Absa on recovery road as it eyes ten-fold hike in interim earnings
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DURBAN - BANKING group Absa said yesterday it expected its earnings for the six months to the end of June to surge tenfold compared with last year because of lower credit impairments as the bank recovers from the fall-out of the Covid-19 pandemic.
The bank informed its shareholders that its headline earnings per share (Heps) and earnings per share for the six months to the end of June were expected to be more than 10 times higher – at 67.7 cents a share and 58.8c, respectively – compared with the first six months of 2020, with most divisions expected to report earnings growth.
Normalised Heps was expected to be between five and six times the normalised Heps of 173.6c reported during the first half of last year.
The group warned that the risks to this guidance included a significantly more severe third wave of Covid-19 than was currently expected, plus any material unforeseen political, macroeconomic or regulatory changes.
“We will provide a more specific guidance range once there is reasonable certainty regarding the extent of the increase in earnings,” the group said. The combined headline earnings of South Africa’s major banks – Standard Bank, Nedbank, Absa and FirstRand – fell by 48.4 percent to R43.6 billion in the 2020 financial year, PricewaterhouseCoopers reported in its Major Banks Analysis.
Absa said yesterday that in its retail and business banking South Africa division, headline earnings increased year-on-year because of to lower credit impairments. In corporate and investment banking South Africa, headline earnings grew substantially year-onyear, given strong revenue growth and materially lower credit impairments.
“In constant currency, Absa Regional Operations (ARO) headline earnings decreased year-on-year on lower pre-provision profits, as cost growth exceeded low revenue growth,” Absa said.
However, the rand was 15 percent stronger year-on-year against currencies in its ARO regions, leading to a 3 percent decline in both revenue and operating expenses.
Absa’s performance in April saw improved year-on-year revenue growth and substantially lower credit impairments compared with April 2020, which included a hard lockdown in South Africa. It saw an improvement in gross customer loans, which have slightly declined year-on-year because of the stronger rand.
“RBB South Africa’s gross customer loans grew by mid-single digits yearon-year, with continued strong new business production in home loans and vehicle and asset finance,” the group said.
Customer deposits increased by high single digits year-on-year, with strong growth in South Africa and ARO, on a constant currency basis.
Absa said, as it had indicated before, it expected to resume paying dividends in the half-year results, starting with a payout ratio of 30 percent and increasing to 50 percent over the medium term.
Absa will release its half-year results on August 16. Absa shares closed 1.07 percent lower at R122.50 on the JSE yesterday.