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11 March 2020
*Salient points:
- Headline earnings increased 1% to R16.3 billion
- Revenue increased 6% to R80 billion
- Operating expenses growth contained to inflationary levels, increasing 6% to R46.4 billion
- Pre-provision profit increased 5% to R33.6 billion
- Return on equity declined to 15.8% from 16.8%
- Dividends increased 1% to R11.25 per share.
*Note: normalised values (stripping out the effect of the separation from Barclays PLC)
Johannesburg, 11 March 2020 –– Absa Group Ltd. today reported improving revenue growth for the 2019 financial year, with headline earnings growing slightly.
“We delivered a resilient performance against a challenging macroeconomic backdrop. We maintained balance sheet momentum and growth was broad-based across most businesses,” said Daniel Mminele, Absa Group Chief Executive.
Absa Group revenue increased 6% while headline earnings, the measure most analysts use to gauge profit, rose 1% as impairments increased.
“Our revenue growth is showing an improving trend, with strong deposit growth of 12% and customer loan growth of 9% for the Group,” said Absa Group Financial Director, Jason Quinn.
Overall, Absa’s balance sheet, revenue and earnings growth were in line with peers after lagging for a number of years.
Absa launched its growth strategy in March 2018 after Barclays PLC ceased to be the controlling shareholder in the Pan African banking group. Absa is on track to complete its separation programme, one of the largest in the banking sector in terms of size and complexity, on time and within budget by the middle of 2020.
Performance highlights from Absa’s three core businesses:
Retail and Business Banking South Africa
RBB South Africa continues to show signs of turnaround as the unit gained ground in key areas, recording increases in customer loans and deposits. Revenue momentum increased and costs were well contained. However, an increase in impairments eroded earnings.
Highlights include:
- Gross loans and advances grew by 7% to R530 billion
- Deposits grew by 10% to R373 billion
- Non-interest income grew by 6%
- Cost-to-income ratio improved to 57.7% from 58.4% in 2018
- Customer growth of 1% to 9.7 million
- Market share growth in retail deposits and retail loans and advances, including personal loans, new home loans and vehicle finance.
Corporate and Investment Banking (CIB)
CIB’s earnings growth was driven by strong performance in countries outside South Africa, which partially offset a decline in earnings in South Africa.
Highlights include:
- Continued growth momentum in ARO with total income growing 15% (12% in constant currency) to R7.4 billion
- Solid income growth from Corporate Bank franchise up 9% (8% in constant currency) to R10.6 billion
- Strong growth momentum in the trade finance business in SA, with a CAGR of 19% in the last four years.
Absa Regional Operations (ARO)
ARO, comprising Absa Group’s African operations excluding South Africa, delivered strong financial performance in 2019 with earnings growth of 16% (12% in constant currency), enhancing the overall Group’s position.
Highlights include:
- Revenue grew by 14% (11% in constant currency)
- Pre-provision profits increased by 17% (14% in constant currency)
- Cost-to-income ratio improved to 57.8%
- While separating, ARO has grown its retail primary customer base in 2019 to 1.5 million customers.
Outlook
South Africa’s macro environment has consistently disappointed for the past five years, and the outlook remains muted, compounded by the recent outbreak of coronavirus which will have an impact on the global macro outlook, and which will also have implications for the economic prospects in our other operating regions.
“We will continue to drive the execution of our strategic objectives with agility, and take advantage of emerging opportunities, while managing risks more effectively in response to changes in the operating environment,” said Mminele.