Things are looking up for South Africa, says Absa

 ·14 Aug 2023

Absa Group Limited has seen significant growth in total income, with the group believing that 2023 will be better than expected due to the resilience of South Africa’s economy.

In its unaudited interim results for the reporting period ended 30 June 2023, Absa recorded a 12.8% increase in total income from R46.3 billion in 2022 to R52.3 billion in 2023.

The bank, which has over 11.8 million active customers across all its operating markets, also recorded a 4.1% increase in Basic Earnings Per Share (BEPS) from 1 250.9 cents in 2022 to 1 302.6 cents in 2023.

Headline Earnings Per Share saw a slightly smaller 1.9% increase from 1 268.6 cents in 2022 to 1 293.1 cents in 2023.

Overall, the dividend per share for the period jumped by 5.4% from 650 cents in 2022 to 685 cents in 2023.

The group’s results for the period ended 30 June 2023 can be seen below:

2022Increase 2023
Total incomeR46 394 million12.8%R52 354 million
HEPS1 268.6 cents1.9%1 293.1 cents
BEPS1 250.9 cents4.1%1 302.6 cents
Return on equity16.4%-4.3%15.7%
Cost-to-income ratio52.3%-2.5%51.0%
Dividend per share 650 cents5.4%685 cents
*Results in International Financial Reporting Standards.

Positive times ahead

Despite the challenging economic environment seen in 2023, economists at Absa said South Africa’s full-year economic performance will be better than initially forecasted.

In its latest economic review, Absa said that real GDP growth would likely hit 0.7% in 2023, growing from its last quarterly perspective (0.3% FY).

Its forecasts for 2024 have also grown by 0.3 percentage points to 1.6%.

“Despite the sharp escalation in load shedding, economic activity in H1 23 was healthier than we expected. Electricity supply will continue to be a growth risk, but we believe that ongoing efforts in private generation will make the economy more resilient over time,” Absa said.

However, the group admitted that overall growth momentum would likely remain weak due to strained business confidence limiting the generalised investment cycle, with household consumption growth also under extreme pressure.

For consumers, there is possibly good news ahead, with the group’s economists saying that headline inflation will likely ease further and that the South African Reserve Bank has ended its interest rate hiking cycle.

“We expect the SARB to cut rates from March next year,” the group said.

Despite having a more positive perspective on the economic data, the bank recognised that there are still risks and uncertainties that could hamper economic growth in the future.

Absa is not alone in having a more bullish outlook for the rest of 2023.

Economic data published last week by Stats SA for the mining and manufacturing sectors pointed to a stronger second quarter GDP performance than initially expected, with economists and analysts pencilling in more robust growth for the full year.

While this comes with the caveat – and warning – that third-quarter growth may not carry the momentum, the data has come as a pleasant surprise given the dismal forecast and outlook at the start of the year.

Read: Absa’s top executives’ massive payday – earning a collective R207 million

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