Absa earnings to halve

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Absa earnings to halve

Published Date: 2021-02-22 | Source: Stephen Gunnion | Author: Stephen Gunnion

Absa earnings to halve

The banking group has already warned that a dividend is unlikely after the SARB advised banks to conserve capital.

Absa has warned that its 2020 earnings will be at least 50% lower due to the big credit loss provisions it made as a result of last year's hard lockdown.

In a trading statement, the banking group said earnings and headline earnings per share (HEPS) for the year to end-December were likely to be 55% to 60% below the 1,717.6c and 1,750.1c it reported for the two measures a year earlier. Normalised HEPS would be 50% to 55% below the 1,926c reported for 2019.

In an update in November, Absa said it probably wouldn't pay a dividend for the year so it could preserve capital in the face of a sharp decline in earnings and rising credit impairments. Despite an improvement in credit impairments for the three months ended September, impairments for the first nine months of the year were still triple those reported for the same period last year. Its credit loss ratio reduced to 219 basis points from 277 basis points in June.

Revenue growth for the nine months ended September was similar to the 3% it recorded for the first six months of the year, with net interest income continuing in line with the 6% reported at the half-way stage. Non-interest income improved slightly from the 2% first-half decline. Its return on equity (ROE) for the first nine months was more than double the first half's 2.6%, as the third quarter ROE improved to low double digits. However, it's still expected to remain well below the cost of equity for last year.

The bank didn't pay an interim dividend following guidance from the Reserve Bank for banks to conserve capital due to the potential fallout from Covid-19.

Absa's results are scheduled for release on 15 March. Its shares fell 1.9% to R124.16 on Friday.





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