By Adelaide Changole.
Absa Group reported profit that exceeded analysts’ forecasts as South Africa, the lender’s home market, recovers from years of economic decay.
Headline earnings increased 9.9% to to R22.06 billion ($1.21 billion) in the three months through December, surpassing the R21.6 billion forecast by seven analysts in a Bloomberg survey.
“Our organisation rallied in the second half, refining our focus areas to ensure that our actions are targeted and precise in generating value and earnings uplift,” interim Chief Executive Officer Charles Russon said in a statement.
Strong consumer demand in South Africa has helped companies from Shoprite Holdings to Nedbank Group report higher profit after the state-run power utility made significant repairs to its largely coal-fired fleet of plants, keeping the lights on most days throughout the year. That helped Absa counter challenges it has faced in other parts of the continent, including surging inflation in Ghana.
Strong consumer demand helped companies from Shoprite Holdings to Nedbank Group report higher profit after the country’s state-run power utility made significant repairs to its largely coal-fired fleet of plants, keeping the lights on most days throughout the year. That helped Absa counter challenges it has faced in other parts of the continent including Kenya, Zambia and Mozambique.
The bank assessed Ghana’s economy as hyperinflationary in the quarter ended December 31, after finding that the cumulative three-year inflation rate was above 100%. The impact of that price growth reduced profit after tax by R653 million, it said.
Absa expects to end the hyperinflation accounting for its Ghanaian business in mid-2025.
Net interest income growth slowed to 4.5%, compared with 21% a year earlier, as higher cash-reserve requirements in some African nations constrained cashflow.
Impairments dropped 8% to R14.3 billion, which helped the lender’s credit-loss ratio — a measure of bad loans as a percentage of the total book — improve to 1.03% for the period. That’s still above Absa’s target range of 75 to 100 basis points, and ahead of all its peers, which have all reduced credit losses to below 1%.
The bank also declared a full-year dividend of R14.6 per share, higher than the R14.36 estimated by analysts.