FirstRand has formally classified its UK business, including Aldermore Bank and MotoNovo Finance, as held for sale after taking a £547.8 million pre-tax hit linked to motor finance redress and associated costs [1].

The South African banking group is progressing its exit from the UK as uncertainty surrounding historic motor finance liabilities continues to weigh on its British operations.

FirstRand's latest results show an additional £518.4 million provision for customer redress arising from the Financial Conduct Authority's motor finance review, alongside £29.4 million in associated costs [2].

The combined pre-tax impact reached £547.8 million.

The development marks a significant step forward from FirstRand's earlier decision to explore a sale of Aldermore. The entire UK operation is now being treated as a discontinued operation under accounting rules, with a formal sale process under way.

For customers with potential MotoNovo Finance claims, however, the proposed sale does not mean historic car finance compensation liabilities simply disappear.

FirstRand moves ahead with UK exit

FirstRand acquired Aldermore in 2017 in a deal valuing the specialist UK bank at around £1.1 billion [3].

The group subsequently expanded its UK presence through Aldermore, which includes MotoNovo Finance, a major provider of vehicle finance.

FirstRand's latest results confirm that the group has now classified the UK business as held for sale.

A confidential information memorandum and virtual data room have been opened to prospective bidders, with non-binding offers expected by the end of September and binding offers by the end of December.

FirstRand is targeting completion of the transaction within 12 months.

The move follows months of speculation about potential buyers for Aldermore and whether MotoNovo could ultimately be sold with the bank or separately.

Motor finance redress charge reaches £548m

The latest financial impact from historic motor finance is substantial.

FirstRand booked an additional pre-tax provision of £518.4 million for customer redress, plus £29.4 million of associated costs [4].

Together, those charges totalled approximately £547.8 million.

At 30 June 2026, FirstRand's balance sheet provision stood at approximately £749 million, compared with £265 million a year earlier.

The gross undiscounted provision was approximately £807 million.

These figures are provisions rather than confirmed payments to consumers. The eventual cost will depend on factors including the final operation of the FCA's Motor Finance Compensation Scheme and the outcome of ongoing legal challenges.

FirstRand has previously indicated that the potential cost of historic motor finance redress has become disproportionate to the returns generated by its UK motor finance operation.

When its provision was increased earlier in 2026, the group noted that the amount significantly exceeded the roughly £275 million its motor finance division had earned over the preceding decade.

Why is FirstRand leaving the UK?

Motor finance redress is an important part of the decision, but the group's explanation is broader than a single compensation charge.

FirstRand said the UK operating environment for consumer finance had become increasingly uncertain and pointed to what it considers an unacceptable level of regulatory "look-back risk".

The group concluded that deploying further capital into its UK businesses would no longer meet its risk appetite or required investment returns.

That distinction matters.

It would be too simplistic to say car finance claims alone forced FirstRand out of Britain.

However, the size of the potential redress liability has clearly become an important factor in how the group views the future risk and attractiveness of its UK operations.

The decision to classify Aldermore as held for sale also resulted in a £171 million goodwill impairment.

What has happened to Aldermore's profits?

The financial impact is also visible in Aldermore's latest results.

Statutory pre-tax profit fell 74% to £51.2 million.

Underlying profit was considerably more resilient, falling around 6% to £238.9 million.

The difference illustrates how exceptional charges associated with the group's current circumstances have affected its reported performance.

Across FirstRand as a whole, normalised earnings fell 5% to approximately £1.81 billion for the year to June 2026, its first decline in six years [5].

Its continuing operations outside the UK performed more strongly, with normalised earnings increasing by 13%.

The contrast helps explain why FirstRand is directing future investment towards South Africa and other African markets rather than committing additional capital to its British operations.

Where does MotoNovo Finance fit into the sale?

MotoNovo is particularly relevant to consumers following the car finance scandal because it has operated in the UK motor finance market for many years.

The corporate history is important when considering historic MotoNovo Finance claims.

MotoNovo Finance Limited was incorporated in 2018 and became part of Aldermore Group in May 2019.

FirstRand has previously explained that motor finance business originated before 5 May 2019, together with associated liabilities, remained on the balance sheet of FirstRand Bank Limited's London Branch.

That means consumers should not assume that every historic MotoNovo agreement necessarily sits within exactly the same corporate entity.

Responsibility can depend on when the agreement was entered into and the relevant lender at the time.

Does selling MotoNovo affect existing car finance claims?

A sale does not, by itself, cancel valid consumer claims.

The distinction between ownership of a business and responsibility for historic liabilities is important whenever a financial company is sold.

FirstRand's decision to leave the UK does not mean consumers with potentially eligible mis-sold car finance claims lose their rights simply because the ownership of Aldermore or MotoNovo changes.

The treatment of historic liabilities will depend on the structure and terms of any eventual transaction, as well as the relevant regulatory requirements.

This is one reason the final terms of the sale will matter.

Prospective buyers will need to consider both the underlying businesses and their exposure to historic liabilities.

For consumers, there is no need to assume at this stage that an eligible MotoNovo Finance claim would cease to exist following a change of ownership.

How does the FCA compensation scheme affect MotoNovo?

The FCA's Motor Finance Compensation Scheme covers certain agreements entered into between 6 April 2007 and 1 November 2024 [6].

