Wrap Text
ABSP/ ABMN - Audited financial results - financial year ended 31 December 2013 and profit and dividend announcement
ABSA BANK LIMITED
Authorised financial services and registered credit provider (NCRCP7)
Registration number: 1986/004794/06
Incorporated in the Republic of South Africa
JSE share code: ABSP
ABMN
ISIN: ZAE000079810
(Absa, Absa Bank, the Bank or the Company)
ABSA BANK LIMITED: PROFIT AND DIVIDEND ANNOUNCEMENT
AUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS
FOR THE REPORTING PERIOD ENDED 31 DECEMBER 2012
CONSOLIDATED SALIENT FEATURES
31 December
2012 2011(1) Change %
Statement of comprehensive income(Rm)
Headline earnings (2) 7 425 7 957 (7)
Profit attributable to ordinary equity holder 7 272 7 901 (8)
Statement of financial position
Total assets (Rm) 764 491 742 436 3
Loans and advances to customers (Rm) 511 179 488 332 5
Deposits due to customers (Rm) 467 318 431 762 8
Loans-to-deposits ratio (%) (3) 89,1 87,2
Off-statement of financial position (Rm)
Assets under management and administration 27 158 22 741 19
Financial performance (%)
Return on average equity (RoE)(3) 13,6 15,8
Return on average assets (RoA)(4) 0,97 1,13
Return on average risk-weighted assets (RoRWA) (4) 1,72 2,07
Operating performance (%)
Net interest margin on average interest-bearing assets (4) 3,62 3,80
Impairment losses on loans and advances as % of average loans
and advances to customers (4) 1,57 1,00
Non-performing advances as % of loans and advances to customers (4) 5,7 6,9
Non-interest income as % of total operating income (3) 44,8 42,8
Cost-to-income ratio (3) 52,9 55,6
Effective tax rate, excluding indirect taxation (3) 26,1 27,7
Share statistics (million)
(including A ordinary shares)
Number of ordinary shares in issue 378,8 374,1
Weighted average number of ordinary shares in issue 375,3 374,1
Diluted weighted average number of ordinary shares in issue 375,3 374,1
Share statistics (cents)
Headline earnings per share 1 978,4 2 127,0 (7)
Diluted headline earnings per share 1 978,4 2 127,0 (7)
Basic earnings per share 1 937,6 2 112,0 (8)
Diluted earnings per share 1 937,6 2 112,0 (8)
Dividends per ordinary share relating to income for the reporting period 1 568,3 1 034,4 52
Dividend cover (times) (3) 1,3 2,1
Net asset value per share (3) 14 845 14 058 6
Tangible net asset value per share (3) 14 539 13 871 5
Capital adequacy (%) (4)
Absa Bank 17,5 16,2
Notes
(1) Comparatives have been reclassified. Refer to note 21.
(2) After allowing for R295 million (2011: R284 million) profit attributable to preference equity holders.
(3) These ratios have been calculated by management based on extracted audited information contained in the
audited annual consolidated financial statements.
(4) These ratios are unaudited.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December
2012 2011(1) 2010(1)
(Audited) (Audited) Change (Audited)
Note Rm Rm % Rm
Assets
Cash, cash balances and balances with central banks 20 435 19 505 5 17 343
Statutory liquid asset portfolio 63 020 57 473 10 48 215
Loans and advances to banks 42 405 55 870 (24) 26 328
Trading portfolio assets 82 302 79 603 3 57 647
Hedging portfolio assets 5 439 4 299 27 4 662
Other assets 11 362 11 459 (1) 8 783
Current tax assets 35 84 (58) 5
Non-current assets held for sale 1 1 438 35 >100 -
Loans and advances to customers 2,3,4 511 179 488 332 5 496 551
Loans to Group companies 10 777 7 164 50 8 071
Investment securities 6 363 8 331 (24) 12 906
Investments in associates and joint ventures 562 412 36 406
Investment properties 331 1 840 (82) 1 771
Property and equipment 7 653 7 268 5 6 987
Goodwill and intangible assets 1 160 700 66 643
Deferred tax assets 30 61 (51) 92
Total assets 764 491 742 436 3 690 410
Liabilities
Deposits from banks 42 936 44 702 (4) 21 740
Trading portfolio liabilities 47 889 49 232 (3) 43 530
Hedging portfolio liabilities 3 855 2 456 57 1 881
Other liabilities 14 431 10 536 37 7 788
Provisions 1 394 1 457 (4) 1 533
Current tax liabilities 59 255 (77) 929
Non-current liabilities held for sale 1 177 - 100 -
Deposits due to customers 5 467 318 431 762 8 382 131
Debt securities in issue 6 106 188 128 051 (17) 162 526
Loans from Group companies - 1 438 (100) -
Borrowed funds 7 17 907 14 051 27 13 649
Deferred tax liabilities 1 411 1 104 28 2 073
Total liabilities 703 565 685 044 3 637 780
Equity
Capital and reserves
Attributable to equity holders:
Ordinary share capital 303 303 0 303
Ordinary share premium 12 465 11 465 9 11 465
Preference share capital 1 1 - 1
Preference share premium 4 643 4 643 - 4 643
Retained earnings 38 025 37 217 2 32 449
Other reserves 5 441 3 605 51 3 704
60 878 57 234 6 52 565
Non-controlling interest 48 158 (70) 65
Total equity 60 926 57 392 6 52 630
Total liabilities and equity 764 491 742 436 3 690 410
Note
(1)Comparatives have been reclassified. Refer to note 21.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the reporting period ended 31 December
2012 2011 (1)
(Audited) (Audited) Change
Note Rm Rm %
Net interest income 21 995 22 110 (1)
Interest and similar income 8.1 48 682 49 180 (1)
Interest expense and similar charges 8.2 (26 687) (27 070) 1
Impairment losses on loans and advances 3 (7 918) (4 876) (62)
Net interest income after impairment losses on loans and
advances 14 077 17 234 (18)
Non-interest income 17 870 16 514 8
Net fee and commission income 13 759 13 393 3
Fee and commission income 9.1 14 890 14 421 3
Fee and commission expense 9.2 (1 131) (1 028) (10)
Gains and losses from banking and trading
activities 9.3 3 543 2 504 41
Gains and losses from investment activities 9.4 20 54 (63)
Other operating income 548 563 (3)
Operating income before operating expenditure 31 947 33 748 (5)
Operating expenditure (21 967) (22 462) 2
Operating expenses 10.1 (21 088) (21 485) 2
Other impairments 10.2 (344) (73) >(100)
Indirect taxation (535) (904) 41
Share of post-tax results of associates and joint ventures 240 47 >100
Operating profit before income tax 10 220 11 333 (10)
Taxation expense (2 669) (3 140) 15
Profit for the reporting period 7 551 8 193 (8)
Other comprehensive income
Foreign exchange differences on translation of foreign operations 183 218 (16)
Movement in cash flow hedging reserve 405 (242) >100
Fair value gains arising during the reporting period 2 650 1 964 35
Amount removed from other comprehensive income and
recognised in the profit and loss component of the
statement of comprehensive income (2 088) (2 300) 9
Deferred tax (157) 94 >(100)
Movement in available-for-sale reserve 1 101 (24) >100
Fair value gains/(losses) arising during the reporting period 1 524 (65) >100
Amortisation of government bonds release to the
profit and loss component of the statement of
comprehensive income 10 20 (50)
Deferred tax (433) 21 >(100)
Movement in retirement benefit fund asset (201) (47) >(100)
Decrease in retirement benefit surplus (279) (66) >(100)
Deferred tax 78 19 >100
Total comprehensive income for the reporting period 9 039 8 098 12
Profit attributable to:
Ordinary equity holder 7 272 7 901 (8)
Preference equity holders 295 284 4
Non-controlling interest (16) 8 >(100)
7 551 8 193 (8)
Total comprehensive income attributable to:
Ordinary equity holder 8 760 7 806 12
Preference equity holders 295 284 4
Non-controlling interest (16) 8 >(100)
9 039 8 098 12
Earnings per share:
Basic earnings per share (cents) 1 937,6 2 112,0 (8)
Diluted earnings per share (cents) 1 937,6 2 112,0 (8)
Note
(1)Comparatives have been reclassified. Refer to note 21.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the reporting period ended 31 December
2012
(Audited)
Capital and
reserves
attributable Non-
to equity controlling Total
holders interest equity
Rm Rm Rm
Balance at the beginning of the reporting period 57 234 158 57 392
Total comprehensive income for the reporting period 9 055 (16) 9 039
Profit for the reporting period 7 567 (16) 7 551
Other comprehensive income 1 488 - 1 488
Dividends paid during the reporting period (6 217) - (6 217)
Shares issued 1 000 - 1 000
Purchase of Absa Group Limited shares in respect of equity
settled share-based payment schemes (211) - (211)
Movement in share-based payment reserve 17 - 17
Transfer from share-based payment (110) - (110)
reserve
Transfer to retained earnings 110 - 110
