…Absa scraps dividend as earnings plunge in first half of 2020

JOHANNESBURG - Absa’s earnings plunged in the first half of 2020 due to the impact of the Covid-19 pandemic on South Africa’s economy.

The group did not declare an ordinary interim dividend, citing guidance from the Prudential Authority of the SA Reserve Bank and the need to preserve capital.

In an earnings report on Monday, the banking group said headline earnings declined 93 percent to R559 million from R7 650 million in the previous period, while diluted headline earnings per share fell 93 percent to 67.7 cents from 920 cents.

On a normalised basis, which adjusts for the consequences of the group’s separation from Barclays, headline earnings per share fell 82 percent to 173.4 cents from 975.8 cents.

“Even as August data show a clear slowing of the spread of the virus in most parts of South Africa, the group expects a continued difficult environment for the consumer, while heightened uncertainty will continue to dampen business confidence and investment,” it said.

Meanwhile, the rand firmed against the dollar on Monday in anticipation of economic intervention by the US Federal Reserve on Thursday, dipping below R17/$.

It firmed sharply against the pound and euro as well, as the top performing emerging market currency alongside the Mexican peso.

Bianca Botes, executive director at Peregrine Treasury Solutions, said the local currency is taking advantage of the current risk-on environment which is creating an opportunity for emerging markets to gain momentum.

According to Botes, this strengthening of the rand, after a few weeks trading above R17/$ and hitting a 10-week low at the beginning of August, is due to the US Jackson Hole symposium, set to start on Thursday.

The symposium will bring together economists, academics, market participants and government representatives to discuss long-term policy considerations. - FIN24.

The regulator said it had taken into consideration the impact Covid-19 has had on the financial services sector.

Said RBZ governor Dr John Mangudya in the mid-term Monetary Policy Statement (MPS):

“Cognisant of the prevailing challenging environment exacerbated by the negative impact of the Covid-19 pandemic, the bank is extending the deadline for compliance with the requirement for meeting the minimum capital levels, by one year from 31 December 2020 to 31 December 2021.

“In this regard, banking institutions are required to submit to the bank updates of capitalisation plans by 31 December 2020 and 30 June 2021,” said Dr Mangudya.

Earlier in January, the RBZ Governor said large indigenous banks and all foreign banks will now need to have minimum capital equivalent to US$30 million, effectively hiking the threshold.

Last year the central bank had set 2020 minimum capital threshold for large indigenous commercial and all foreign banks at $200 million, but kept them at $25 million for small