Absa profits take a massive hit as earnings look set for 92% decline

DURBAN – Absa opened weaker on the JSE on Thursday after the bank flagged that its profits would likely take a massive hit in the six months to end June.

Absa said its earnings were expected to decline between 92 percent and 97 percent with headline earnings per share and earnings per share tumbling compared to last year’s 920 cents and 918.9c respectively.

It said the Covid-19 pandemic, national lockdowns and weak economy during the first half had a material impact on customer loan and transaction volumes while significantly lower policy rates reduced its net interest margin despite protection from its structural hedge.

Absa said its revenue would also slow to single-digit growth but it has managed to reduce operating expenses during the period.

“However, credit impairments were four times higher, resulting in a credit loss ratio of 2.77 percent from 0.79 percent in the comparative period. Half of the increase reflects judgmental macro-economic overlays, which strengthened stage 1 and 2 loan coverage materially,” Absa said.