South African lender Absa said on Monday it would not declare an annual dividend after profit fell 58%, pushing its shares down almost 2% as it fell out of step with rivals who have restored payouts in recent weeks.
After the central bank cautiously relaxed guidance advising lenders against dividends, investors had been widely expecting a restoration of payouts from some lenders but were less certain about others, including Absa, whose capital position is not as strong as some peers.
The bank said it expected to gradually return to payouts from the first half of its next financial year, and that in the absence of appropriate loan growth it could “return excess capital to shareholders”.
CFO Jason Quinn told a media briefing that in the medium term that could see either a share buy back or special dividend.
“Those would probably be the two preferred mechanisms,” he said.
CEO Daniel Mminele added that progress against a 2018 turnaround strategy had been “respectable”. Pre-provision profits, a measure of underlying performance excluding the impact of the pandemic, rose 7%.
But a huge spike in bad debt charges in particular has hurt all South African lenders this year, along with slowing fee and loan growth and interest rate cuts.
Overall Absa reported a 58% decline in headline earnings per share – the main profit measure in South Africa – to 730.9 cents in the year to December 31, around the middle of its forecast range and down from 1750.1 cents a year earlier.
This was driven by a 163% jump in credit impairments to R20.6 billion ($1.37 billion).
The bank also said that, following a review of its strategy sparked by the pandemic, beyond 2021 it would place more emphasis on digital distribution, technology and market diversification.