It was established following years of regulatory and legal scrutiny of historic commission practices in the motor finance market.

The scheme addresses certain discretionary commission arrangements, excessive commissions and undisclosed commercial relationships that may have resulted in unfair outcomes for consumers.

Not every MotoNovo agreement within the period will qualify.

Likewise, simply having used PCP car finance does not automatically mean someone has a valid PCP claim or PCP finance claim.

Whether a consumer is eligible for car finance compensation or PCP claims depends on the circumstances of the individual agreement and the FCA's rules.

Why is FirstRand's provision so large?

Motor finance provisions are estimates of what a lender believes it may ultimately have to pay, together with relevant associated costs.

They are not necessarily equivalent to the final amount consumers will receive.

The FCA estimates that its industry-wide scheme could result in approximately £7.5 billion of compensation being paid to consumers at a 75% participation rate, with total industry costs of around £9.1 billion [7].

Around 12.1 million agreements could potentially qualify.

Average compensation has been estimated at approximately £829 per eligible agreement, although individual outcomes could be higher or lower.

For a lender with a substantial historic motor finance portfolio, even an average payment of this size across a large number of eligible agreements can translate into a significant overall liability.

FirstRand's provision reflects its own assessment of its potential exposure rather than a final determination of what it will ultimately pay.

Legal challenges still create uncertainty

The final cost remains uncertain because parts of the FCA car finance compensation scheme are currently suspended while legal challenges proceed before the Upper Tribunal [8].

Volkswagen Financial Services, Mercedes-Benz Financial Services and CA Auto Finance UK are challenging aspects of the scheme from the lender side.

Consumer Voice has brought a separate challenge arguing that elements of the framework do not provide sufficient compensation to consumers.

The legal proceedings could affect how the scheme ultimately operates and therefore how much individual firms are required to pay.

FirstRand is not one of the three lender challengers.

The existence of those proceedings nevertheless matters to the group because changes to the scheme could affect the value of its eventual motor finance liabilities.

FirstRand's decision shows the wider financial impact of redress

Much of the public discussion around car finance mis-selling has understandably focused on how much individual motorists could receive.

FirstRand's UK exit illustrates the other side of the equation.

Historic motor finance liabilities are now large enough to influence strategic decisions about where major financial groups invest capital and whether they remain in particular markets.

FirstRand's decision does not establish that the FCA scheme alone made its UK operation unviable.

But the scale of the provision, combined with the group's concerns about future regulatory risk, shows how historic car finance claims are affecting decisions far beyond individual compensation payments.

What happens next?

The immediate focus will be the Aldermore sale process.

Non-binding offers are expected by the end of September, followed by binding offers by the end of December, according to FirstRand's current timetable.

The group aims to complete its UK exit within 12 months.

A key question will be whether Aldermore Bank and MotoNovo Finance ultimately remain together or whether different parts of the business are sold separately.

The treatment of historic motor finance liabilities will also be closely watched.

For consumers with potential MotoNovo Finance claims, the important point is that a sale of the business does not automatically remove existing rights or make an eligible claim disappear.

Until a transaction is agreed, the exact future ownership structure and allocation of relevant liabilities remain uncertain.

What is already clear is that historic motor finance redress has moved beyond being simply a provision on FirstRand's balance sheet. Alongside wider concerns about the UK regulatory environment, it has become an important factor in the group's decision to leave the British market altogether.

_________

References:

1. FirstRand has formally classified its UK business, including Aldermore Bank and MotoNovo Finance, as held for sale after taking a £547.8 million pre-tax hit linked to motor finance redress and associated costs - https://www.billionaires.africa/2026/09/10/mary-vilakazi-takes-firstrand-out-of-britain-after-548-million-hit/
2. FirstRand's latest results show an additional £518.4 million provision for customer redress arising from the Financial Conduct Authority's motor finance review, alongside £29.4 million in associated costs - https://businesstech.co.za/news/banking/874746/one-of-south-africas-most-valuable-banks-planning-a-major-exit/
3. FirstRand acquired Aldermore in 2017 in a deal valuing the specialist UK bank at around £1.1 billion - https://www.firstrand.co.za/media/1031/2017/Media_release.pdf
4. FirstRand booked an additional pre-tax provision of £518.4 million for customer redress, plus £29.4 million of associated costs - https://www.moneyweb.co.za/mny_sens/firstrand-limited-audited-results-and-ordinary-cash-dividend-declaration-for-the-year-ended-30-june-2026/
5. Across FirstRand as a whole, normalised earnings fell 5% to approximately £1.81 billion for the year to June 2026, its first decline in six years - https://www.billionaires.africa/2026/09/10/mary-vilakazi-takes-firstrand-out-of-britain-after-548-million-hit/
6. The FCA's Motor Finance Compensation Scheme covers certain agreements entered into between 6 April 2007 and 1 November 2024 - https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme
7. The FCA estimates that its industry-wide scheme could result in approximately £7.5 billion of compensation being paid to consumers at a 75% participation rate, with total industry costs of around £9.1 billion - https://www.fca.org.uk/publication/policy/ps26-3.pdf
8. The compensation scheme are currently suspended while legal challenges proceed before the Upper Tribunal - https://www.fca.org.uk/news/statements/motor-finance-scheme-partially-suspended