Absa profit slumps as credit impairments almost quadruple
Banking group Absa has reported a profit collapse in its six months to end-June, when the Covid-19 pandemic resulted in credit impairments almost quadrupling.
Credit impairments rose 297% to R14.6bn in the group’s six months to end-June, with the group expecting customer loan and deposit growth to slow in the second half, with deposits expected to grow faster than loans.
Diluted normalised headline earnings per share (Heps) fell 82% to 173.4c. Heps is a widely used profit measure in SA that excludes one-off items to give a better indication of underlying performance. The group normalises the figure to account for the effects of its separation from Barclays.
The group expects further economic pressure in the last six months of 2020, and does not expect to declare dividends in 2020.
Absa is forecasting another 25 basis point cut from the Reserve Bank, while it expects SA’s economy to contract about 8.3% in 2020.
“Downside risks remain significant and include an increase in virus intensity, the lagged impact of the second quarter’s historic economic contraction, SA’s accelerating fiscal challenges, as well as heightened global risks and uncertainty,” the group said.
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