Absa revises its decline-in-earnings forecast lower
DURBAN - BANKING group Absa on Friday warned that its earnings for the year to the end of December would fall by more than it had earlier anticipated, with the Covid-19 outbreak continuing to have a negative impact on the banking sector.
The group said in a second trading guidance to investors that it expected headline earnings per share (Heps) and earnings per share (Eps) to tumble between 55 and 60 percent, compared with Heps of 1 750.1 cents a share and Eps of 1 717.6c reported last year.
It said its normalised Heps would decline by a smaller margin of between 50 percent and 55 percent.
Last year, Absa posted normalised Heps of 1 926c.
“Shareholders are advised that there is more certainty regarding our financial results for the year ended December, and we are able to provide a narrower earnings range,” the group said.
In November, the group said in a trading update that earnings were projected to fall by more than 40 percent, but it informed shareholders that it would release another trading update once it was certain about the earnings guidance for the year.
Standard Bank warned of a more than 20 percent decline in its full-year earnings, while FirstRand expects a decline of between 20 and 25 percent for the six months to the end of December, and Capitec Bank reported a 78 percent decline in earnings for the six months to the end of August.
Absa said it expected the trends set out in its previous trading statement to remain relevant for the period.
It said revenue for the nine months to the end of September would remain similar to the 3 percent increase reported in the first half, while the rand was 11 percent weaker year-onyear than its Absa Regional Operations currencies for the period, and this was in line with the first half’s 12 percent.
The banking sector is still feeling the impact of the Covid-19 outbreak as its credit impairments for the nine months trebled year-on-year, given the substantial first-half charge.
In the first half of the financial year, Absa reported an 82 percent decline in earnings to R1.46 billion, with impairment charges increasing by 297 percent to R14.66bn from R3.7bn last year, negatively impacted by the pandemic.
“However, third-quarter credit impairments were better than expected, with a credit loss ratio slightly above the 100 basis point top end of our through-the-cycle target range,” the group said.