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Absa Shrugs Off Tumultuous Year to Report Record Jump in Profit

Absa Shrugs Off Tumultuous Year to Report Record Jump in Profit

Anyone looking at Absa Group Ltd.’s 2021 earnings statement alone would have no inkling the South African lender had such a tumultuous year in the boardroom.

The country’s third-largest bank saw former Chief Executive Officer Daniel Mminele quit after less than 18 months after a dispute with other board members over strategy. Former lead independent director Sipho Pityana took the banking regulator to court after being passed over for the chairman role, and Deputy CEO Peter Matlare died after contracting Covid-19.

Yet against that backdrop, Absa reported net income three times higher than a year earlier and resumed dividend payments at 7.85 rand a share.

“We tilted toward growth probably a little bit quicker than I would have thought,”Acting CEO Jason Quinn said in an interview. Whereas in the previous year we were very much about preserving capital, liquidity and the like, it was nice to see some opportunities come through the second half.”

While all South Africa’s banks have reported sharply higher earnings when compared with the lockdown-blighted 2020, Quinn said momentum will continue and Absa sees revenue climbing at a rate in the high single digits. The lender joined its peers in forecasting a series of rate rises, predicting a 600 million rand ($40 million) bump in net interest income for each 100 basis point increase. 

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ESG, Deposit Growth

Absa also plans to fund 100 billion rand of new ESG-related products by 2025, more than doubling it’s current book of 47 billion rand. The bank funded 80% of the fifth round of South Africa’s auctions for clean power from private developers.

The shares jumped as much as 3.8%, before paring gains to trade 2.1% higher as of 1:50 p.m. in Johannesburg. The FTSE/JSE Banks Index was up 1%. 

“The key standout for me was the deposit growth,” said Nolwandle Mthombeni, a banking analyst at Intellidex. “The deposit franchise is still very strong despite the general industry slow down, and they gaining market share in a key area.”

Still, that CEO position remains unfilled. And should Quinn eventually be confirmed in the role permanently, as many in the industry expect, his old chief financial officer position will also need to be addressed. That’s being occupied on an interim basis by Punki Modise.

“There was a lot going on around us, whether it was in the markets or in the company,” Quinn said. “The leadership team stayed very focused on the task at hand and the strategy at hand.”

Source: Bloomberg


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