Value of employee services 17 - 17
Share of post-tax results of associates and joint ventures - - -
Transfer to associates and joint ventures
reserve 240 - 240
Transfer from retained earnings (240) - (240)
Increase in interest of non-controlling equity holders - 35 35
Release of non-controlling interest arising from disposal of business - (129) (129)
Balance at the end of the reporting period 60 878 48 60 926
2011
(Audited)
Capital and
reserves
attributable Non-
to equity controlling Total
holders interest equity
Rm Rm Rm
Balance at the beginning of the reporting period 52 565 65 52 630
Total comprehensive income for the reporting period 8 090 8 8 098
Profit for the reporting period 8 185 8 8 193
Other comprehensive income (95) - (95)
Dividends paid during the reporting period (3 184) - (3 184)
Purchase of Absa Group Limited shares in respect of equity-settled
share-based payment scheme (281) - (281)
Movement in share-based payment reserve 44 - 44
Transfer from share-based payment reserve (155) - (155)
Transfer to retained earnings 155 - 155
Value of employee services 44 - 44
Share of post-tax results of associates and joint ventures - - -
Transfer to associates and joint ventures Reserve 47 - 47
Transfer from retained earnings (47) - (47)
Disposal of associates and joint ventures - release of reserves - - -
Transfer to associates and joint ventures reserve 13 - 13
Transfer from retained earnings (13) - (13)
Increase in the interest of non-controlling equity holders - 21 21
Non-controlling interest arising from business combinations - 64 64
Balance at the end of the reporting period 57 234 158 57 392
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the reporting period ended 31 December
2012 2011
(Audited) (Audited) Change
Note Rm Rm %
Net cash generated from operating activities 1 784 3 464 (48)
Net cash generated from investing activities 1 132 3 026 (63)
Net cash utilised in financing activities (1 928) (3 465) 44
Net increase in cash and cash equivalents 988 3 025 (67)
Cash and cash equivalents at the beginning of the reporting period 1 7 798 4 773 63
Effect of exchange rate movements on cash and cash equivalents - 0 -
Cash and cash equivalents at the end of the reporting period 2 8 786 7 798 13
NOTES
1. Cash and cash equivalents at the beginning of the
reporting period
Cash, cash balances and balances with central banks 7 226 4 431 63
Loans and advances to banks 572 342 67
7 798 4 773 63
2. Cash and cash equivalents at the end of the
reporting period
Cash, cash balances and balances with central banks 8 094 7 226 12
Loans and advances to banks 692 572 21
8 786 7 798 13
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL RESULTS
as at 31 December
1. NON-CURRENT ASSETS HELD FOR SALE
During the reporting period, the Bank effected the following transfers to non-current assets and non-current liabilities
held for sale:
Through the RBB segment:
- the investment in Sekunjalo Investments Limited, with a carrying value of R20 million. This investment was subsequently
sold in January 2013;
- in the Commercial Property Finance Equity (CPF Equity) division, net assets in one of its subsidiaries totaling R1 209
million, and one of its property equity investments with a carrying value of R10 million;
- in the CPF Equity division, a property and equipment with a carrying value of R22 million, and concluded a contract of
sale of the Pivot Office Park, with a carrying value of R66 million, previously classified as investment property.
Through the Corporate Real Estate business segment:
- transferred several properties during the reporting period whose contracts for sale were concluded in the previous
reporting period.
2. LOANS AND ADVANCES TO CUSTOMERS
2012 2011(1) 2010(1)
(Audited) (Audited) Change (Audited)
Rm Rm % Rm
Cheque accounts 31 619 31 370 1 30 696
Corporate overdrafts and specialised finance loans 5 121 10 681 (52) 9 612
Credit cards (2) 27 051 16 072 68 15 258
Foreign currency loans 12 152 8 564 42 5 602
Instalment credit agreements 60 364 57 246 5 56 874
Gross advances 72 999 68 401 7 67 424
Unearned finance charges (12 635) (11 155) (13) (10 550)
Reverse repurchase agreements 4 698 1 613 >100 3 063
Loans to associates and joint ventures 10 094 7 909 28 8 025
Microloans 1 846 1 690 9 1 766
Mortgages 278 200 287 710 (3) 302 516
Other(3) 3 230 4 601 (30) 3 779
Overnight finance 18 862 12 320 53 7 647
Personal and term loans 29 638 26 324 13 25 262
Preference shares 6 352 6 973 (9) 6 637
Wholesale overdrafts 34 950 26 647 31 32 638
Gross loans and advances to customers 524 177 499 720 5 509 375
Impairment losses on loans and advances (refer to note 3) (12 998) (11 388) (14) (12 824)
511 179 488 332 5 496 551
Notes
(1)Comparatives have been reclassified. Refer to note 21.
(2)Include the acquisition of the Edcon store card loan portfolio.
(3)Include customer liabilities under acceptances, working capital solutions and
collateralised loans.
3. IMPAIRMENT LOSSES ON LOANS AND ADVANCES 2012 2011
( Audited) (Audited) Change
Rm Rm %
Balance at the beginning of the reporting period 11 388 12 824 (11)
Amounts written off during the reporting period (6 084) (5 787) (5)
Foreign exchange differences 3 1 >100
Interest on impaired assets (refer to note 8.1) (1 020) (1 176) 13
4 287 5 862 (27)
Impairments raised during the reporting period 8 711 5 526 58
Balance at the end of the reporting period 12 998 11 388 14
Comprising:
Identified impairments 12 089 10 618 14
Performing loans (1) 10 794 9 258 17
Non-performing loans (1) 1 295 1 360 (5)
Unidentified impairments 909 770 18
12 998 11 388 14
3.1 Statement of comprehensive income charge for the reporting period ended 31 December
Impairments raised during the reporting period 8 711 5 526 58
Identified impairments 8 560 5 642 52
Unidentified impairments 151 (116) >100
Recoveries of loans and advances previously written off (793) (650) (22)
7 918 4 876 62
Note
(1) The breakdown of identified impairments between performing and non-performing loans is unaudited.s
4. NON-PERFORMING LOANS
2012
(Unaudited)
Expected
recoveries
and fair Total
Outstanding value of Net identified Coverage
balance collateral exposure impairment ratio
Rm Rm Rm Rm %
RBB 28 930 18 633 10 297 10 297 35,6
Retail Markets 23 103 15 182 7 921 7 921 34,3
Cheque accounts 96 29 67 67 69,8
Credit cards 1 310 430 880 880 67,2
Instalment credit
agreements 1 562 798 764 764 48,9
Microloans 337 115 222 222 65,9
Mortgages 18 750 13 408 5 342 5 342 28,5
Personal loans 1 048 402 646 646 61,6
Business Markets 5 827 3 451 2 376 2 376 40,8
Cheque accounts 859 522 337 337 39,2
Commercial asset finance 670 242 428 428 63,9
Commercial property
finance 3 222 1 883 1 339 1 339 41,6
Term loans 1 076 804 272 272 25,3
Corporate, Investment Banking and Wealth (CIBW) 880 384 496 496 56,4
Non-performing loans 29 810 19 017 10 793 10 793 36,2
Non-performing loans
ratio (%) 5,7
2011
(Unaudited)
Expected
recoveries
and fair Total
Outstanding value of Net identified Coverage
balance collateral exposure impairment ratio
Rm Rm Rm Rm %
RBB 33 507 24 688 8 819 8 819 26,3
Retail Markets 29 239 21 975 7 264 7 264 24,8
Cheque accounts 153 45 108 108 70,6
Credit cards 1 498 532 966 966 64,5
Instalment credit agreements 2 645 1 370 1 275 1 275 48,2
Microloans 348 76 272 272 78,2
Mortgages 23 479 19 466 4 013 4 013 17,1
Personal loans 1 116 486 630 630 56,5
Business Markets 4 268 2 713 1 555 1 555 36,4
Cheque accounts 749 432 317 317 42,3
Commercial asset finance 932 395 537 537 57,6
Commercial property
finance 1 894 1 354 540 540 28,5
Term loans 693 532 161 161 23,2
CIBW 844 405 439 439 52,0
Non-performing loans 34 351 25 093 9 258 9 258 27,0
Non-performing loans
ratio (%) 6,9
5. DEPOSITS DUE TO CUSTOMERS
2012 2011
(Audited) (Audited) Change
Rm Rm %
Call deposits 56 648 55 528 2
Cheque account deposits 139 857 130 953 7
Credit card deposits 1 938 1 884 3
Fixed deposits 124 832 124 341 0
Foreign currency deposits 9 723 6 898 41
Notice deposits 55 728 28 500 96
Other deposits(1) 1 557 2 695 (42)
Repurchase agreements with non-banks 1 503 8 734 (83)
Savings and transmission deposits 75 532 72 229 5
467 318 431 762 8
Note
(1) Include partnership contributions received, deposits due on structured deals, preference investments on behalf of
customers and unclaimed deposits.
