Absa flags big earnings recovery


Absa flags big earnings recovery


Published Date: 2021-05-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

Absa flags big earnings recovery

Credit impairments have reduced after the blow out during the hard lockdown last year.

Absa expects to report a sharp increase in first-half earnings after last year's profit was wiped out by lower customer loans and transaction volumes, as well as soaring credit impairments due to the Covid-19 lockdown.

In a trading update for the three months to end-March, the pan-African banking group said credit impairments had declined since last year, resulting in a credit loss ratio only marginally above its through-the-cycle target range of 57 to 100 basis points. The credit charge in its Corporate and Investment Bank, as well as Personal Loans and Home Loans in SA, improved substantially.

While the rand's strength in the first quarter had resulted in reduced revenue and operating expenses at its Absa Regional Operations business in the rest of Africa, total group revenue was flat year-on-year. Net interest income grew by mid-single digits. Non-interest income fell due to a decrease in net fee and commission income and substantially higher life insurance claims. This was partially offset by strong Global Markets trading revenue, particularly in SA.

Operating expenses decreased by low single-digits, with continued strong control of fixed costs and increased variable costs. As a result, pre-provision profits for the quarter grew by low single digits.

In a trading statement, the bank said it expected earnings and headline earnings per share (HEPS) for the six months to end-June to be more than ten times those reported for the first half of last year. Normalised HEPS were likely to be between five and six times than the 173.6c it reported last year.

Absa said risks to its guidance included a significantly more severe third wave of Covid-19 than currently expected, plus any material unforeseen political, macroeconomic or regulatory changes.

Its interim results are scheduled for release on 16 August. Its shares closed 1.1% down at R122.50 yesterday.


Similar Stories