Absa hit by credit impairments

Absa’s earnings for the 2023 financial year decreased slightly despite a jump in net asset value (NAV) per share, as the bank took a hit from higher impairments.

Absa released its results for the year ended 31 December 2023 today, which revealed mixed results for the bank.

Total income increased by 8.1% to R104.64 billion. NAV per ordinary share also increased by 7.3% to 17,109 cents per share.

However, Absa’s headline earnings per share only increased by 0.6%, while basic earnings per share decreased by 1.8%.

This translates to headline earnings per share of 2,422 cents and basic earnings of 2,400 cents per share.

This is likely due to Absa’s higher credit impairment charges, which increased by over 13% to R15.54 billion in the period.

In 2023, Absa’s gross loans and advances increased by 5% to R1.32 trillion. Deposits grew by 8% to R1.34 trillion.

This brought the bank’s stage 3 loans ratio to gross loans and advances to 6.1% from 5.3% previously. Absa’s liquidity coverage ratio decreased marginally to 124% from 124.6% in 2022.

The bank achieved a common equity tier 1 ratio of 12.5% in 2023, down from 12.8% in 2022.

Absa declared a final dividend of 685 cents per ordinary share for 2023 – down almost 13% from the dividend declared in 2022.

While Absa is struggling, its competitors in South Africa’s financial landscape are flourishing.

Nedbank also recently released its results for the 2023 financial year, which revealed headline earnings growth of 11%.

This growth was enabled by a strong operational performance as pre-provisioning operating profit increased by 15%.

It was underpinned by 12% revenue growth and solid expense management and was partially offset by a 30% increase in the impairment charge.

As a result, the group’s credit loss ratio improved from 121 basis points in H1 2023 to 96 basis points in H2 2023 and, therefore, reached 109 basis points for the full year.

Standard Bank is also set to release its results for the 2023 financial year soon, which are expected to reveal a very strong performance.

The bank recently informed shareholders that it expects its earnings to rise by up to 30% for the 2023 financial year.

Headline earnings are expected to rise by up to 28% to 2,050 cents per share. Earnings per share are expected to grow by up to 30% to 2,074 cents.