Absa warns of steep drop in half-year profits

Says credit impairments were four times higher.
Image: Waldo Swiegers/Bloomberg

Absa said on Wednesday its half-year earnings could be almost wiped out as a steep rise in bad loans dented its performance.

The bank, previously owned by Barclays, said first-half headline earnings per share were expected to decline by between 92% and 97% from the comparative period’s 920 cents ($0.5286).

“Credit impairments were four times higher,” Absa said, adding it expected bad debts to fall significantly in the second half of the year.

“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 our net interest margin,” it said.

Its balance sheet, however, remained resilient, it said.

Its shares, which had finished trading for the day when the statement was released, closed 0.94% lower on Wednesday.

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Not my fault. Although our nearest branch was closed for months and ATM’s were not serviced regularly, they kept on deducting bank fees regularly. They lost nothing on me.

So are SA banks a buy..recently listened to 2 analysts stating that on a look through earnings basis, low price to books, depressed Roes and recovery in dividend payouts that the banks are a “bargain”. Any views?

One may have run out of ideas when you start thinking of ZA banks as an investment option. They are geared plays on the South African economy. Plenty of exposure to the SOEs and property companies. Is it inconceivable that at least one bank could fail in the next 24m?

This is what happens when you drive sales, first and foremost, at all costs, instead of concentrating on retention of the client base, during such uncertain times.

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