Absa more than doubles half-year dividend

Absa Group has more than doubled its interim dividend to 650 cents per share (HY 2021 310 cents) for the period ended 30 June 2022, off the back of double-digit growth in revenue and headline earnings. The dividends have been declared out of income reserves.

The group’s half-year results, published on Monday, showed the bank’s continued recovery on most of its key metrics from the economic fallout of the Covid-19 pandemic.

Africa’s third largest bank reported a 14% rise in revenue to R46.9 billion during the period and a 27% rise in headline earnings to R11 billion.

Pre-provision profit grew 23% to R22.8 billion compared to the previous period, an increase the bank says was supported by “growth across our business units and supported by a rebound in the insurance business in South Africa and increased interest rates across key markets.”

Headline earnings per share (Heps) for the half-year surged 27% to 1 298.5 cents, up from 1 019.7 cents in the 2021 comparable period.

“Our strong results reaffirm the strategic choices we made in 2018 and are testimony to the work we have undertaken in creating a business that is closer to customers,” Absa Group CEO Arrie Rautenbach says in his first interim results as captain of the ship.

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“With a strong, experienced leadership team and an improved operating model, we now have a strong foundation for outperformance,” he adds.

Segmental performance

The bank’s retail and business banking (RBB) segment – the group’s largest revenue generator – reported positive growth trends during the period, despite seeing an increasingly difficult operating environment in the second quarter.

According to the bank RBB’s performance was supported by an increase in home loans registrations, vehicle asset financing and personal loans.

“Absa gained market share in key areas in retail advances including home loans and vehicle asset financing and our deposit market share continued to be strong at 22%. Customer numbers increased 1% to 9.6 million.”

The Corporate and Investment Banking (CIB) segment also reported revenue growth across all its business units, with the segment reporting revenue growth of 7% during the period.

“All of our key measures are significantly above the pre-Covid levels of the first half of 2019,” Group Financial Director Jason Quinn says.

“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 adds.

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Outlook

In an outlook for the rest of the year Absa says it expects to see low double-digit growth in revenue compared to the 2021 full year.

While it further anticipates an at least low to mid-single digit increase in operating expenses in the full year. This as the banking group reports a 7% rise in operating costs to R24.1 billion in the half-year period.

“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 says.

“Absa remains well positioned for the tougher operating environment, with a strong balance sheet and high levels of capital and provisioning.”

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