6. DEBT SECURITIES IN ISSUE
2012 2011
(Audited) (Audited) Change
Rm Rm %
Credit linked notes 9 800 8 976 9
Floating rate notes 53 904 69 854 (23)
Negotiable certificates of deposit 17 926 30 302 (41)
Other debt securities 7 - 100
Promissory notes 1 561 3 168 (51)
Structured notes and bonds 1 098 1 451 (24)
Senior notes 21 892 14 300 53
106 188 128 051 (17)
7. BORROWED FUNDS
2012 2011
(Audited) (Audited) Change
Rm Rm %
Subordinated callable notes
The subordinated debt instruments listed below qualify
as secondary capital in terms of the Banks Act.
Interest rate Final maturity date
8,75% 1 September 2017 - 1 500 (100)
8,80% 7 March 2019 1 725 1 725 -
8,10% 27 March 2020 2 000 2 000 -
10,28% 3 May 2022 600 600 -
8,295% 21 November 2023 1 188 - 100
Three-month JIBAR + 2,10% 3 May 2022 400 400 -
Three-month JIBAR + 1,95% 21 November 2022 1 805 - 100
Three-month JIBAR + 2,05% 21 November 2023 2 007 - 100
CPIlinked notes, fixed at the following coupon rates:
6,25% 31 March 2018 1 886 1 886 -
6,00% 20 September 2019 3 000 3 000 -
5,50% 7 December 2028 1 500 1 500 -
Accrued interest 1 462 1 157 26
Fair value adjustment 334 283 18
17 907 14 051 27
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL RESULTS
for the reporting period ended 31 December
NET INTEREST INCOME
8.1 Interest and similar income
2012 2011 (1)
(Audited) (Audited) Change
Rm Rm %
Interest and similar income is earned from:
Cash, cash balances and balances with central banks 19 2 >100
Fair value adjustments on hedging instruments (185) 1 063 >(100)
Investment securities 117 317 (63)
Loans and advances to banks 839 960 (13)
Other 745 805 (7)
Reverse repurchase agreements 94 155 (39)
Loans and advances to customers 41 290 41 508 (1)
Cheque accounts 2 677 2 572 4
Corporate overdrafts and specialised finance loans 484 664 (27)
Credit cards 2 660 2 089 27
Foreign currency loans 218 110 98
Instalment credit agreements 5 536 5 559 (0)
Interest on impaired financial assets (refer to
note 3) 1 020 1 176 (13)
Loans to associates and joint ventures 494 417 18
Microloans 477 505 (6)
Mortgages 20 611 21 672 (5)
Other loans and advances(2) 211 251 (16)
Overnight finance 814 584 39
Personal and term loans 3 228 3 260 (1)
Preference shares 485 619 (22)
Wholesale overdrafts 2 375 2 030 17
Other interest income (3) 1 018 1 045 (3)
Statutory liquid asset portfolio 5 584 4 285 30
48 682 49 180 (1)
Notes
(1)Comparatives have been reclassified. Refer to note 21.
(2)Include items such as interest on factored debtors books.
(3)Include items such as overnight interest on contracts for differences as well as
inter-segment eliminations between Interest and similar income, 'Interest expense and similar charges',
Gains and losses from banking and trading activities and 'Gains and losses from investment activities'.
8.2 Interest expense and similar charges
2012 2011
(Audited) (Audited) Change
Rm Rm %
Interest expense and similar charges are paid on:
Borrowed funds 1 352 1 350 0
Debt securities in issue 8 327 9 763 (15)
Deposits due to customers 17 789 16 306 9
Call deposits 2 863 3 072 (7)
Cheque account deposits 3 127 2 758 13
Credit card deposits 9 10 (10)
Fixed deposits 6 884 7 064 (3)
Foreign currency deposits 73 80 (9)
Notice deposits 2 469 776 >100
Other deposits 219 477 (54)
Savings and transmission deposits 2 145 2 069 4
Deposits from banks 1 227 1 273 (4)
Call deposits 677 744 (9)
Fixed deposits 517 504 3
Other deposits 33 25 32
Fair value adjustments on hedging instruments (998) (778) (28)
Interest incurred on finance leases 51 85 (40)
Other interest expense (2) (1 061) (929) (14)
26 687 27 070 (1)
Notes
(1)Comparatives have been reclassified. Refer to note 21.
(2)Includes interest costs relating to inter-segment eliminations between Interest and similar income,
'Interest expense and similar charges', Gains and losses from banking and trading activities and 'Gains
and losses from investment activities'.
9. NON-INTEREST INCOME
9.1 Fee and commission income
Asset management and other related fees 62 78 (21)
Consulting and administration fees 136 110 24
Credit-related fees and commissions 12 021 11 822 2
Cheque accounts 3 539 3 292 8
Credit cards (1)(2) 428 449 (5)
Electronic banking 4 068 4 086 (0)
Other credit-related fees and commissions (3) 1 516 1 620 (6)
Savings accounts 2 470 2 375 4
Insurance commission received 465 436 7
Investment banking fees 252 203 24
Merchant income (2) 1 843 1 656 11
Other 81 97 (16)
Trust and other fiduciary services 30 19 58
Portfolio and other management fees 20 14 43
Trust and estate income 10 5 100
14 890 14 421 3
9.2 Fee and commission expense
Cheque processing fees (161) (171) 6
Other fee and commission expense (480) (429) (12)
Transaction-based legal fees (310) (227) (37)
Trust and other fiduciary service fees (56) (64) 13
Valuation fees (124) (137) 9
(1 131) (1 028) (10)
Net fee and commission income 13 759 13 393 3
Notes
(1) Include acquiring and issuing fees.
(2) During the current reporting period, certain clearing fees were reclassified from
Credit cards to Merchant income to more accurately present Card non-interest
income. This resulted in a reclassification of comparative information.
(3)Includes service, credit-related fees and commissions on mortgage loans and
foreign exchange transactions.
9.3 Gains and losses from banking and trading activities
Net gains on investments (1)(2) 192 432 (56)
Debt instruments designated at fair value
through profit or loss 179 215 (17)
Equity instruments designated at fair value
through profit or loss 23 237 (90)
Available-for-sale unwind from reserves (10) (20) 50
Net trading result (2)(3) 3 429 2 060 66
Net trading income excluding the impact of hedge
accounting 3 407 2 034 68
Ineffective portion of hedges 22 26 (15)
Cash flow hedges 45 33 36
Fair value hedges (23) (7) >(100)
Other (losses)/gains (78) 12 >(100)
3 543 2 504 41
Net trading income excluding the impact of hedge accounting 3 407 2 034 68
Losses on financial instruments designated at
fair value through profit or loss (750) (835) 10
Net gains on financial assets designated at fair
value through profit or loss 1 292 594 >100
Net losses on financial liability designated
at fair value through profit or loss (2 042) (1 429) (43)
Gains on financial instruments held for trading 4 157 2 869 45
Other gains/(losses) (78) 12 >(100)
(Losses)/Gains on financial instruments designated at
fair value through profit or loss (141) 26 >(100)
Gains/(losses) on financial instrument held for 63 (14) >100
trading
Notes
(1)In order to provide for improved disclosure, revaluations between debt and equity
instruments have been reclassified.
