THE ABSA GROUP has resumed dividends off the back of a strong surge in earnings and declining provisions for bad debts in the first half of 2021.
Headline earnings a share increased to 1 019.7 cents in the first half from 173.6c at the same time last year. An interim dividend of 310c per share was declared.
Revenue was up only 3 percent to R41.2 billion. Operating costs also increased 5 percent to R22.6bn, and the cost-to-income ratio rose to 54.9 percent from 53.9 percent.
However, impairments fell 68 percent to R4.7bn. The group's core capital adequacy ratio of 12.4 percent was well above regulatory requirements, after being increased from 11 percent a year prior.
Interim chief executive Jason Quinn said the fivefold increase in headline earnings to R8.6bn was higher than pre-pandemic levels, and had been supported by resilient pre-provision profit growth and the big decline in impairments. And while earnings had exceeded pre-Covid-19 levels, it was off a low base a year earlier. Absa generates most of its income from its operations in South Africa.
Interim financial director Punki Modise said the core capital adequacy ratio had been further strengthened to the top end of the banks' target range, the balance sheet remained resilient and returns were now above cost of equity.
“These results are testimony to decisions we took during the crisis around supporting our customers and taking a cautious approach to preserving capital and liquidity,” said Quinn.
All business units had reported strong growth from a low base in the prior year.
Retail and Business Banking (RBB), which generates most of the group's income, grew headline earnings eightfold to R4.2bn.
In this business unit, the benefit of a lower impairment charge was partially eroded by a 15 percent decline in pre-provision profit, given high claims and reserving in the life insurance business and customer-centric fee reductions.
RBB also made progress in its digital investments, including the recent launch of Apple Pay.
Corporate and Investment Banking's headline earnings more than doubled to R4bn, which helped to offset low credit appetite from corporate clients.
Absa also refined its operating model after an internal and external review, and RBB and CIB would now be accountable for their product lines across the continent.
Absa announced R500 million of pricing relief for customers in South Africa in February and reinstated its Siyasizana payment relief programme in August to assist retail customers (individuals) with existing credit facilities after they were impacted by unrest in July. Absa also extended tailored credit solutions to business banking customers and made donations totalling R12.5m to assist with food relief and infrastructure restoration in affected areas.
The lender said it expected the local economy to grow 4 percent this year from last year's 7 percent decline, a better outlook compared with the 3 percent growth forecast in March.
Absa Group shares closed 1.59 percent higher at R148.93 on the JSE yesterday.
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