics related to the transaction,
and the level of commission is not indicative of the level of commissions paid across the overall
motor finance book.
FirstRand Bank London Branch had sought to comply with the regulatory framework (and common
industry practice) as it was understood at the time. However, the group notes that the Supreme
Court now considers the disclosure to Mr Johnson, who the Supreme Court regarded as a
commercially unsophisticated customer, was inadequate.
The group also notes the statement issued by the UK Financial Conduct Authority (FCA) on 3 August
outlining its initial thinking on a proposed redress scheme. FirstRand is working through the full
implications of the FCA's current proposals, which are still not finalised and subject to change, and
will continue to engage with the regulator. The FCA will publish its consultation process by early
October, which will run for 6 weeks, and aims to finalise the rules such that the scheme can
launch in 2026, with consumers starting to receive compensation next year.
The group believes an important reference point to highlight is that its own internal data indicates
that over an 18 year period agreements that had a commission as a percentage of the cost of credit
of 55% or above (the UK Supreme Court reference for the Johnson case) represents a small
proportion or 4% of total agreements and only 7% of the total commissions paid over the period.
Based on early assessments of the above data and assuming that all such customers fall under the
FCA's unfairness criteria for the redress scheme, the group may be required to update its accounting
provision for the year-end 30 June 2025. This would include updating its various probability weighted
scenarios as well as utilising the FCA's proposed interest rate of the average base rate per year +1%.
Should this be the case, normalised earnings growth for the year would trend closer to the bottom
end of the current guidance range provided in the trading update on 25 June 2025 which stated,
"The group now expects to deliver full year earnings growth of low double digit to mid teens".
Shareholders are advised that this voluntary update is based on financial information that has not
been reviewed and reported on by the group's external auditors.
Sandton
5 August 2025
Sponsor
Rand Merchant Bank (a division of FirstRand Bank Limited)
Date: 04-08-2025 09:30:00
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