{"id":816133,"date":"2025-03-11T08:23:45","date_gmt":"2025-03-11T06:23:45","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=816133"},"modified":"2025-03-11T08:23:51","modified_gmt":"2025-03-11T06:23:51","slug":"relief-for-absa-customers-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/816133\/relief-for-absa-customers-in-south-africa\/","title":{"rendered":"Relief for Absa customers in South Africa"},"content":{"rendered":"\n

Absa has seen a jump in earnings, with its retail customers seeing credit impairment charges amidst an improving environment. <\/p>\n\n\n\n

In its financial results for 2024, Absa said that two major events are set to have long-lasting impacts on South Africa – the formation of the Government of National Unity (GNU) and the reduction of load shedding.<\/p>\n\n\n\n

Although neither of these issues led to immediate faster economic growth, business and consumer confidence are showing positive movement.<\/p>\n\n\n\n

Inflation also improved in 2024, allowing for a shallow interest rate cut in September, while the two-pot system also boosted household finances. <\/p>\n\n\n\n

The performance across its Africa Regions saw sharply different narratives in 2024. East Africa continued to perform well, while Zambia and Mozambique were hit by drought and unrest, respectively. <\/p>\n\n\n\n

The group’s headline earnings for the period grew 10% to R22.059 million. Thus, the group increased its dividend per share by 7% to 1,460 cents per share, achieving a payout ratio of 55%.<\/p>\n\n\n\n

South African headline earnings increased by 14% to R15 billion, while Africa regions remained flat at R6 billion.<\/p>\n\n\n\n

Revenue for the period increased to R109.9 billion, as net interest income rose by 4% to R71.1 billion, and non-interest income increased by 6% to R38.8 billion.<\/p>\n\n\n\n

The group’s credit impairment charges also decreased by 8% to R14.3 billion, improving the credit loss ratio to 1.03% from 1.18%.<\/p>\n\n\n\n

The lower charges reflect better early-cycle performance in the Product Solutions Cluster and Everyday Banking as the South Africa retail cycle started to improve and from risk reductions from management.<\/p>\n\n\n\n

However, this was partly offset by higher impairment charges in Absa Regional Operations – Retail and Business Banking and Corporate and Investment Banking, albeit off from a low base. <\/p>\n\n\n\n

The credit loss ratio of 103 basis points is slightly above the upper end of the group’s through-the-cycle target range (75-100 basis points). <\/p>\n\n\n\n

Nevertheless, the group’s credit loss ratio in the second half of 2024 was 85 basis points, well within the range. <\/p>\n\n\n\n

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Outlook<\/strong><\/h2>\n\n\n
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“The global economic environment is likely to remain very uncertain, largely due to the sweeping and volatile changes being announced by the new US administration,” said Absa.<\/p>\n\n\n\n

“Global forecasters have largely taken a cautious approach in translating these early policy indicators into sharp changes in the expected global growth outlook.”<\/p>\n\n\n\n

“The current view is for the global economy to grow somewhat slower over the coming years than during the pre-Covid period.” <\/p>\n\n\n\n

For South Africa, the group expects real GDP growth of about 2% in 2025 and 2026, with early reaction to the GNU having been positive. <\/p>\n\n\n\n

Despite the occasional return of load shedding in early 2025, Eskom’s operational performance since late March 2024 is expected to be resilient, with systematic and lasting load shedding not expected. <\/p>\n\n\n\n

Moreover, Transnet, South Africa’s embattled rail and port operator, is expected to slowly gain momentum in its performance. <\/p>\n\n\n\n

“Household incomes are expected to increase, with wage growth ahead of inflation and as some receive a boost via withdrawals under the two-pot pension reform. <\/p>\n\n\n\n

“Lower interest rates, at least compared to 2023 and 2024, will result in a lower debt service burden, which, together with the aforementioned factors, should see a modest acceleration in household consumption.” <\/p>\n\n\n\n

The group did, however, note that the South African Reserve Bank’s Monetary Policy Committee was split on whether to cut interest rates by another 25 basis points in January.<\/p>\n\n\n\n

This reflects the expectation that inflation will rise during 2025 towards the mid-point of the central bank’s target and also some caution as a consequence of global uncertainty.<\/p>\n\n\n\n

“As of late February, financial markets expect that the bottom of the current interest rate cycle has either been reached already or will be reached following a potential March rate cut.”<\/p>\n\n\n\n

Looking at the rest of the continent, Absa expects the GDP-weighted growth for its Africa region countries will rise to 5.3% in 2025.<\/p>\n\n\n\n

It believes that disinflation, lower policy rates, improving weather conditions and strong infrastructure investment will boost the region, even if the US cuts development aid.<\/p>\n\n\n\n

The group’s guidance thus expects mid-single-digit revenue growth in 2025, with similar growth in net interest income and non-interest income. <\/p>\n\n\n\n

“The first half of 2025 credit loss ratio should improve noticeably year-on-year from 123bps in the first half of 2024,” it said.<\/p>\n\n\n\n

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The four banks that merged to create South Africa’s R170 billion giant<\/a><\/blockquote>