Strong profits for Absa in recovery from global economic downturn

Absa, SA’s fourth-largest bank by market capitalisation, has delivered record normalised interim headline earnings supported by income-led “pre-provision profit growth”, as it benefits from SA recovering from the Covid-19 pandemic.

The group, which employs more than 35,000 people across 15 countries, also more than doubled its interim dividend to 650c, from 310c in the same period last year.

The bank said this normalised view of its 2022 interim results was the most accurate reflection of the underling business as it “adjusts for the consequences of the separation from Barclays PLC”.

Barclays announced its separation from Absa in 2016 and has since reduced its stake in the group from 62% to 7.4%.

The bank said group headline earnings of R11bn for the six months ended June “is the highest ever recorded in a half”, 27% higher than the interim period last year, “demonstrating a continued strong recovery from the global economic downturn in 2020”.

Absa group CFO Jason Quinn said the bank’s “earnings growth was due to significantly higher pre-provision profit, which was in turn driven by very pleasing revenue growth”.

“Revenues grew 14% or 13% in constant currency to R47bn. Within this, net interest income increased 12% or 11 % in constant currency, reflecting further margin expansion and solid 8% growth in average interest bearing assets.”

He said non-interest income grew 18% or 17% in constant currency, “in part due to a substantial recovery in insurance revenues while fee income growth was also strong”.

On a headline earnings per share basis, group CEO Arrie Rautenbach said diluted normalised headline earnings per share had “rebounded from the lows two years ago”, including 27% growth “year-on-year this half”, adding this was a third higher than pre-Covid levels.

Rautenbach said the bank’s return on equity of 17.7% was also well above pre-Covid levels.

“We are building a consistent track record which gives us confidence,” he said.

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