Absa expects growth to decelerate to 1.5 per cent in 2014 - CNBC Africa

Absa expects growth to decelerate to 1.5 per cent in 2014

Earnings

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Absa Bank is a is a wholly-owned subsidiary of the Barclays Africa Group. PHOTO: Barclays

Revenue grew 5 per cent to 21.4 billion rand for the interim reporting period ended 30 June 2014 from 20.3 billion rand in the previous comparative period. Net interest income also rose 7 per cent to 12.3 billion rand from 11.4 billion rand in 2013.

“Absa Bank Limited’s headline earnings increased 2 per cent to 4 billion rand from 3.9 billion rand. The bank’s Return on Equity improved to 15.6 percent from 14.2 per cent, comfortably above its 13.5 per cent cost of equity,” Absa said in a statement.

“Domestically, the growth outlook has deteriorated markedly since the start of the year and we expect growth to decelerate to 1.5 per cent in 2014 from 1.9 per cent in 2013.”

[DATA ABSP:Absa Bank Limited] is a financial services provider headquartered in South Africa, and is a wholly-owned subsidiary of the Barclays Africa group.

(READ MORE: Africa regulator approve Absa, Barclays Africa merger)

Operating expenses grew 10 per cent to 12.1 billion rand, increasing the cost-to-income ratio to 56.5 per cent for the period under review from 54.3 per cent in 2013.

Absa declared an interim and special dividend of 1,231.7 cents, and total assets grew 2 per cent to 811.1 billion rand for the period from 794 billion rand in 2013.

Credit impairments declined 11 per cent to R2.9 billion rand, which resulted in a 1.10 per cent credit loss ratio from 1.31 per cent. Coverage on performing loans increased to 67 basis points from 47 basis points.

Loans and advances to customers grew 4 per cent to 542.4 billion rand, while deposits due to customers rose 6 per cent to 505.1 billion rand.

Non-performing loans improved to 4.3 per cent of gross loans and advances to customers for the period under review from 5.3 per cent in 2013.

(WATCH VIDEO: Barclays Africa progress since selling to Absa)

Absa’s retail banking segment’s headline earnings increased 4 per cent to 2.4 million rand due to an 11 per cent reduction in credit impairments, as pre-provision profits declined 3 per cent.

The Home Loans segment’s earnings also grew to 801 million rand, having been driven by 60 per cent lower credit costs and 16 per cent lower expenses.

Vehicle and Asset Finance’s earnings rose 4 per cent to 535 million rand for the period under review on 11 per cent loan growth, and an improved credit loss ratio.

Earnings for the Card segment declined 22 per cent to 629 million rand for the period as impairments increased 59 per cent to 1.1 billion rand. Absa’s Edcon portfolio made a 97 million rand loss.

Headline earnings for Business Banking increased 11 per cent to 803 million rand for the period under review from 724 million rand in 2013. Headline earnings for the corporate and investment bank segment grew 6 per cent to 1.164 million rand from

“We expect mid-single digit loan growth in South Africa this year, although less than we initially expected. Our net interest margin should widen, given rising interest rates in South Africa, while our credit loss ratio is also likely to improve slightly,” Absa explained.

“Continued investment spend will make it difficult to reduce our cost-to-income ratio this year.”

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