FirstRand Ltd.’s Rand Merchant Bank will discontinue proprietary trading while combining its fixed income, currency, commodity and equity trading units to boost returns.
RMB found its “current portfolio would deliver returns below the group’s hurdle rate unless certain actions were taken,” Alan Pullinger, head of Johannesburg-based RMB, said in an e-mailed statement today. “Outright proprietary trading activities, in both FICC and equities are no longer able to produce sustainable returns given the new capital regime.”
FirstRand, South Africa’s second-largest lender, said last month that RMB’s pretax profit for the six months through December dropped 15 percent to 1.78 billion rand. With banking regulators worldwide working toward the implementation of new capital levels under Basel III, RMB has been investigating the effects these rules may have on its business.
“The changes in RMB are strategically based, are significantly driven by Basel III and are not a disguised cost cutting or retrenchment exercise,” Pullinger said. “Clearly if certain activities are closed or significantly restructured, certain individuals may well be impacted.”
South Africa’s Financial Mail magazine reported on changes at RMB earlier today.
RMB, with its parent company FirstRand, will continue to expand in Africa and may soon receive a license to operate in Nigeria, Pullinger said.