(2)Due to structure changes, certain revenue streams have been reclassified from
Markets to Corporate. This also resulted in a reclassification from Net
trading results to Net gains on investments.
9.4 Gains and losses from investment activities
2012 2011
(Audited) (Audited) Change
Rm Rm %
Available-for-sale unwind from reserves 2 1 100
Net gains on investments
Other gains (1) 18 53 (66)
20 54 (63)
Note
(1) Include gains and losses from instruments designated at fair value through profit
or loss.
10. OPERATING EXPENDITURE
10.1 Operating expenses
2012 2011
(Audited) (Audited) Change
Rm Rm %
Amortisation of intangible assets 143 148 (3)
Auditors remuneration 148 149 (1)
Cash transportation 591 643 (8)
Depreciation 1 155 1 155 -
Equipment costs 177 173 2
Information technology (IT) (1) 1 930 2 065 (7)
Investment property charges change in fair value 162 43 >100
Marketing costs 958 928 3
Operating lease expenses on properties 916 880 4
Other property costs 249 220 13
Printing and stationery 185 216 (14)
Professional fees (1) 677 934 (28)
Property costs 1 186 1 042 14
Staff costs 11 109 11 722 (5)
Bonuses 824 1 098 (25)
Current service costs on post-retirement benefits 514 648 (21)
Other staff costs(2) 385 428 (10)
Salaries 8 772 8 897 (1)
Share-based payments 431 434 (1)
Training costs 183 217 (16)
Telephone and postage 637 659 (3)
Other operating expenses(3) 865 508 70
21 088 21 485 (2)
Notes
(1) Information technology expenses and Professional fees include research and development costs totalling
R 113 million (2011: R101 million).
(2) Include recruitment costs, membership fees to professional bodies, staff parking,
redundancy fees, study assistance, staff relocation and refreshment costs.
(3) Include fraud losses, travel, entertainment and collection costs.
10.2 Other impairments
2012 2011 (1)
(Audited) (Audited) Change
Rm Rm %
Financial instruments 258 26 >100
Amortised cost 258 26 >100
Other 86 47 83
Computer software development costs 68 - 100
Goodwill 18 28 (36)
Investments in associates and joint ventures - (2) 100
Repossessed properties - 21 (100)
344 73 >100
11. HEADLINE EARNINGS
2012 2011
(Audited) (Audited) Net
Gross Net Gross Net Change
Rm Rm Rm Rm %
Headline earnings(1) is determined as follows:
Profit attributable to ordinary equity holder 7 272 7 901 (8)
Total headline earnings adjustment: 153 56 >100
IAS 36 - Goodwill impairment 18 18 28 28 (36)
IAS 16 Profit on disposal of
property and equipment (80) (62) (27) (22) >(100)
IAS 28 and 31 - Headline earnings
component of share of post-tax results
of associates and joint ventures (1) (1) (0) (0) (100)
IAS 28 and 31 Impairment
reversal of investments in associates
and joint ventures - - (2) (1) 100
IAS 38 and IAS 36 Loss on disposal and impairment of intangible assets 68 49 - - 100
IAS 39 - Release of available-for-sale
Reserves 10 7 20 14 (50)
IAS 40 - Change in fair value of
investment properties 162 142 43 37 >100
Headline earnings/diluted headline earnings 7 425 7 957 (7)
Headline earnings per share/diluted headline earnings per share (cents) 1 978,4 2 127,0 (7)
Note
(1)The net amount is reflected after taxation and non-controlling interest.
12. DIVIDENDS PER SHARE
2 012 2 011
(Audited) (Audited) Change
Rm Rm %
Dividends paid to ordinary equity holders
Interim dividend (27 July 2012: 695,5 cents) 2 602 1 550 68
(2 August 2011: 414,3 cents)
Special dividend (27 September 2012: 267,3 cents) 1 000 - 100
Final dividend (12 February 2013: 605,5 cents) (10 February
2012: 620,1 cents) 2 293 2 320 (1)
5 895 3 870 52
Dividends paid to preference equity holders
Interim dividend (27 July 2012: 3 134,6575 cents)
(2 August 2011: 2858,3014 cents) 155 141 10
Final dividend (12 February 2013: 2 950,5479 cents) (10 February 2012: 146 140 4
301 281 7
In 2007, the Minister of Finance announced a two-phased approach to Secondary Tax
on Companies (STC) reform which included the reduction of the STC tax rate to 10%
and the replacement of STC with a new dividend withholding tax on shareholders (DWT).
On 1 April 2012 dividend tax came into effect and the tax ceased to be levied at a
company level, and is now levied on the shareholders who receive the dividends.
Unutilised STC credits at the end of December 2011 were utilised against the STC
payable on the final dividend declared in February 2012. Deferred tax assets
relating to unutilised STC credits up to 31 March 2012 have been utilised.
Note
(1)Included in statement of changes in equity is the interim dividend paid during the
reporting period of R2 602 million (2011: R1 550 million), special dividend of
R1 000 million (2011: Rnil) and the final dividend paid during the previous
reporting period of R2 320 million (2010: R1 350 million), attributable to the
ordinary equity holders, as well as the interim dividend paid to preference equity
holders during the current reporting period of R155 million (2011: R141 million)
and the final dividend paid during the previous reporting period of R140
million (2010: R143 million) to the preference equity holders.
13. ACQUISITIONS AND DISPOSALS OF BUSINESSES
The following interests were acquired/disposed during the reporting period:
Acquisitions
Subsidiaries and business combinations
The following interests were acquired/disposed of during the current reporting period:
During the reporting period, the Bank through its wholly owned subsidiary Absa Bank
Limited acquired the remaining 50% shareholding in NewFunds Proprietary Limited
(NewFunds) from Vunani Capital Proprietary Limited. Following the acquisition, the Bank
owns 100% of the shares in NewFunds.
At the acquisition date, the investment was recognised at R2 million.No gain/(loss) was
recognised in the statement of comprehensive income. NewFunds is a collective investment
scheme manager that provides various management services to collective investment schemes.
Other significant assets
The Bank, acquired the store card portfolio of Edcon Proprietary Limited (Edcon). This
portfolio consists of approximately four million active store cards.
A cash consideration equal to the net book value was paid on the acquisition date as at
1 November 2012. The Bank is responsible for credit management, fraud, risk, finance, legal,
compliance and key back office operations, while Edcon manages the front office operations
and primary customer interaction.
The net book value of the Edcon store card portfolio (Edcon portfolio), as at 1 November 2012,
amounted to approximately R8,7 billion.
The Edcon portfolio is not considered to be a business combination in terms of IFRS 3, Business
Combinations. As such, the acquisition was accounted for as an acquisition of a financial asset
and therefore recorded in the credit cards disclosure line in the loans and advances to customers
account. The acquisition will result in an increase of R8 361 million in net loans and advances and
R388 million in intangible assets with no impact on the statement of comprehensive income at the
acquisition date. This transaction relates to the acquisition of the South African Edcon portfolio.
The transactions relating to the other jurisdictions are to be completed in 2013.The significant ratios
are impacted mainly by the increase in the Banks asset base as a result of increase in Loans and advances
to customers.
Associates and joint ventures
During the reporting period, the Bank, through its Home Loans Division, entered into a joint venture
arrangement with other commercial banksin South Africa and created the Document Exchange Association (DEA),
an unincorporated entity. The DEA's main purpose will be the facilitation and development of software to
electronically exchange bank statements between local banks where these documents are used in the customer
credit application process.
Disposals
Subsidiaries, business combinations and other
The Bank, through its Commercial Property Finance (CPF) division, sold all of its Class C units (effectively a
holding of 64,08%) in the Absa Property Equity Fund (APEF) in the market on 28 June 2012. No profit or loss was
recognised in the Absa Bank consolidated results due to the underlying investments being measured at fair value.
Associates and joint ventures
There were no entities disposed of during the current reporting period.
