Total revenue reach R41.2 billion
Headline earnings increase to R8.6 billion
Botswana’s economy recovering slowly
BAKANG TIRO
editors@thepatriot.co.bw
Absa Group, the parent company of Absa Bank of Botswana Limited has recorded a 3% growth in its revenue climbing to R41.2 billion during the first half of the year.
Absa Group Interim Chief Executive Officer, Jason Quinn, said the business operated under tough economic conditions presented by the disrupting Covid-19 pandemic which hinders growth.
Notwithstanding, Quinn said the South African economy is recovering strongly more than expected. He added that Botswana’s economy, which is highly dependable on tourism, is in slower recovery. That being the case, Absa boss indicated that the disruptive Covid-19 leaves a lot of uncertainty.
The Group’s headline earnings grew five- fold to R8.6 billion, which is higher than pre-pandemic levels, buoyed by the resilient pre-provision profit and significant cut in impairments. While earnings increased strongly, the improvement is of a low base; with Absa saying it generates most of its income from its operations in South Africa which is a big economy.
“These results are testimony to the decisions that we took during the crisis around supporting our customers and taking a cautious approach to preserving capital and liquidity,” The Group further strengthened its capital reserves during the period and maintained the strong liquidity position in the first half. The Consumer confidence Index however remains negative,” said Quinn.
Furthermore, he noted that the recent looting of businesses in South Africa poses a negative threat to the growth of the country’s Gross Domestic Product (GDP) in the third quarter.
The lootings, he said, also left a negative impact on Absa business as some of its ATMS were damaged. According to Quinn, the business is taking strong confidence on its strong balance sheet status.
“Absa is well positioned and poised for success. First half performance is better than expected. There was also strong deposit growth that also improved our liquidity. Mortgage market is buoyant in SA,” he added.
Interim Chief Financial Officer at Absa, Punki Modise said their headline earnings exceeded pre-Covid levels and common equity tier 1 capital ratio strengthened more to the top end of the target range.
The Group’s balance sheet, she said, remains resilient and returns are now above cost of equity. The recovery was broad-based as all business units posted strong growth from a low base in prior year. Modise said the costs were significantly reduced as there was no issuance of bonuses in 2020.
She explained that the Group anticipates to pay bonus at a tune of R1 billion this year to staff. “The Group refined its operating model after an internal and external review found that the Group structure was sub-optimal relative to its growth ambitions and the scale of the opportunity across the continent. The major reporting units, RBB and CIB, will be accountable for their product lines across the continent, complemented by a strong, focused and lean ARO central capability and fully enabled country leadership teams.Absa continued to play a role in society this year, building on last year’s substantial efforts to support customers, staff, communities and stakeholders in difficult times,” said the Group.
Regarding the outlook, Absa foresees a number of risks to the Group’s growth forecasts in the remainder of the year and recognizes that the impact of Covid-19 remains a significant uncertainty.
Absa says its currently expects the South African economy to grow 4% this year from last year’s 7% decline, a slightly improved outlook compared with the 3% growth forecast before in March.