DURBAN - ABSA’s share price fell by almost 3 percent on the JSE yesterday morning after the financial services group reported a 51 percent decline in normalised headline earnings, hurt by a 163 percent increase in impairments due to the Covid-19 outbreak. The share closed the day at R133.
Its normalised headline earnings fell to R8 billion, with a return on equity of 7.2 percent as impairments nearly trebled to R20.6 billion, up from R7.82bn compared to last year.
Absa did not declare a dividend, in line with previous guidance.
Last week its competitor, Standard Bank, declared a dividend of 240 cents a share despite reporting a 43 percent decline in headline earnings to R15.95bn in its fullyear results.
Absa’s revenue increased by 2 percent to R81.59bn, with net interest income increasing by 5 percent to R48.86bn and non-interest income declining by 3 percent to R32.74bn.
Absa provided approximately R9.8bn in cash-flow relief to 613 000 retail and business banking customers to mitigate the Covid-19 impact.
Its headline earnings declined by 82 percent in the first half, as lockdown restrictions eased, particularly in South Africa, which accounts for more than 80 percent of its earnings, but improved in the second half although still down by 19 percent compared to the second half of 2019.
Chief executive Daniel Mminele said Absa responded decisively to the Covid19 pandemic and the resulting economic downturn.
“We supported our staff, customers and communities through a difficult period and produced a resilient financial performance in a very challenging operating environment. We also successfully completed our separation from Barclays and reviewed our strategy to ensure that it continues to be relevant in the context of rapid changes in the operating environment,” Mminele said.
In Retail and Business Banking South Africa earnings declined by 55 percent to R4.27bn due to 134 percent higher credit impairments.
Corporate and Investment Banking headline earnings fell by 17 percent to R4.95bn as impairments increased sixfold.
In the Absa Regional Operations, earnings declined 56 percent to R1.59bn as credit impairments rose by 229 percent.
The group undertook an in-depth review of its strategy in 2020, two years after the launch of the 2018 growth strategy.
“The group has delivered respectable progress in the last two-and-half years against the strategy journey that was adopted in 2018 and we have seen good traction in some parts of the business. Our refreshed strategy enables us to become more precise in expressing how we want to embed customer-centricity at the heart of our business, how we will evolve our digital maturity, and what it means to be purpose-led,” Mminele said.
Looking ahead, Absa said there remained substantial uncertainty regarding the global economic recovery which depends on the roll-out of effective vaccines and additional policy support.
“However, Absa expects an improved macroeconomic backdrop in 2021 which should support financial performance,” the group said.
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