14. RELATED PARTIES
The Bank's ultimate parent company is Barclays Bank PLC, which owns 55,5% (2011: 55,5%) of the ordinary
shares in Absa Group Limited. The remaining 44,5% (2011: 44,5%) of the shares are widely held on the
Johannesburg Stock Exchange (JSE).
The following are defined as related parties of the Bank:
- key management personnel (refer to note 14.1 and 14.2);
- the ultimate parent company (refer to note 14.3);
- fellow subsidiaries, associates and joint venture of the ultimate parent company (refer to note 14.4);
- the parent company (refer to note 14.5);
- fellow subsidiaries; associates and joint ventures of the parent company (refer to note 14.6);
- subsidiaries;
- associates, joint ventures and retirement benefit fund;
- an entity controlled/jointly controlled or significantly influenced by any individual referred to above;
- post-employment benefit plans for the benefit of employees or any entity that is a related party of
the Bank; and
- children and/or dependants and spouses or partners of the individuals referred to above.
Balances and transactions between the Bank and its subsidiaries have been eliminated on consolidation
and are not disclosed in this note.
14.1 Balances and transactions with key management personnel and entities controlled by key management
IAS 24 requires the identification of key management personnel, who are individuals responsible for planning,
directing and controlling the activities of the entity, including directors. Key management personnel
are defined as executive and non-executive directors and members of the Executive Committee (Exco).
Entities controlled by key management personnel are also considered to be related parties.
A number of banking and insurance transactions are entered into with key management personnel in the
normal course of business under terms that are no more favourable than those arranged with third parties.
These include loans deposits and foreign currency transactions. The related party transactions, outstanding
balances at the end of the reporting period, and related expenses and income with related parties for the
reporting period are as follows:
2012 2011
(Audited) (Audited) Change
Rm Rm %
Balances
Loans 455 680 (33)
Deposits 15 34 (56)
Guarantees issued by the Group 103 79 30
Other investments 40 81 (51)
Loans include mortgages, asset finance transactions, overdraft and other credit facilities. Loans to key management personnel
are provided on the same terms and conditions as loans to employees of the Group, including interest rates and collateral
requirements. Loans to key management personnel of Rnil (2011: Rnil) were written off as irrecoverable. Loans to entities
controlled by key management personnel of R0 million (2011: Rnil) were written off as irrecoverable.
2012 2011
(Audited) (Audited) Change
Rm Rm %
Transactions
Interest income 45 56 (20)
Interest expense 1 1 0
14.2 Key management personnel compensation
Directors
Post-employment benefit contributions 1 1 0
Salaries and other short-term benefits 30 20 50
Share-based payments 68 27 >100
Termination benefits 12 - 100
111 48 >100
Other key management personnel
Post-employment benefit contributions 2 2 0
Salaries and other short-term benefits 65 42 55
Share-based payments 89 36 >100
Termination benefits - 3 (100)
156 83 88
14.3 Balances and transactions with the ultimate parent company (1)(2)
The following are balances with, and transactions entered into with the ultimate parent company:
Balances
Loans and advances to banks 20 698 41 065 (50)
Derivative assets 14 310 10 524 36
Nominal value of derivative assets 1 399 103 637 611 >100
Other assets 896 338 >100
Investment securities 584 499 17
Deposits from banks (8 963) (5 784) (55)
Derivative liabilities (13 842) (10 488) (32)
Nominal value of derivative liabilities (1 213 065) (462 870) >(100)
Other liabilities (59) (1 167) 95
Transactions
Interest and similar income (204) (111) (84)
Interest and similar expense 106 67 58
Net fee and commission income (18) (17) (6)
Gains and losses from banking and (158) (16)
trading activities (136)
Other operating income (36) (152) 76
Operating expenditure/recovered expenses (12) (115) >(100)
Trade balances must be settled in accordance with market conventions applicable to the underlying transaction.
Non-trade balances must be settled by the close of the month immediately following the month in which the
transaction occurred. Further, settlement must be made in the currency required by the ultimate parent company.
In exceptional cases it may be impractical or inefficient to settle balances monthly. In such cases,
the unsettled balances must be explicitly agreed to on a monthly basis in writing and full settlement must
be made at least quarterly.
There were no bad debt expenses and provisions for bad debts that related to balances and transactions with
the ultimate parent company.
Notes
(1) The Banks ultimate parent company is Barclays Bank PLC, which has a majority
equity interest in Absa Group Limited.
(2) Debit amounts are shown as positive, credit amounts are shown as negative.
14.4 Balances and transactions with fellow subsidiaries, associates and joint ventures of the
ultimate parent company(1)(2)
2012 2011
(Audited) (Audited) Change
Rm Rm %
Balances
Loans and advances to banks 221 188 18
Derivative assets 37 - 100
Nominal value of derivative assets 947 608 56
Other assets 74 1 >100
Deposits from banks (1 016) (559) (82)
Derivative liabilities 5 (72) >100
Nominal value of derivative liabilities (521) (1 441) 64
Other liabilities (61) (52) (17)
Transactions
Interest and similar income 0 (2) >100
Net fee and commission income (7) (12) 42
Operating expenditure 100 152 (34)
Other operating income (3) - (100)
Trade balances must be settled in accordance with market conventions applicable to the underlying transaction.
Non-trade balances must be settled by the close of the month immediately following the month in which the
transaction occurred. Further, settlement must be made in the currency required by the fellow subsidiary,
associate or joint venture receiving the settlement. In exceptional cases it may be impractical or
inefficient to settle balances monthly. In such cases, the unsettled balances must be explicitly agreed to
on a monthly basis in writing, and full settlement must be made at least quarterly.
There were no bad debt expenses and provisions for bad debts that related to balances and transactions with
the fellow subsidiaries, associates and joint ventures.
Notes
(1) Fellow subsidiaries, associates and joint ventures are those entities of Barclays
Bank PLC.
(2) Debit amounts are shown as positive, credit amounts are shown as negative.
14.5 Balances and transactions with the parent company(1)
2012 2011
(Audited) (Audited) Change
Rm Rm %
Balances
Other assets 64 - 100
Deposits from banks (708) (215) >(100)
Transactions
Dividends paid 5 921 3 184 86
Interest expense and similar charges 0 8 (100)
14.6 Balances and transactions with fellow subsidiaries (1)(2)
2012 2011
(Audited) (Audited) Change
Rm Rm %
Balances
Trading and hedging portfolio assets 1 213 (4) >100
Loans to Group companies 10 777 7 139 51
Deposits from banks (3 455) (3 740) 8
Debt securities in issue (242) (1 933) 87
Loans from Group companies - (1 438) 100
Transactions
Interest and similar income (476) (563) 15
Interest and similar expense 615 785 (22)
Net fee and commission income (418) (512) 18
Gains and losses from banking and 1 870 1 624 15
trading activities
Other operating income (32) (26) (23)
Operating expenditure (412) (442) 7
Notes
(1) Debit amounts are shown as positive, credit amounts are shown as negative.
(2) Balances and transactions between the Bank and its subsidiaries have been eliminated on consolidation
and are not disclosed in this note.
15. ASSETS UNDER MANAGEMENT AND ADMINISTRATION
as at 31 December
2012 2011
(Audited) (Audited) Change
Rm Rm %
Alternative asset management and exchange-traded funds 20 665 16 615 24
Portfolio management 5 942 5 136 16
Private equity - 728 (100)
Unit trusts 551 262 >100
27 158 22 741 19
16. FINANCIAL GUARANTEE CONTRACTS
Financial guarantee contracts(1)(2) 176 356 (51)
17. COMMITMENTS
Authorised capital expenditure
Contracted but not provided for(3) 208 119 75
Operating lease payments due(4)
No later than one year 893 1 073 (17)
Later than one year and no later than five years 1 816 2 062 (12)
Later than five years 303 488 (38)
3 012 3 623 (17)
Sponsorship payments due (5)
No later than one year 289 209 38
Later than one year and no later than five years 884 299 >100
1 173 508 >100
18. CONTINGENCIES
Guarantees (6) 15 540 12 509 24
Irrevocable debt facilities (7) 46 191 45 637 1
Irrevocable equity facilities (7) 543 494 10
Letters of credit 5 894 4 560 29
Other 5 10 (50)
68 173 63 210 8
Notes
(1) Financial guarantee contracts represent contracts where the Absa Bank Limited undertakes to make
specified payments to a counterparty, should the counterparty suffer a loss as a result of a
specified debtor defaulting on payment in accordance with the terms of the debt instrument.
