Daily Banking News
$42.39
-0.38%
$164.24
-0.07%
$60.78
+0.07%
$32.38
+1.31%
$260.02
+0.21%
$372.02
+0.18%
$78.71
-0.06%
$103.99
-0.51%
$76.53
+1.19%
$2.81
-0.71%
$20.46
+0.34%
$72.10
+0.28%
$67.30
+0.42%

Absa Group earnings decline – Graphic Online


Absa Group Limited has posted a 51 per cent decline in normalised headline earnings to R8 billion after impairments nearly trebled to R20.6 billion amid the economic downturn that was precipitated by the coronavirus (COVID-19) pandemic.

Earnings and returns improved materially in the second half of the year as lockdown restrictions eased, particularly in South Africa, which accounts for more than 80 per cent of the group’s earnings. The Group’s headline earnings fell 82 per cent in the first half of 2020 compared with the first half of 2019. Headline earnings in the second half of last year were 19 per cent lower than in the second half of 2019.

A press release issued by the financial service provider on March 15 quoted the Group Chief Executive of Absa, Mr Daniel Mminele, of saying that “Absa responded decisively to the COVID-19 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.”

As COVID-19 lockdown restrictions were implemented across countries last year, Absa moved swiftly to adopt remote-working, implement payment relief measures for clients, and to launch initiatives to support the communities we serve, while ensuring operational and financial resilience.

COVID-19 pandemic response

Colleague safety and wellbeing was the immediate priority, following which substantial customer and community support initiatives were implemented.

“We believe we offered the most comprehensive relief programme in the South African banking sector, providing approximately R9.8 billion in cash-flow relief to 613 000 retail and business banking customers,” it stated.

In addition, Absa waived various transaction fees and provided insurance premium relief, while temporarily extending credit cover to include a wider definition of ‘loss of income’ events.

Absa subsidiaries in countries outside of South Africa extended COVID-19 payment relief to more than 60,000 retail and business banking customers.

Approximately R54.4 billion in payment relief was extended to corporate and investment banking clients during the year under review. This included interest and/or capital moratoriums, covenant concessions and extensions of maturity dates on expiring facilities.

Absa also mobilised its citizenship programme to support communities across presence markets. Absa and its employees directed R83 million towards COVID-19 response initiatives across the continent.

Financial performance

While credit impairments had a substantial negative impact on earnings, Absa Group’s 2020 financial results indicated positive underlying trends, including a two per cent increase in income and strong growth in pre-prevision profit. (Pre-provision profit is profit before setting aside funds for impairments.)

Net interest income growth of five per cent stands out, considering large policy rate cuts that reduced Absa’s net interest income in South Africa. However, Absa’s structural hedge released R2.6 billion to the profit and loss statement to partially offset this.

Operating expenses remained well-managed, declining two per cent.

Combining resilient revenue growth with lower costs produced positive operating JAWS – a measure of efficiency – of three per cent, improving cost-to-income ratio noticeably to 56 per cent.

“I was really pleased with our seven per cent rise in pre-provision profit as this is an important indicator of positive underlying performance. I believe that we have appropriately prioritised balance sheet strength balanced against selective targeted growth during these uncertain times,” the Absa Group Financial Director, Mr Jason Quinn, said.

Strategy

Absa undertook an…



Read More: Absa Group earnings decline – Graphic Online

Get real time updates directly on you device, subscribe now.

Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments

Get more stuff like this
in your inbox

Subscribe to our mailing list and get interesting stuff and updates to your email inbox.

Thank you for subscribing.

Something went wrong.