South African lender Absa reports lower half-year profit

AFRICAN STOCKS AND FINANCEAugust 22, 2024 at 10:17 AM UTC

TLDR

Absa Group reported a 5% decline in half-year profit, mainly due to rising operating expenses and slower revenue growth.
Net interest income increased by 7%, but was offset by a 2% drop in non-interest income.
South African lender, Absa Group, anticipates a moderation in cost growth and slightly improved credit loss levels in the second half of the year.

Absa Group reported a 5% decline in half-year profit, with diluted headline earnings per share dropping to 1,228.4 cents for the six months ending June 30, down from 1,293.1 cents the previous year.

The decline was attributed to operating expenses rising by 8% to 28.3 billion rand ($1.59 billion), outpacing the 3% revenue growth to 53.7 billion rand. The increase in net interest income by 7% to 35.3 billion rand was offset by a 2% drop in non-interest income.

Despite this, the South African lender indicated a potential moderation in cost growth and slight improvement in credit loss levels in the second half of the year.

Key Takeaways

Absa's financial performance in the first half of the year was impacted by inflationary pressures, high interest rates, regular power blackouts, and logistical challenges, particularly affecting its retail and small business customers. Despite these challenges, Group Financial Director Deon Raju noted a significant improvement in early delinquencies among customers in distress. Looking ahead, Absa expects mid-single-digit growth in both revenue and operating expenses for the full year, aiming to maintain a cost-to-income ratio similar to 2023’s 53.2%.

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