(2) Represents the maximum off-statement of financial position exposure, which is not necessarily
the measurement recognised in the statement of financial position in accordance with International
Financial Reporting Standards (IFRS).
(3) The Bank has capital commitments in respect of computer equipment and property development.
Management is confident that future net revenue and funding will be sufficient to cover
these commitments.
(4) The operating lease commitments comprise a number of separate operating leases in
relation to property and equipment, none of which is individually significant to
the Bank. Leases are negotiated for an average term of three to five years and
rentals are renegotiated annually.
(5) The Bank has sponsorship commitments in respect of sports, arts and culture.
Certain sponsorship agreements expire in 2013 and are under review by management
for renewal in the foreseeable future.
(6) Guarantees include performance and payment guarantee contracts.
(7) Irrevocable facilities are commitments to extend credit where the Bank does not
have the right to terminate the facilities by written notice. Commitments generally
have fixed expiry dates. Since commitments may expire without being drawn upon, the
total contract amounts do not necessarily represent future cash requirements.
19. SEGMENT PERFORMANCE
for the reporting period 31 December
19.1 Condensed consolidated profit contribution by segment
2012 2011(1)
(Audited) (Audited) Change
Rm Rm %
Retail and Business Bank (RBB) 4 318 5 947 (27)
Retail Markets 3 386 4 096 (17)
Home Loans (1 078) 448 >(100)
Vehicle and Asset Finance 788 403 96
Card (including Edcon) 1 933 1 646 17
Personal Loans 587 720 (18)
Retail Bank 1 156 879 32
Business Markets 932 1 851 (50)
CIBW 2 587 2 014 28
Corporate Centre 447 (49) >100
Capital and funding centres 368 329 12
Preference equity holders (295) (284) (4)
Headline earnings attributable to ordinary equity holder 7 425 7 957 (7)
Notes
(1) Comparatives have been reclassified. Refer to note 21.
19.2 Condensed consolidated total revenue(1) contribution by segment
2012 2011(2)
(Audited) (Audited) Change
Rm Rm %
RBB 31 335 30 772 2
Retail Markets 22 757 22 042 3
Home Loans 4 073 4 016 1
Vehicle and Asset Finance 2 228 2 164 3
Card (including Edcon) 4 370 3 757 16
Personal Loans 1 971 2 108 (6)
Retail Bank 10 115 9 997 1
Business Markets 8 578 8 730 (2)
CIBW 8 142 7 403 10
Corporate Centre (460) (230) (100)
Capital and funding centres 848 679 25
Total revenue 39 865 38 624 3
Notes
(1) Revenue includes net interest income and non-interest income.
(2) Comparatives have been reclassified. Refer to note 21.
19.3 Condensed consolidated total internal revenue(1) contribution by segment
2012 2011(2)
(Audited) (Audited) Change
Rm Rm %
RBB (9 978) (11 407) 13
Retail Markets (9 841) (10 676) 8
Home Loans (12 092) (12 890) 6
Vehicle and Asset Finance (2 504) (2 442) (3)
Card (including Edcon) (404) (303) (33)
Personal Loans (523) (569) 8
Retail Bank 5 682 5 528 3
Business Markets (137) (731) 81
CIBW 8 686 11 031 (21)
Corporate Centre (119) 179 >(100)
Capital and funding centres (183) (1 170) 84
Internal revenue (1 594) (1 367) (17)
Notes
(1) Internal revenue includes net interest income and non-interest income.
(2) Comparatives have been reclassified. Refer to note 21.
19.4 Condensed consolidated total assets by segment
as at 31 December
2012 2011(1)
(Audited) (Audited) Change
Rm Rm %
RBB 589 904 557 019 6
Retail Markets 483 714 452 022 7
Home Loans 222 419 234 304 (5)
Vehicle and Asset Finance 51 810 46 393 12
Card (including Edcon) 36 914 23 352 58
Personal Loans 13 318 13 494 (1)
Retail Bank 159 253 134 479 18
Business Markets 106 190 104 997 1
CIBW 463 094 456 255 1
Corporate Centre (380 625) (354 802) (7)
Capital and funding centres 92 118 83 966 10
Total assets 764 491 742 436 3
Note
(1)Comparatives have been reclassified. Refer to note 21.
20. FAIR VALUE HIERARCHY DISCLOSURES
for the reporting period ended 31 December
Significant transfers of financial instruments between levels.
There have been no significant transfers of financial instruments between levels during the current reporting period.
2011
(Audited)
Valuations with Valuations Valuations
reference to based on based on
observable observable unobservable
prices inputs inputs
Level 1 Level 2 Level 3
Rm Rm Rm
Financial liabilities designated at fair value through profit and loss
Deposits due to customers - 655 (655)
21. RECLASSIFICATIONS
as at 31 December
21.1 Some items within the statement of financial position as at 31 December 2011 and
31 December 2010 were reclassified in the current reporting period.
Initial margin
During the current reporting period, the Bank reclassified certain initial margins placed as collateral
which were previously disclosed as Other assets' to Loans and advances to banks' and Loans and advances
to customers' in order to better reflect the true nature of these balances as collateralised loans.
This has resulted in comparatives being reclassified for 31 December 2011 and 31 December 2010 reporting
period as reflected in the table that follows:
2011
(Audited)
As previously
reported Reclassification Reclassified
Rm Rm Rm
Loans and advances to banks 55 803 67 55 870
Other assets 12 948 (1 489) 11 459
Loans and advances to customers 486 910 1 422 488 332
2010
(Audited)
As previously
reported Reclassification Reclassified
Rm Rm Rm
Loans and advances to banks 26 251 77 26 328
Other assets 9 678 (895) 8 783
Loans and advances to customers 495 733 818 496 551
21.2 Some items within the statement of comprehensive income for the reporting
period ended 31 December 2011 were reclassified in the current reporting period.
Elimination of funding interest
During the current reporting period, the Bank refined the elimination of funding interest between
Interest and similar income and Interest expense and similar charges.
This has resulted in comparatives being reclassified for 2011 reporting period as reflected
in the table that follows:
2011
As previously
reported Reclassification Reclassified
Rm Rm Rm
Interest and similar income 49 210 (30) 49 180
Interest expense and similar charges (27 100) 30 (27 070)
21.3 Segment reclassifications
The following segment reclassifications have taken place during the current reporting period:
- As part of the One Absa' strategy, the segments of Retail Markets (previously known
as Retail Banking) and Business Markets (previously known as Absa Corporate and
Business Bank)were merged into the RBB segment.
- Absa Cash Solutions Group Processing Centre and Integrated Processing Services were
moved from Corporate Centre to RBB.
- The Bank's corporate customers and products were transferred from Business Markets
to CIBW following an initiative to optimise product delivery to its corporate
customers.
- Foreign Exchange Operations and Group Payments were moved from Corporate Centre to CIBW.
Profit and dividend announcement
Overview of results
Absa Bank's headline earnings decreased 7% to R7 425 million (2011: R7 957 million). Diluted
HEPS also declined 7% to 1 978,4 cents (2011: 2 127,0 cents). Absa's RoE decreased to 13,6%
(2011: 15,8%), marginally above our internal cost of equity.
Higher credit impairments, particularly in retail mortgages and commercial property finance,
were the principal reason for lower headline earnings. Pre-provision profit increased 10% to
R18.8 billion, largely due to continued focus on sustainable operating model changes.
Retail and Business Banking's (RBB) headline earnings fell 27%, due to substantial credit
impairments and large commercial property equity investment write downs. Corporate, Investment
Banking and Wealth's (CIBW) headline earnings increased 28%, given strong Markets growth.
Operating environment
Global economic growth remained subdued in 2012. Central banks in advanced economies injected
liquidity into the financial system, helping to improve market sentiment and investor risk appetite.
South Africa's growth slowed sharply in the third quarter to 1,2% from 3,4% the previous quarter,
the lowest growth rate since emerging from recession in 2009. Household consumption expenditure
continued to slow, reflecting subdued consumer confidence, moderating real wage growth, a
lacklustre job market and higher inflation. While growth in private sector credit extension
gained traction in 2012, it was mostly driven by non-asset backed categories. Inflation moderated
in the early part of the year to a low of 4,9%, but has since started to rise steadily, driven by
food and petrol prices.
