Absa warns of a likely interim earnings drop

BANKING group Absa warned in a trading update yesterday that its interim earnings were likely to fall by more than 20 percent, as it foresees a significant increase in credit impairments this year due to the Covid-19 disruption.

Headline earnings per share and earnings per share for the six months to the end of June were expected to decrease below 920 cents and 918.9c reported in the first half of 2019, respectively.

Absa said credit impairments for the first four months of the year doubled year-on-year, with large increases in personal loans and credit cards.

The lender said its credit loss ratio was similar to 2009 financial year levels of 1.7 percent.

“It is difficult to provide guidance for the rest of the year, given the significant uncertainty about the impact of Covid-19, national lockdowns and the macroeconomic outlook. These have a material impact on customer loan and transaction volumes and credit impairments, in particular,” Absa said.

The national lockdown had a substantial impact on Absa’s financial performance in April, affecting the first four months of the year.

The year-on-year growth in customer loans to April 30 was low. This would affect Absa’s return on equity, which for the year was likely to decline materially from last year’s 15.8 percent.