Absa profit more than triples as credit impairments improve

Absa, SA’s fourth-largest bank by market value, has more than trebled full-year profit as credit impairments improved, reflecting a broader recovery in the economy.

Headline earnings per share jumped 193% to R21.47 in the year to end-December as credit impairments plummeted 59% to R8.5bn, the banking group said in a statement on Monday.

Its net interest income rose 9% to R52.32bn and net interest margin improved to 4.46% from 4.17% as interest rates normalised. That was after the Reserve Bank cut rates by a cumulative 300 basis points in 2020 to soften the blow of the Covid-19 pandemic.

Absa, which still does not have a permanent CEO after the sudden departure of Daniel Mminele a few months ago, said non-interest revenue was flat at R32.58bn year on year. Return on equity improved to 14.6% from 5.2% while gross loans and advances rose 7%.

“SA’s economy, already under pressure before the onset of the pandemic, witnessed [a] sharp economic contraction in the second quarter of 2020, followed by recovery through the second half of 2020 and into 2021,” the company said.

“Economic recovery progressed somewhat more rapidly than expected, notwithstanding challenges posed by load-shedding and July’s social unrest.”

Absa expects the economy to grow 2.1% in 2022. Sectoral differences are likely to remain large, with high commodity prices boosting parts of the mining sector, while households face steep increases in fuel and other commodity prices, it said.

The company reinstated an ordinary dividend of R7.85 per share, after none was declared a year ago due to Covid-19 related uncertainty.

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