Bank performance
Statement of financial position
The Bank's assets increased 3% to R764,5 billion on 31 December 2012, largely due to 5% growth in
loans and advances to customers and 10% higher statutory liquid assets.
Loans and advances to customers
Absa's loans and advances to customers increased 5% to R511,2 billion, almost all in the second half
of 2012, in part due to acquiring Edcon's book, which saw credit cards increase 68% to R27.1 billion.
Retail Markets' gross loans grew 3%, despite 2% lower mortgages, given this growth in credit cards
and 9% higher vehicle finance. New retail volumes improved materially in the second half. Gross
Business Markets loans declined 2%, reflecting 9% lower commercial property finance. Gross CIBW
loans increased 17%, with strong growth in overnight finance and foreign currency loans.
Deposits due to customers
We maintained our strong liquidity position, growing customer deposits 8% or by R35,6 billion to
R467,3 billion. Our funding tenor also remained robust with an average long-term funding ratio of
26.2% for 2012. The weighted average life of wholesale funding at 31 December 2012 was 17.6 months
from 15.3 months the previous year. Deposits due to customers contributed 76.8% of total funding
from 72.3% in 2011, while the proportion of debt securities in issue dropped to 17% from 21%.
Retail Markets' deposits increased 4% to R131.7 billion to maintain its leading market share.
Business Markets' deposits rose also 4% due to 9% growth in cheque accounts. CIBW's deposits
increased 12%, with 6% growth in cheque accounts and a significant R27.3 billion rise in notice
deposits.
Absa's loans-to-deposits ratio increased to 89,1% from 87,2%.
Net asset value
The Bank's NAV increased 7% to R56.2 billion, as we generated retained earnings of R0.8 billion.
Absa's NAV per share grew 6% to 14 845 cents.
Capital to risk-weighted assets
After implementing Basel II.5 and the AIRB approach on our wholesale book, and growing loans and
advances to customers 5% in 2012, the Bank's risk-weighted assets increased 0.2% to R385.9 billion
(2011: R384.9 billion).
We maintained our strong capital levels, which remain above board targets and regulatory requirements.
At 31 December 2012, Absa Bank's Core Tier 1 and Tier 1 capital adequacy ratios were steady at 12,5%
and 13,7% respectively (2011: 12,1% and 13,3%).
The Bank's total capital ratio improved to 17,5% (2011: 16,2%).
Statement of comprehensive income
Net interest income
Net interest income decreased 1% to R21 955 million (2011: R22 110 million), despite 5% higher
average interest earning assets. Absa's net interest margin declined to 3,62% from 3,80%, largely
because of a lower margin in CIBW. Higher average foreign currency loans and reverse repos with
banks that have narrow margins was the main cause for this decline, although this was offset by
related trading gains in non-interest revenue. Our deposit margins also decreased and liquidity
costs increased. These offset our improved margin from loan mix and better Home Loan pricing.
Credit losses
Credit impairments rose 62% to R7 918 million (2011: R4 876 million), resulting in a credit loss
ratio of 1,57% from 1,00%. Retail Market's charge grew 56% to R5.9 billion, increasing its credit
loss ratio to 1,92% from 1,23%.
Our Home Loans credit impairments rose to R4.4 billion from R2.1 billion following a thorough
review of our mortgage provisioning. Higher provisioning for our legal book, particularly insolvencies,
increased our Home Loans non-performing loan coverage to 28,5% from 17,1% in December 2011 and 22,6%
last June. We moved more mortgages into legal during the second half, necessitating a higher charge
due to lower expected recoveries. Our mortgage collections processes were strengthened, which reduced
the age of our legal portfolio in the second half. We also provided an additional R145 million for
performing mortgages, reflecting a more conservative approach to restructured accounts.
Vehicle and Asset Finance's credit loss ratio improved to 0.64% from 1.88%, reflecting improved
collections, while Personal Loans increased in line with expectations to 4.68% from 3.86%. Early
arrears continue to improve across all portfolios.
Business Markets' R1.9 billion charge increased its credit loss ratio to 2,15% from 0,97%,
including commercial property finance which rose to R979 million (2011: R219 million) due to one
large exposure and lower expected collateral realisation values.
Our total non-performing loans declined 13,2% or by R4.5 billion to R29.8 billion. Retail Markets'
non-performing loans fell by 21% to R29.1 billion. Absa's non-performing loan coverage improved
to 36.2% from 27.0%, given the significant rise in our mortgage cover. Non-performing loans as a
percentage of customer loans and advances improved to 5,7% from 6,9% in December 2011 and 6.3% last
June despite a large increase in Business Markets' non-performing loans.
Non-interest income
Non-interest income increased 8% to R17 870 million (2011: R16 514 million). Net fee and commission
income rose 3%, as 10% higher fee and commission expenses offset 8% growth in cheque accounts fees
and an 11% increase in merchant income.
Retail Markets' non-interest income grew 2% at R10.0 billion, with 10% growth in Card and 24% in
Vehicle and Asset Finance. Net retail fee and commission income increased 1% to R9.8 billion, reflecting
increased competition and changing customer transactional behaviour.
Business Markets' net fee and commission income increased 10%, in line with its strategy to grow
primary customers and reducing revenue leakage. Its equities revaluations were negative R296 million.
CIBW's non-interest income increased 31%, as net trading was 66% higher.
Operating expenses
Operating expenses decreased 2% to R21 088 million (2011: R21 506 million). Staff costs decreased 5%
to R11.1 billion, reflecting 25% lower bonuses and continued focus on operational efficiencies.
Non-staff expenses grew 2%, due to 1,4% higher property costs and a 49% rise in other operating expenses.
Professional fees declined 28%. Total IT-related spend, which declined 7% to R5.1 billion, accounted for
24% of Bank costs. Amortisation of intangible assets decreased 3% to R143 million. Retail Markets'
operating expenses declined 1% while CIBW grew 1%. Business Markets' costs rose 5% due to a large
negative change in fair value of investment property. Absa's cost-to-income ratio improved to 52,9%
from 55,6%. Our burden (non-interest revenue over costs) improved to 85% from 77%.
Taxation
Our taxation decreased 15% to R2 669 million, as our effective tax rate decreased to 26.1% from 27.7%.
The lower rate was mainly due to replacing secondary tax on companies with dividend withholding tax.
Prospects
Fiscal austerity measures across most advanced economies are the main drag facing the global economy in 2013.
Emerging markets are expected to perform better, supported by fiscal stimulus and monetary easing.
Global growth is expected to remain subdued at 3.3% in 2013 from around 3.0% last year. We expect
Sub-Saharan Africa to grow 5.7% this year.
South Africa's strong links with advanced economies are a headwind to growth in 2013, even as trade
with the rest of Africa and other emerging markets grow robustly. Growth in household consumption
(albeit muted) and a rebound in mining production following labour unrest late last year, should
boost growth. We expect 2.8% growth in 2013 from last year's estimated 2.5%. Given the moderate
growth in household consumption expenditure, we expect limited demand pressures on inflation in 2013.
Our base case for the next upward move in rates is in early 2014.
Against this backdrop, we expect mid-single digit loan growth this year. Improved momentum in our
revenue growth and continued focus on efficiency should reduce our cost to income ratio again. Our
credit loss ratio is expected to improve materially from last year's elevated levels. Together with
capital management initiatives, these drivers should increase our RoE. We are excited by our proposed
Barclays Africa transaction and the opportunity it offers to increase our exposure to higher growth
economies in the rest of Africa.
Basis of presentation
The Bank's condensed consolidated financial results have been prepared in accordance with the recognition
and measurement requirements of International Financial Reporting Standards (IFRS) the interpretations
issued by the IFRS-IC and AC 500 standards as issued by the South African Accounting Practices Board or
its successor. The presentation and disclosure complies with International Accounting Standard (IAS) 34.
The preparation of financial information requires the use of estimates and assumptions about future
conditions. The accounting policies that are deemed critical to the Bank's results and financial
position and which involve a high degree of judgement including the use of assumptions and estimation,
are impairment of loans and advances, goodwill impairment, valuation of financial instruments, impairment
of available-for-sale financial assets, impairment of investments in associates and joint ventures,
deferred tax assets,, post-retirement benefits, provisions, share-based payments, income taxes and
offsetting of financial assets and liabilities.
