Absa records strong performance

Absa bank group reported strong financial performance in the first half of the year with profit increase of 23 percent to P22.8 billion driven by good operational performance across all its markets.

The group headline earnings increased by 27 percent to R11 billion during the period as revenue increased, demonstrating a continued strong recovery from the global economic downturn in 2020. Presenting the results on Monday, Absa Group Chief Executive Officer, Arrie Rautenbach said the strong performance is supported by revenue which rose by 14 performance, underpinned by growth across all business units and supported by a rebound in the insurance business in South Africa and increased interest rates across key markets. Net interest income and non-interest income rose by 12 percent and 18 percent, respectively.

Rautenbach said the strong performance reaffirms the strategic choices the Group made in 2018 and are testimony to the work undertaken in creating a business that is closer to customers. “With a strong, experienced leadership team and an improved operating model, we now have a strong foundation for outperformance.” In June, Absa announced a strengthened and more diverse executive leadership team. Absa refined its operating model, adopting a flatter structure, bringing management closer to customers and allowing the Group to accelerate strategy execution. Effective 1 July, Absa has five business units, from two previously. All business units reported improved earnings and stronger returns during the first half. For his part, Absa Group Financial Director, Jason Quinn said costs were well maintained as the Group increased investment in IT for enhanced digital performance and improved customer experience. Total IT spend grew 11 percent to R6 billion. Improved stability and enriched functionality saw digitally active customers grow across the businesses including a 10 percent increase to 2.2 million in retail and business banking in South Africa. “The strategic decisions we made in the last few years have ensured that we remain capital generative and we are appropriately provisioned as we face a tougher environment,” he said. However, Quiin highlighted that the macro backdrop deteriorated noticeably in the past six months and global growth expectations have reduced materially. “There are considerably higher inflationary pressures across most of the markets in which Absa operates and policy rates are increasing faster than we expected.” The group expects to achieve low double-digit revenue growth in 2022 compared with 2021. Operating expenses will likely increase by low to mid-single digits, with pre-provision profit growth in the teens, resulting in a cost-to-income ratio which is expected to be lower than 2021 levels. Return on equity is also expected to improve by approximately 17 percent.