Finance
South Africa's FirstRand to Exit UK Unit After Car Loan Provisions Hit $993 Million
Published by Global Banking & Finance Review®
Posted on April 7, 2026
2 min readLast updated: April 7, 2026
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Quick Summary
FirstRand will orderly exit its UK arm Aldermore after increasing provisions for mis‑sold UK car loans to £750 million (~$993 million), underscoring mounting regulatory and financial pressures in its motor finance business.
FirstRand to exit UK's Aldermore, increases provisions after 'flawed' motor finance redress scheme
FirstRand's Strategic Shift and Financial Impact
(Changes paragraph 6 to show earnings contraction forecast at 4% to 9%, not 10% to 15%, and the ROE forecast at or just below stated range, not below the bottom of the range, after the company corrected its figures)
FirstRand's Exit from Aldermore
April 7 (Reuters) - South Africa's FirstRand said on Tuesday it plans to exit from its UK challenger bank Aldermore as it cut earnings forecasts and blamed a costly and "deeply flawed" British motor finance redress scheme.
Increased Provisions for Motor Finance Redress
The financial services group increased its provisions for mis-sold motor loans by 510 million pounds to 750 million pounds ($993.4 million), saying it had done everything in its power to protect shareholders from a disproportionate and unfair scheme.
Statement on Shareholder Value and Transition
"Cognisant of protecting shareholder value and ensuring Aldermore's future success, the group will work with the Aldermore board and respective regulators to facilitate an orderly ownership transition," the group said in a statement.
Background: FCA's Motor Finance Redress Scheme
After months of wrangling with the industry, the UK's Financial Conduct Authority (FCA) last month told the motor finance industry to compensate UK motorists for unfair vehicle loans by around 9.1 billion pounds in one of Britain's costliest financial mis-selling scandals.
FCA's Accusations and Industry Practices
The FCA accuses the industry of inadequately disclosing commissions and contractual ties between lenders and car dealerships that it said encouraged brokers to increase vehicle loan rates between 2007 and 2024.
Financial Forecasts and Market Response
Updated Earnings and ROE Forecasts
FirstRand, which bought Aldermore in 2017, said it now expected group full-year normalised earnings after the motor provision to contract between 4% and 9% and its return-on-equity (ROE) to be at or just below the bottom-end of a previously stated range.
Regulatory Response
The FCA did not provide an immediate comment.
Currency Note
($1 = 0.7550 pounds)
Reporting Credits
(Reporting by Kirstin Ridley in London and DhanushVignesh Babu in Bengaluru; Editing by Sahal Muhammed and Susan Fenton)
Key Takeaways
- •FirstRand raises provision to £750 million for mis‑sold UK car loans, reflecting deepening FCA redress exposure.
- •The decision to exit Aldermore underlines the heavy capital strain and legal uncertainty linked to UK motor finance.
- •Aldermore had previously delivered solid profitability, but rising provisions erode group earnings and strategic viability.
Frequently Asked Questions about South Africa's FirstRand to exit UK unit after car loan provisions hit $993 million
1Why is FirstRand exiting its UK unit Aldermore?
FirstRand is exiting Aldermore due to ongoing challenges in the UK market and increased financial provisions for mis-sold car loans.
2How much has FirstRand set aside for UK car loan provisions?
FirstRand has raised its provisions for mis-sold UK car loans to 750 million pounds, equivalent to $993.38 million.
3What impact will FirstRand's decision have on its UK operations?
FirstRand will seek an orderly exit from its UK operations, focusing on winding down activities in Aldermore.
4Who reported on FirstRand's exit from the UK market?
The information was reported by DhanushVignesh Babu in Bengaluru and edited by Sahal Muhammed.