By Lehlohonolo Lehana.
Absa Group said Monday that headline earnings of R18.6 billion for the period ended December 2021 was more than double the earnings generated a year ago.
The group, which operates in 15 countries, and boasts 35,267 employees, said that diluted headline earnings per share (DHEPS) grew 193% to 2 143.5 cents from 730.5 cents, while a dividend of 785 cents was declared (2020: nil).
Return on equity (RoE) improved to 14.6% from 5.2%, while revenue grew 5% to R85.9 billion and operating expenses rose 1% to R48.6 billion, resulting in a 56.6% cost-to-income ratio.
Retail and Business Banking (RBB) headline earnings increased 141% to R10.2 billion and Corporate and Investment Bank (CIB) headline earnings grew 54% to R7.76 billion.
On a geographic basis, South Africa’s headline earnings increased 140% to R15.53 billion, while African regions grew 107% to R3 billion, it said.
Absa said that the outlook for the global economy in 2022 is particularly uncertain. “Geopolitical events in Ukraine are acute, and sharp moves in commodity prices and potential interruptions to supply are likely to trigger significant re-assessment.
“Furthermore, high inflation in many developed markets is expected to result in moves to start normalising accommodative policies, with uncertain consequences for asset prices and flows into emerging markets,” it said.
Against this highly uncertain global backdrop, the lender said it expects South Africa’s economy to grow by 2.1% in 2022, closing the gap to pre-Covid-19 levels before the end of the year.
“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. Eskom’s operational challenges remain a key downside risk to growth and investor sentiment.
“Headline consumer price inflation is likely to remain elevated, particularly in the first half, and we expect the MPC to continue raising rates in a measured manner, more slowly than interest rate markets are pricing in.”
Absa forecasts 5.37% GDP-weighted economic growth for our ARO presence countries. Policy rates are likely to rise in many of them, albeit gradually.
Based on these assumptions, and excluding further major unforeseen political, macroeconomic or regulatory developments, the bank’s guidance for 2022 is as follows:
- High single-digit revenue growth, driven by improved non-interest income growth, in part due to lower Covid-19-related life insurance claims.
- High single-digit growth in customer loans and deposits, while our net interest margin will benefit from rising rates.