Daniel Mminele, Absa Group Chief Executive
Absa Group Ltd. today reported an 82% decline in normalised interim earnings after impairments increased four-fold to R14.7 billion. Impairment charges rose as customers and clients struggled to repay debt and as the Group took decisive action to increase impairment provisions against future potential credit losses.
Despite significantly higher credit impairments and the material impact of the lockdowns on transactional volumes, the Group, including all business units, remained profitable. The Group expects a continued difficult environment for the consumer and heightened uncertainty is expected to dampen business confidence and investment in the remainder of 2020.
“In the current economic climate, ensuring continued operational and financial resilience is paramount. We are therefore temporarily holding our growth ambitions in abeyance to focus on cost management and capital and liquidity preservation, while continuing to support customers,” said Daniel Mminele, Absa Group Chief Executive.
Absa extended significant support to customers and clients across its operating markets. In South Africa, the Group’s largest market, Absa implemented a comprehensive payment relief plan. Measures included credit payment relief, insurance premium relief, the temporary expansion of the Credit Life product to cover a wider definition of loss of income, the waiving of Saswitch fees, and supporting the distribution of social grants and pension payments.
As at 30 June, Absa had provided R8.7 billion of relief on R154 billion worth of loans to 538 000 customers, including 20 000 businesses in South Africa.
Corporate and Investment Banking South Africa assisted clients on a one-to-one basis and granted payment relief on R37 billion of loans, 12% of their book.
Absa Regional Operations afforded customers payment relief on loans totaling R25 billion.
In line with Absa’s commitment to be a force for good in the communities that we operate in, we mobilised our citizenship programme as COVID-19 quickly evolved into a humanitarian crisis. Absa and its employees contributed over R71 million in support across the continent, contributing towards screening and testing, the provision of personal protective equipment for thousands of health workers and humanitarian support to vulnerable communities in the Southern, East and West African countries.
While the negative impact of the crisis on Absa’s earnings is clear, the interim results also highlight the resilience of the business.
“Our revenue remained resilient and our operating costs were well managed and responded to the crisis, resulting in encouraging pre-provision profit growth of 9%,” said Absa Group Financial Director Jason Quinn. “Our capital and liquidity levels are strong and will allow us to further support our customers as we emerge from the crisis,” he said.
Absa continued to deliver against major business imperatives during the period, achieving substantial separation from Barclays and completing the process of renaming and rebranding its operations in 12 countries. The separation has fundamentally improved Absa’s resilience, systems and capabilities, to the benefit of staff and customers.
Outlook
While uncertainty remains high, the Group is well-positioned with a strong capital and liquidity position allowing it to continue to support its customers. With the decisive actions that have been taken in the first half to improve balance sheet resilience, the Group expects the second-half impairment outcome and returns to improve.
