‘Weaker than expected’ SA market hurts Absa

Despite Absa Group crossing the R100 billion revenue threshold for the first time for its full-year results to the end of December, it reported just a one percent increase in normalised headline earnings per share yesterday.

The banking group said it achieved “strong full-year revenue growth of eight percent to R104.5 billion” but this was “offset by higher credit impairments, particularly in South Africa, Absa’s largest market by revenue”.

Absa, which has a presence in 16 countries largely in Africa, noted its “Africa regions [excluding SA] reported very strong growth, well ahead of South Africa”.

Notwithstanding the poorer showing compared to some of its peers, the group said it was “a resilient set of results for 2023”.

Absa added it “delivered [the results] in an operating environment that was weaker than expected, particularly in South Africa where continued electricity supply disruptions, supply chain logistic issues and sticky inflation along with a higher interest rate environment weighed on growth prospects for customers and clients alike”.

“Within this context, normalised headline earnings increased one percent as pre-provision growth of six percent reflected continued momentum in the business, offset by higher credit impairments, particularly in South Africa…” Absa pointed out.

It noted that normalised values reflected in the results “strip out the effect of the separation from Barclays”.

Absa reported the group’s customer base expanded four percent to 12.2 million last year from 11.7 million a year earlier.

However, according to its Sens, just over a third (3.8 million) of its customer base are “digitally active customers”.

“Despite a challenging climate, Absa remains resilient, and the underlying franchise is strong and growing,” Absa Group chief executive Arrie Rautenbach said.

“We are seeing the benefits of the strategic choices we made in 2018, as is evident from our diversified business, growing customer franchise and engaged workforce,” he added.

The group’s share price weakened by about 2.5% in morning trade, following the release of its latest results, exchanging hands at R162.71 a share just after 10.45am.