{"id":1021589,"date":"2022-03-14T18:56:41","date_gmt":"2022-03-14T18:56:41","guid":{"rendered":"https:\/\/www.ghanamma.com\/2022\/03\/14\/absa-group-2021-earnings-increase-on-lower-impairments-higher-pre-prevision-profit-banking-finance\/"},"modified":"2022-03-14T18:56:41","modified_gmt":"2022-03-14T18:56:41","slug":"absa-group-2021-earnings-increase-on-lower-impairments-higher-pre-prevision-profit-banking-finance","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2022\/03\/14\/absa-group-2021-earnings-increase-on-lower-impairments-higher-pre-prevision-profit-banking-finance\/","title":{"rendered":"Absa Group 2021 Earnings Increase On Lower Impairments, Higher Pre-Prevision Profit | Banking\/Finance"},"content":{"rendered":"

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Absa Group headline earnings more than doubled to R18.6 billion in 2021 (R8 billion in 2020), well in excess of 2019 earnings, as pre-provision profit increased and as the impairments charge reduced substantially. <\/p>\n

The improvement in part reflects a stronger than expected economic recovery in South Africa, where Absa generates most of its income. South Africa\u2019s gross domestic product improved from a low base in 2020 and showed improving momentum for most of the year. All of the countries in which Absa has a presence look to have returned to positive economic growth during 2021. <\/p>\n

\u201cThis is a strong set of results which reflect the benefit of, not only the improved operating environment in 2021, but also the deliberate actions that we have taken to ensure that Absa remains resilient and poised to resume our growth plans in a favourable environment,\u201d said Jason Quinn, Absa Interim Group Chief Executive. \u201cOur purpose-led approach to supporting our clients and communities defined our success in a tough environment while also creating value for shareholders,\u201d he said. <\/p>\n

Revenue growth remained resilient at 6%, or 8% in constant currency, supported by strong growth in net interest income (up 9%). Non-interest income was in line with 2020 levels, as the negative impact of Covid-19-related claims in the insurance business eroded the benefit of strong income increases in areas including Global Markets. <\/p>\n

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Solid revenue growth and cost management helped to deliver positive pre-provision profit growth over the past two years.
Absa continues to make material investments in information technology (IT), where costs increased by 19% to R4.9 billion as Absa sought to build on the gains made during the past three years in improving system reliability and stability for customers, and to strengthen security and controls. Impairment charges were significantly lower than in the prior year as fewer customers defaulted on loans and the outlook for defaults improved on the back of improved macro-economic conditions. <\/p>\n

Customer deposits grew 12%, supported by strong performance in the retail and business banking and corporate deposit portfolios and the closure of the Absa Money Market Fund, with a significant portion of those customers electing to migrate to Absa deposit products. Growth in gross customer advances at 7% was supported by strong growth in secured assets in South Africa, where home loans increased 9% and vehicle asset finance rose 10% as Absa continued to gain market share in these areas. <\/p>\n

\u201cWe have come through the crisis in a strong position, having focused on managing operating leverage, building balance sheet resilience and preserving capital,\u201d said Punki Modise, Absa Interim Group Financial Director. \u201cThese actions and our financial performance resulted in a return on equity that exceeds our cost of equity, years ahead of expectation,\u201d she said.
Return on equity improved to 15.8% in 2021, while Absa Group\u2019s Common Equity Tier 1 (CET1) ratio was strong at 12.8%. At this level, Absa\u2019s capital reserves are above the Board target level and above the minimum regulatory capital requirement level. <\/p>\n