{"id":380733,"date":"2020-03-11T09:19:58","date_gmt":"2020-03-11T07:19:58","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=380733"},"modified":"2020-03-11T09:23:13","modified_gmt":"2020-03-11T07:23:13","slug":"absa-feels-the-bite-of-south-africas-stagnating-economy-as-retail-and-corporate-earnings-take-strain","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/380733\/absa-feels-the-bite-of-south-africas-stagnating-economy-as-retail-and-corporate-earnings-take-strain\/","title":{"rendered":"Absa feels the bite of South Africa’s stagnating economy as retail and corporate earnings take strain"},"content":{"rendered":"

Absa said Wednesday (11 March), that it recorded a ‘resilient performance’ for the year ended December 2019, considering the challenging macroeconomic backdrop.<\/p>\n

However it saw a decline in its retail and corporate banking segments, as consumers and businesses alike felt the effects of the country’s stagnating economy, and credit impairments increased.<\/p>\n

The group pointed out that South Africa’s GDP growth has consistently disappointed over the past five years. South Africa\u2019s economy contracted in the third and fourth quarters by 0.8% and 1.4%, respectively – leading to the second recession in as many years.<\/p>\n

The economy has been hit by short-term shocks, persistently weak business sentiment and periods of load shedding, it said, with GDP growth for full-year 2019 slowing to 0.2%, the weakest outcome since the 2009 recession.<\/p>\n

Despite stagnant growth and challenging labour market conditions, household credit extension picked up gradually through the year, reaching 6.1% YoY in December, the bank said.<\/p>\n

Headline inflation surprised on the downside in 2019 and reached a nine-year low of 3.6% YoY in November, reflecting weak demand and persistent slack in the economy, but picked up to 4.0% in December.<\/p>\n

The South African Reserve Bank (SARB) reduced the repo rate by 25 bps in July 2019, citing the improved inflation outlook.<\/p>\n

“The rand spent much of 2019 trading weaker, but recovered towards the end of the year to finish slightly higher as a favourable turn in global risk appetite helped offset a generally downbeat assessment of South Africa\u2019s risks,” the lender said.<\/p>\n

Absa said that it maintained balance sheet momentum, with underlying costs remaining well contained.<\/p>\n

Group headline earnings grew 3% to R14.5 billion, and diluted headline earnings per share (HEPS) rose 3% to 1 747.6 cents.<\/p>\n

The group\u2019s RoE declined to 13.1% from 13.4% and its return on assets was 1.07% from 1.17%. Revenue, meanwhile, grew 5%, it said.<\/p>\n

A final ordinary dividend of 620 cents per ordinary share was declared.<\/p>\n

Absa disclosed International Financial Reporting Standards (IFRS) financial results and a normalised view, which adjusts for the financial consequences of separating from Barclays PLC, which is almost complete.<\/p>\n

IFRS basis<\/strong><\/p>\n