Absa announced its “strongest half yet” in the six months to June 2022 after posting 30% growth in overall profits.
- Absa posted 30% growth in half-year profits, thanks in part to strong loan growth.
- It has increased its share of the home loan market, but its number of the primary banking clientele has decreased.
- Bank CEO says Absa is entering a new phase of ‘smart growth’
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Absa announced its “strongest half yet” in the six months to June 2022. The bank, which has been trying to claw back market share it lost under Barclays rule, recorded a 30% growth in overall profits.
Its half-yearly dividend more than doubled to 650c per share.
Absa’s largest business unit, the Retail and Corporate Banking (RBB) division, increased its overall profit by 34% to R5.6 billion, contributing 57% of the group’s profit over the past year. this semester. Absa’s corporate and investment bank increased its overall profit by 5% to R4.28 billion.
Absa Group CEO Arrie Rautenbach said the bank continued to gain market share in targeted areas such as home loans. But it lost some of its key banking customers, reducing that number to 2.7 million customers. These are people who deposit their wages with Absa, and most of that loss was in the entry-level market. Rautenbach said the group has a strategy to grow its primary bank customer base again.
“While we have grown to all middle-market and affluent customers, we aim to grow our entry-level and inclusive banking base as well as youth and SMEs,” Rautenbach said.
Gain loan market share
One of the areas in which Absa has constantly developed its market over the past few years is that of loans. In the six months to the end of June 2022, the group increased its total loans and advances by 11%.
“Our retail market share increased slightly to just over 22%, with continued momentum in secured lending and improved production in unsecured lending. [loans]“said Absa Chief Financial Officer Jason Quinn.
RBB loans and advances to customers increased by 9% to R684 billion. Installment credit contracts increased by 10%. Home loans increased by 8%, personal loans by 10% and credit cards by 8%.
Gross loans to customers of Absa Regional Operations (ARO), which covers the rest of the continent, increased by 17%.
In South Africa, RBB increased its loans and advances by 7% to R922 billion. Home loans led the pack, growing 9% in South Africa. This brought Absa’s home loan market share in South Africa to 23.7%, with average loan value and registrations both increasing by 7%.
Absa’s personal loan advances returned to 2019 levels, growing 8% in the six months to the end of June. But Quinn said such loans remain “a small part” of Absa’s retail lending, and its market share in this area is around 10%.
Absa also increased its retail deposits in South Africa by 7%, maintaining its market share of 22%. Its investment deposits increased by 8%.
CIB South Africa increased its loans by 5%, while CIB ARO recorded an 18% growth in its advances. CIB SA deposits increased by 1% and CIB ARO recorded growth of 17% in this area.
Rautenbach said these figures show that the strategy launched by Absa in 2018 is now paying off. He said the first phase of this strategy is to turn the bank around. This has been achieved. Absa has now moved on to the next phase: “smart growth”.
“I feel the group is in a very positive space,” he said. “We delivered…We are now moving into the outperformance phase of our execution plan,” he added.
Rautenbach believes Absa is “back in the spotlight” and is well placed to weather the difficult operating conditions that come with the rising cost of living affecting its customers.
Absa’s share price rose 0.7% to R187.38 on Monday morning.
