Absa gains share in tough economy


Absa gains share in tough economy

Published Date: 2019-08-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

Absa gains share in tough economy

The banking group says a bigger share of the retail market helped prop up interim earnings.

Absa says it has managed to grow its share of the retail market, propping up its first-half earnings and mitigating the negative effects of a tough economy.

Releasing interim results yesterday, the banking group said its biggest business unit, Retail and Business Banking SA (RBB SA), grew faster than the market in key product areas as it fought to regain its leading position. Home loan registrations rose 16%, more than double the growth in total home loan registrations in SA during the period. Retail customer deposits rose 12% against market growth of 9% and new personal loans grew 20%. RBB SA reported a 4% increase in earnings. The unit contributes more than 60% of group income.

Absa's Corporate and Investment Banking (CIB) business reported a 5% decrease in earnings on a pan-African basis, following a difficult trading period in SA. However, it said its client franchise continued to perform well with notable client acquisitions across the countries where it has a presence.

The bank's operations outside of SA grew earnings by 8%, increasing their contribution to group earnings. Absa Regional Operations (ARO) now accounts for a fifth of total earnings.

Group income rose 6% to R39.1 billion in the six months to end-June and its cost-to-income ratio was unchanged at 56.7%. Headline earnings increased by 3% to R8.3 billion and headline earnings per share (HEPS) rose 5% to 918.4c. Normalised HEPS increased by 3% to 977.5c. It's raised its dividend by the same margin to 505c per share. The normalised figures better reflect its underlying performance as they strip out the distorting effects of items related to its separation from former parent Barclays plc.

Credit impairments also rose over the period, increasing by 19% to R3.7 billion and resulting in a credit loss ratio of 0.79%, up from 0.75%.

The bank said the prospects for stronger growth were constrained by the slowing global economy, as well as weak business sentiment and decelerating household income growth in SA. After declining to 16.4% from 17.1%, it expects its return on equity (RoE) to be marginally lower this year. It remained committed to its RoE target of 18% to 20% in 2021.

Its shares rose 1.1% to R149.97 yesterday.

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