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Absa predicts half-year earnings will rise by more than 20 percent

The logo of South Africa's Absa bank is seen outside an Absa branch in Cape Town.

The logo of South Africa's Absa bank is seen outside an Absa branch in Cape Town.

Published Jun 22, 2022

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Absa Group’s headline earnings per share (Heps) and earnings per share for the six months to June 30 are expected to be more than 20 percent above the comparatives for the first half of 2021, the bank said yesterday.

Absa’s share price notched up a healthy 2.87 percent to R169.73 yesterday afternoon on the release of its trading statement, outstripping a 1.2 percent gain in the JSE’s Bank Index at the same time. The share price has risen 27 percent in 12 months.

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The lender said normalised Heps was also expected to exceed the 1019.7 cents in the first half of 2021 by more than 20 percent. First half results are expected to be released on August 15.

In the five months to May 31, 2022, Absa saw growth in gross customer loans by high single digits, reflecting improved growth in Corporate and Investment Banking (CIB), with Retail and Business Banking (RBB) also growing by high single digits, driven largely by Home Loans and Vehicle and Asset Finance.

Customer deposit growth slowed to mid-single digits, with solid RBB growth partially offset by lower CIB deposits due to a large reduction in low-margin national government deposits.

Total revenue growth for the five months improved strongly, increasing by low double digits year-on-year. South Africa’s revenue grew by low double digits and Africa regions was higher.

Net interest income was higher than the bank had expected, increasing by low double digits year-on-year. As expected, non-interest income growth improved materially, rising by low double digits year-on-year.

Life insurance revenue rebounded “very strongly” off a low base that included significant Covid-19 claims and provisions. Fee and commission income grew mid-single digit year-on-year, while trading revenues were at similar levels to the high base recorded in the prior year.

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Operating expenses grew by high single digits year-on-year, in part due to considerably higher incentives, reflecting our improved performance, the bank said.

Credit impairments grew materially year-on-year, off a relatively low base.

Return on equity for the period improved noticeably year-on-year to almost 17 percent.

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