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ABSA GROUP LIMITED
Incorporated in the Republic of South Africa
Registration number: 1986/003934/06
ISIN: ZAE000255915
JSE share code: ABG
('Absa Group' or 'the Group')
VOLUNTARY TRADING UDPATE FOR THE QUARTER ENDED 31 MARCH 2021 AND
TRADING STATEMENT FOR THE SIX MONTHS ENDING 30 JUNE 2021
Trading update
This trading update provides information related to Absa Group's financial performance for the
quarter ended 31 March 2021. 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 15% stronger year-on-year against currencies in our Absa Regional
Operations (ARO) during the period, reducing both Group revenue and operating expenses by
3% year-on-year. Total revenue was flat year-on-year. Net interest income grew by mid-single
digits, and the Group's net interest margin improved from the second half of 2020. Non-interest
income decreased by mid- to high-single digits, as net fee and commission income declined by
mid-single digits and life insurance claims were materially higher, partially offset by strong Global
Markets trading revenue, particularly in South Africa. Operating expenses decreased by low
single-digits, with continued strong control of fixed costs and increased variable costs, in particular
related to variable remuneration. Consequently, the Group's pre-provision profits for the quarter
grew by low single digits. Credit impairments dropped by mid-teens year-on-year, resulting in a
credit loss ratio only marginally above our through-the-cycle target range of 75 to 100 basis points.
The credit charge in Corporate and Investment Bank (CIB), as well as Personal Loans and Home
Loans in South Africa improved substantially. The percent of stage 3 loans improved slightly
year-to-date. The Group's first quarter return on equity improved year-on-year, comfortably
exceeding its cost of equity.
Division-wise, Retail and Business Banking (RBB) South Africa's headline earnings increased
year-on-year due to lower credit impairments. CIB South Africa's headline earnings grew
substantially year-on-year, given strong revenue growth and materially lower credit impairments.
In constant currency, ARO headline earnings decreased year-on-year, on lower pre-provision
profits as cost growth exceeded low revenue growth.
Group gross customer loans decreased slightly year-on-year due to the stronger Rand. RBB
South Africa's gross customer loans grew by mid-single digits year-on-year, with continued strong
new business production in Home Loans and Vehicle and Asset Finance. Group customer
deposits increased by high single digits year-on-year, with strong growth in South Africa and ARO
(in constant currency).
Absa Group's common equity tier 1 (CET1) capital ratio improved to 11.9% at 31 March 2021,
slightly above the middle of our Board CET1 target range of 11.0% to 12.5%, from 11.2% at 31
December 2020. As indicated in March, the Group expects to resume paying dividends from the
first half of 2021, starting with a payout ratio of 30% and increasing to 50% over the medium-term.
The Group's performance in April 2021 saw improved year-on-year revenue growth and
substantially lower credit impairments versus April 2020, which included a hard lockdown in South
Africa due to Covid-19. The revenue run rate for April 2021 was similar to first quarter 2021 levels.
Trading statement
In accordance with section 3.4(b) of the JSE Listings Requirements, shareholders are advised
that the Group's IFRS headline earnings per share (HEPS) and earnings per share for the six
months ending 30 June 2021 are expected to be more than 10 times the comparatives for the first
half of 2020 of 67.7 cents and 58.8 cents respectively. Normalised HEPS for the six months
ending 30 June 2021 is expected to be between 5 and 6 times the normalised HEPS of 173.6
cents for first half of 2020. Risks to this guidance include a significantly more severe third wave
of Covid-19 than currently expected, plus any material unforeseen political, macroeconomic or
regulatory changes. We will provide a more specific guidance range once there is reasonable
certainty regarding the extent of the increase in earnings.
Shareholders are advised that the financial information contained in this trading update and
trading statement have not been reviewed or reported on by Absa Group's auditors.
The Group will release its financial results for the first half of 2021 on 16 August 2021.
Johannesburg
13 May 2021
Enquiries:
Alan Hartdegen
(+27 72) 576-2713
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: 13-05-2021 08:00:00
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