Wrap Text
ABSA GROUP LIMITED
Incorporated in the Republic of South Africa
Registration number: 1986/003934/06
ISIN: ZAE000255915
JSE share code: ABG
JSE bond issuer code: ABGI
('Absa Group' or 'the Group')
VOLUNTARY TRADING UPDATE FOR THE TEN MONTHS ENDED 31 OCTOBER 2022
AND OPERATIONAL OUTLOOK FOR THE YEAR ENDING 31 DECEMBER 2022
Trading update
This trading update provides information on Absa Group's financial performance for the ten
months ended 31 October 2022. The commentary throughout refers to the percent change year-
on-year (unless otherwise noted) in the Group's normalised financial results, which adjust for the
consequences of separating from Barclays PLC. On average, the Rand was broadly in line with
our Absa Regional Operations (ARO) currencies during the period and had a limited impact on
our revenue and earnings, although it increased cost growth slightly.
Gross customer loans grew by low double digits, reflecting solid loan growth across all the
divisions. Customer deposits rose by high single digits, driven by strong growth in Relationship
Banking and Retail and Business Banking (RBB) ARO in particular.
Revenue growth for the ten months was broad-based, with the total increasing by low teens, a
similar rate to the first half. Reflecting strong loan growth and the margin benefit of rising interest
rates, net interest income grew by low teens. Non-interest income also increased by low teens.
The rebound in life insurance revenue, off a low base that included significant Covid-19 claims
and provisions, and mid- to high single digit growth in fee and commission income, offset slightly
lower Markets revenue.
Operating expenses rose by high single digits, although excluding performance costs the increase
was mid-single digit.
Hence, operating JAWS were strongly positive and our cost-to-income ratio improved to the low
50s. Pre-provision profit growth for the ten months was in the low 20s.
Credit impairments increased, with our credit loss ratio in the upper half of our through-the-cycle
target range of 75 to 100 basis points. Corporate and Investment Bank (CIB) and Product Solution
Cluster's credit impairments grew noticeably off low bases, while RBB ARO and Relationship
Banking decreased.
Our return on equity for the period improved noticeably to 17%.
Our capital levels remain strong. Absa Group's common equity tier 1 (CET1) capital ratio was
12.4% at 30 September 2022 (including unappropriated profits) after paying our interim dividend.
Operational outlook
Based on our performance for the first ten months and our current expectations for the operating
environment, barring any major unforeseen political, macroeconomic or regulatory developments
(particularly in our large markets South Africa and Ghana, which is experiencing a sovereign
funding crisis), our guidance for 2022 is as follows:
Revenue for the year is likely to increase by low teens year-on-year, driven by strong non-interest
income growth in part due to a recovery in life insurance revenue off a low base. We expect low
double digit net interest income growth, benefiting from rising interest rates, high single digit
growth in gross customer loans and mid-single digit growth in customer deposits.
Operating expenses are expected to increase by high single digits year-on-year, reflecting higher
performance costs, some Rand depreciation and continued technology investment.
We expect wide positive operating JAWS to produce substantial pre-provision profit growth in the
low 20s. Consequently, our cost-to-income ratio is likely to improve noticeably to the low 50s,
albeit slightly above the first half level given seasonal factors.
Given higher policy rates and the uncertain macroeconomic outlook, we will maintain strong loan
coverage. Our credit impairments are expected to increase year-on-year, resulting in a credit loss
ratio in the upper half of our through-the-cycle range and above our first half charge of 91 basis
points. Within our South African retail portfolio, higher inflation and the 325 basis point rise in
policy rates are expected to increase credit impairments. Vehicle finance credit impairments are
expected to grow materially, despite improving noticeably in the second half, while Home Loans
should normalise off a reversal in the previous year. Personal Loans credit impairments are also
expected to increase materially, in part due to new business strain. Relationship Banking and
RBB ARO's charges are expected to decline, with CIB increasing to within its through-the-cycle
target range.
Our return on equity is likely to improve substantially year-on-year to around 17%, well above our
cost of equity. Given our strong CET1 capital ratio, we expect to increase our dividend payout
ratio to at least 50% for the year.
Shareholders are advised that the financial information contained in this trading update and
operational outlook have not been reviewed or reported on by our auditors.
We will release our 2022 financial results on 13 March 2023.
Johannesburg
7 December 2022
Enquiries:
Alan Hartdegen
E-mail: alan.hartdegen@absa.africa
Lead Independent Sponsor:
J.P. Morgan Equities South Africa Proprietary Limited
Joint Sponsor:
Absa Bank Limited (Corporate & Investment Bank)
Editor's Note:
Normalised reporting
Given the process of separating from Barclays PLC, Absa Group continues to report IFRS-
compliant financial results and a normalised view. The latter adjusts for the consequences of the
separation and better reflects its underlying performance.
Date: 07-12-2022 10:19:00
Supplied by www.sharenet.co.za
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
