DURBAN - Absa has said its credit impairments leapt 24percent to R7.82billion in the year to end December as South African banks faced a weak economy aggravated by load shedding, the threat of a rate cut by Moody’s and now the coronavirus outbreak.
Chief executive Daniel Mminele, who took the helm in January and presented his maiden results, said the group managed to deliver a resilient performance against a challenging macroeconomic backdrop.
Mminele said he was comfortable with the choices Absa made in restructuring its retail and business banking units as well as the expansion in the rest of the continent. “We maintained balance sheet momentum and growth was broad-based across most businesses,” Mminele said.
Absa reported a 1percent increase in headline earnings to R16.3bn during the period while revenue rose 6percent to R80bn.
Headline earnings per share inched up 3percent to 1750.1cents and the group declared an increase in dividend to 1125c.
Mminele said he had a mandate to review strategy and make changes if needed.
Absa launched its growth strategy in March 2018 after Barclays plc ceased to be the controlling shareholder in the Pan African banking group.
It said it was on track to complete its separation programme, one of the largest in the banking sector in terms of size and complexity, on time and within budget by the middle of 2020.
Absa’s credit loss ratio increased to 0.8percent from 0.73percent last year. Absa Regional Operations consisting of Absa’s African operations excluding South Africa, delivered strong financial performance by growing earnings by 16percent and 12percent in constant currency.
Absa increased gross loans and advances to customers by 9percent to R917bn while deposits due to customers increased by 12percent to R826bn.
Absa expected the weak environment to persist and projected 0.9percent real growth for South Africa in 2020.
The group said it believed that a return on equity target of 18 percent to 20 percent was appropriate, it did not envisage achieving it until 2022 at the earliest, depending on the state of the country’s economy.
“We expect a continued difficult environment for the consumer while heightened uncertainty will continue to dampen business confidence and investment,” the group said. “Downside risks are significant and include the risk of protracted load shedding, a sharper global slowdown due to the coronavirus outbreak and the impact of a potential sovereign credit rating downgrade from Moody’s.”
Nesan Nair, a senior portfolio manager at Sasfin Securities, said the 1percent growth in headline earnings was a normalised result to take into consideration the Barclays separation effect.
Absa rose 1.74 percent on the JSE yesterday to close at R122.11.