File photo: Simphiwe Mbokazi

Johannesburg - Absa Group, the South African unit of Barclays, said full-year profit missed estimates and the firm’s performance, hit by real estate losses, prompted chief executive Maria Romos to forsake her cash bonus.

Net income dropped an annual 13 percent to 8.39 billion rand ($935.6 million), the Johannesburg-based bank said in a statement today.

Earnings per share, excluding one-time items, were 12.27 rand, lower than the 12.57 rand median estimate of 17 analysts surveyed by Bloomberg.

The results were “disappointing” and earnings per share excluding one-time items missed Absa’s own targets, Ramos said during a presentation to reporters in Johannesburg today.

Absa suspended its head of debt collections and boosted provisions after credit impairments rose in the period.

The bank also tightened lending as consumer indebtedness gained.

Eight years after Barclays first bought control of Absa, the South African bank is now seeking to buy the bulk of Barclays’s African operations for 18.3 billion rand.

“While Absa is still a good business and the Barclays Africa transaction has been well received, both by ourselves and the market, performance from its core retail franchise has been disappointing,” Greg Saffy, an analyst at RMB Morgan Stanley in Johannesburg, said in a report to clients on January 18.

Higher credit impairments, particularly in retail mortgages and commercial property finance, were the principal reason for the lower-than-expected earnings, Absa said.

Absa’s capital adequacy ratio, a measure of financial strength, rose to 17.4 percent last year, while its return on equity dropped to 13.6 percent from 16.4 percent.

Absa said it would pay a final dividend of 6.84 rand per share.

Special Dividend

The company rose 0.4 percent to 165.50 rand at 11:19 a.m. in Johannesburg. It dropped as much as 2.2 percent earlier.

The bank may still use its surplus capital to pay a special dividend, Chief Financial Officer David Hodnett said at the presentation with Ramos. It won’t be making any “huge” acquisitions this year, he said.

Five out of eight analysts polled by Bloomberg had expected Absa to pay the dividend. It has as much as 10 billion rand in excess capital, according to Saffy.

Absa investors including Coronation Fund Managers and the Public Investment Corporation, have questioned why Absa isn’t using excess capital to help finance its purchase of Barclays’ African assets and limit dilution of minority shareholders.

Sanlam Investment Management will be speaking with Absa management in the next week about the bank’s high capital levels, Patrice Rassou, head of equities at the firm, said in an e-mailed response to questions today.

Absa expects loan growth of less than 10 percent again this year, while its credit-loss ratio is expected to improve “materially,” Ramos said. “We are building momentum in our business and this should become evident in our top line growth this year, which should improve from last year’s modest levels, and should underpin a noticeable improvement in our return on equity.” - Bloomberg