Absa lifts dividend in a year of change for the bank

Absa Group reported an increase in revenue and earnings for the reporting period ended December 2018, a period when the group announced a new strategy as an independent African banking group.

Headline earnings per share (HEPS), which included R3.2 billion of separation costs, recognised as operating expenses, decreased 1% to 1,703.7 cents from 1,724.5 cents, however, diluted normalised HEPS grew 4% to 1,910.0 cents from 1,845.4 cents

Normalised headline earnings increased 3% to R16.1 billion compared with 2017 and revenue increased 4% to R75.7 billion.

“Despite a challenging backdrop, we are particularly pleased with our improved momentum as we embark on our new growth strategy. This was evident in our gross loans to customers which increased by 13%,” said Jason Quinn, Absa Group financial director.

In its largest business, retail in South Africa, lending momentum outpaced the market showing good new business growth across home loans, vehicle and asset finance and personal loans, Absa said. The lender also gained market share in deposits which grew by 11% with strong growth in fixed and notice deposits.

Key financial highlights:

  • Headline earnings rose 3% to R16.1 billion;
  • Return on equity improved to 16.8% from 16.5%;
  • Revenue grew 4% to R75.7 billion;
  • Operating expenses rose 5% to R43.6 billion;
  • Dividend increased 4% to R11.10 per share.

“Last year was a year of almost unprecedented activity for Absa Group as the business was re-set as an independent bank after Barclays Plc reduced its shareholding to a minority stake in 2017,” said René van Wyk, Absa Group CEO said.

In April 2018, a new operating model was implemented at the bank to structure the business for delivery against the new strategy.

In June of the same year, Absa Group achieved regulatory deconsolidation from Barclays PLC, which meant that regulators no longer regarded the two businesses as a consolidated entity.

In July, the group started trading as Absa Group and launched a refreshed brand in South Africa.

Retail and Business Banking (RBB) South Africa’s headline earnings rose 2% to R8.88 billion primarily due to 10% lower credit impairments. Retail Banking South Africa headline earnings grew 2% to R6.36 billion, while Business Banking South Africa increased 1% to R2.52 billion. CIB South Africa’s earnings declined 1%, given 76% higher credit impairments.

Corporate South Africa grew 4% to R1.17 billion and Investment Banking South Africa decreased 4% to R2.2 billion.

South African earnings grew 3% to R13.0 billion, while Africa Regions rose 6% (CCY 10%) to account for 20% of the group’s earnings.

In 2018, the group launched ChatBanking on WhatsApp, enabling customers to conduct basic banking on one of the world’s most-used chat platforms.

“With major changes bedded down in 2018, the framework for the business has been re-set,” said Van Wyk. “The strong leadership team and structure that was put in place over the past year can now deepen the efforts within their business units to deliver against our ambitious growth strategy.”

 

Bloomberg reported earlier in March that Absa is restructuring its South African RBB unit within months of reducing the division’s management team and rolling out a new strategy.

Finance labor union Sasbo was notified to begin consulting staff last week on the potential impact of the move, union representative Philip Landman told the publication.

About 15 retail-banking executives exited their positions at the Johannesburg-based lender in June, after a similar process was followed to flatten the unit’s top structure.

Discussions between Sasbo, Absa and employees are still in their early stages, with 827 jobs potentially at risk, Landman cited a written notice from the company, adding that 340 people might be employed through the process.


Read: Hundreds of jobs at risk as Absa revamps retail bank

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Absa lifts dividend in a year of change for the bank