Absa Group expects South Africa’s real GDP to fall 8.7% in 2020, with muted growth of 2.6% forecast for next year amid significant uncertainty caused by the Covid-19 pandemic.
“We expect another 25 basis point cut in South Africa’s prime rate today (Thursday 19 November), although this remains finely balanced. Thereafter, it is likely to remain flat until a 25 basis point increase in the fourth quarter of 2021,” it said on Thursday (19 November) in a voluntary trading update for the nine months ended September 2020.
The group said it experienced the following financial trends for the first nine months of 2020, on a normalised basis:
- Revenue growth was similar to the 3% increase in the first half;
- Growth in gross loans slowed slightly to 5% YoY;
- In South Africa, Retail and Business Banking (RBB) and Corporate and Investment Banks (CIB) gross loans grew 3% and 5% respectively YoY.
Absa pointed out that headcount fell by 1,200 in the year-to-date.
The lender said it expects headline earnings per share (HEPS) and earnings per share (EPS) to decline by more than 40% to R17.50 and R17.17 per share respectively for the year ending December 2020.
Retail and business banking South Africa’s third quarter credit loss ratio increased substantially YoY, although it improved noticeably from the first half, particularly in mortgages, it said.
Of the R154 billion in payment relief granted to RBB South Africa customers, 24% by value extended payment relief when it expired. Of the R116 billion in RBB South Africa relief book that expired, 91% are paying and 9% have missed one or more payments.
Missed payments on the expired payment relief book are lowest in Relationship Banking and home loans at 4% and 8% respectively, and higher in unsecured. As part of the government loan guarantee scheme R1.8 billion in business loans have been approved, from R0.5 billion at 30 June 2020, the lender said.