Absa Group’s second-half credit loss ratio was likely to improve noticeably from an elevated first half, but would remain above its through-the-cycle range targets, the bank group said in an update to its guidance on Friday.
The announcement certainly attracted investor attention, as the share price fell 6.31% to R159.64 on Friday, which is a large percentage decline for a JSE-listed bank that counts among the four biggest lenders in the country. The JSE’s Banks Index closed only 0.92% lower.
Also expected to impact earnings for the year by about 1% was the groups broad-based black economic empowerment transaction, which, given its effective date of September 1, 2023, was included in the 2023 financial results for four months.
In addition, earnings in South Africa were expected to decline compared with the first half, while Africa Regions’ earnings were expected to increase noticeably, in spite of applying hyper-inflation accounting in Ghana.
“We expect similar full-year earnings trends to the first-half performances,” the group said.
High single digit revenue growth was expected for 2023, driven mainly by net interest income, reflecting balance sheet growth and higher policy rates.
High Africa Regions single digit growth in customer loans and deposits were expected for the full financial year, the financial results of which were expected to be published on March 11, 2024.
Revenue growth was expected to slow in the second half of 2023, in part due to material base effects.
“Given significantly higher policy rates, our credit loss ratio is expected to exceed our through-the-cycle target range of 75 to 100 basis points,” the bank said.
High single digit growth in operating expenses was expected, resulting in a slightly higher cost-to-income ratio than 2022's 51.2%, and mid-single digit growth in pre-provision profit.
Last month, Absa Group’s financial director Jason Quinn announced his resignation so that he could become the chief executive of Nedbank.
Chris Snyman, an Absa executive director and head of financial decision support became Absa’s interim group financial director.