Accounting policies
The accounting policies applied in preparing the financial results during the reporting period are
the same as the accounting policies in place for the year ended 31 December 2011. Amendments and
changes to IFRS that are mandatory for 31 December 2012 financial year are specified in the most
recent audited annual consolidated financial statements. These amendments resulted in additional
disclosures being presented but had a minimal impact on the financial results during the
reporting period.
Reclassifications
- During the current reporting period, the Bank reclassified certain initial margins placed as
collateral which were previously disclosed as Other assets' to Loans and advances to banks' and
Loans and advances to customers' in order to better reflect the true nature of these balances as
collateralised loans. This has resulted in comparatives being reclassified for 31 December 2011
(loans and advances to banks R67 million, other assets (R1 489 million) and loans and advances to
customers R1 422 million) and 31 December 2010 (loans and advances to banks R77 million, other assets
(R895 million) and loans and advances to customers R818 million).
- During the current reporting period, the Bank refined the elimination of funding interest between
Interest and similar income' and Interest expense and similar charges'. This
has resulted in comparatives being reclassified for the 2011 reporting period (interest and similar
income R30 million, and interest expense and similar charges (R30 million)).
Auditors report
Ernst & Young Inc. and PricewaterhouseCoopers Inc., Absa Bank Limited's independent auditors, have
audited the consolidated annual financial statements of Absa Bank Limited from which management
prepared the condensed consolidated financial results. The auditors have expressed an unqualified
audit opinion on the consolidated annual financial statements. The condensed consolidated financial
results comprise the condensed consolidated statement of financial position at 31 December 2012,
condensed consolidated statement of comprehensive income, condensed consolidated statement of changes
in equity and condensed consolidated statement of cash flows for the year then ended, and selected
explanatory notes, excluding items not indicated as audited. The audit report of the consolidated
annual financial statements is available for inspection at Absa Bank Limited's registered office.
Events after the reporting period
The directors are not aware of any events occurring between the reporting date of 31 December 2012
and the date of authorisation of these condensed consolidated financial results as defined in IAS 10.
On behalf of the board
G Griffin M Ramos
Group Chairman Group Chief Executive
Johannesburg
12 February 2013
Declaration of preference dividend number 14: Absa Bank non-cumulative, non-redeemable preference
shares (Absa Bank preference shares)
The Absa Bank preference shares have an effective coupon rate of 70% of Absa Bank's prevailing
prime overdraft lending rate (prime rate). Absa Bank's current prime rate is 8,5%.
Notice is hereby given that preference dividend number 14, equal to 70% of the average prime rate
for 1 September 2012 to 28 February 2013, per Absa Bank preference share has been declared for the
period 1 September 2012 to 28 February 2013. The dividend is payable on Monday, 8 April 2013, to
shareholders of the Absa Bank preference shares recorded in the register of members of the Company
at the close of business on Friday, 5 April 2013.
The directors of Absa Bank confirm that the Bank will satisfy the solvency and liquidity test
immediately after completion of the dividend distribution.
Based on the current prime rate, the preference dividend payable for the period 1 September 2012
to 28 February 2013 would indicatively be 2,950.5479 cents per Absa Bank preference share.
The dividend will be subject to the new dividend tax that was introduced with effect from 1 April 2012.
In accordance with paragraphs 11.17 (a) (i) to (x) and 11.17 (c) of the JSE Listings Requirements,
the following additional information is disclosed:
- The dividend has been declared out of income reserves.
- The local dividend tax rate is fifteen per centum (15%).
- The gross local dividend amount is 2,950.5479 cents per preference share for shareholders exempt
from the dividend tax.
- The net local dividend amount is 2 507.96572 cents per preference share for shareholders liable
to pay the dividend tax.
- Absa Bank currently has 4,944,839 preference shares in issue.
- Absa Bank'income tax reference number is 9575117719.
In compliance with the requirements of Strate, the electronic settlement and custody system used
by the JSE Limited, the following salient dates for the payment of the dividend are applicable:
Last day to trade cum dividend Wednesday, 27 March 2013
Shares commence trading ex dividend Thursday, 28 March 2013
Record date Friday, 5 April 2013
Payment date Monday, 8 April 2013
Share certificates may not be dematerialised or rematerialised between Thursday, 28 March 2013 and
Friday, 5 April 2013, both dates inclusive.
On Monday, 8 April 2013, the dividend will be electronically transferred to the bank accounts of
certificated shareholders who use this facility. In respect of those who do not, cheques dated
8 April 2013 will be posted on or about that date. The accounts of those shareholders who have
dematerialised their shares (which are held at their participant or broker) will be credited on
Monday, 8 April 2013.
On behalf of the board
NR Drutman
Company Secretary
Johannesburg
12 February 2013
Absa Bank Limited is a company domiciled in South Africa. Its registered office is the 7th Floor,
Absa Towers West, 15 Troye Street, Johannesburg, 2001.
Please note that the preference dividend calculation dates are 28 (29) February and 31 August of
each year and that the payment date may not be later than 45 days after the preference dividend
calculation date.
Administration and contact details
These audited condensed annual consolidated financial results are a summary of the audited annual
consolidated financial statements of the Bank, which were prepared by Absa Group Financial Reporting
under the direction and supervision of the Financial Director, DWP Hodnett CA(SA). A copy of the
audited annual financial statements will be available from 31 March 2012, either on www.absa.co.za
or, on request, at the registered address of the Bank.
Absa Bank Limited is a company domiciled in South Africa.
Absa Bank Limited
Registered office
7th Floor, Absa Towers West
15 Troye Street
Johannesburg, 2001
Postal address: PO Box 7735
Johannesburg, 2000
Telephone: (+27 11) 350 4000
Email: groupsec@absa.co.za
Board of directors
Independent non-executive directors
C Beggs, YZ Cuba,
SA Fakie, G Griffin (Group Chairman),
MJ Husain, PB Matlare,
TM Mokgosi-Mwantembe, EC Mondlane Jr1,
TS Munday, SG Pretorius,
BJ Willemse
Non-executive directors
AP Jenkins2, R Le Blanc2,
IR Ritossa3,4, LL von Zeuner5
Executive directors
DWP Hodnett (Financial Director),
M Ramos (Chief Executive)
Notes
1Mozambican
2British
3Australian
4Resigned 31 December 2012
5Became a non-executive, effective 1 January 2013
Transfer secretary
South Africa
Computershare Investor Services
Proprietary Limited
70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshalltown, 2107
Telephone: (+27 11) 370 5000
Telefax: (+27 11) 370 5271/2
ADR depositary
BNY Mellon
101 Barclay Street, 22W
New York, NY, 10286
Telephone: +1 212 815 2248
Auditors
PricewaterhouseCoopers Inc.
Ernst & Young Inc.
Lead Independent Sponsor
J P Morgan Equities South Africa Proprietary Limited
No 1 Fricker Road, Cnr. Hurlingham Road,
Illovo, Johannesburg, 2196
Private Bag X9936
Sandton, 2146
Telephone: (+27 11) 507 0300
Telefax: (+27 11) 507 0503
Joint Sponsor
Absa Corporate and Investment Banking,
a division of Absa Bank Limited,
15 Alice Lane
Sandton,2196
Private Bag X10056
Sandton, 2146
Telephone: (+27 11) 506 7951/ (+27 11) 895 6821
Telefax: (+27 11) 895 7809
Shareholder contact information
Shareholder and investment queries about the
Absa Bank should be directed to the following areas:
Group Investor Relations
AM Hartdegen (Head of Investor Relations)
Telephone: (+27 11) 350 2598
E-mail: investorrelations@absa.co.za
Company Secretary
NR Drutman
Telephone: (+27 11) 350 5347
E-mail: groupsec@absa.co.za
Other contacts
Group Media Relations
M Pirikisi (General Manager: Media Relations)
Telephone: (+27 11) 350 4787
E-mail: maxwellp@absa.co.za
Head office switchboard
Telephone: (+27 11) 350 4000
Group Finance
R Stromsoe (Head: Group Finance)
Telephone: (+27 11) 895 6365
Website address
www.absa.co.za
Date: 12/02/2013 07:32:00 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
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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,
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