Absa Group Ltd., parent firm of Absa Bank of Uganda has reported a 51% drop in normalized earnings to R8 billion.
This decline is on back of impairments which nearly trebled to R20.6 billion amid the economic downturn that was precipitated by the Covid-19 pandemic.
Earnings and returns improved materially in the second half of the year as lockdown restrictions eased, particularly in South Africa, which accounts for more than 80% of the group’s earnings.
The financial services giant’s headline earnings fell 82% in the first half of 2020 compared with the first half of 2019. Headline earnings in the second half of last year were 19% lower than in the second half of 2019.
Commenting on the financial performance, Daniel Mminele, Absa Group Chief Executive said, ““Absa responded decisively to the COVID-19 pandemic and the resulting economic downturn. We supported our staff, customers and communities through a difficult period and produced a resilient financial performance in a very challenging operating environment.”
“We also successfully completed our separation from Barclays and reviewed our strategy to ensure that it continues to be relevant in the context of rapid changes in the operating environment.” Mminele added.
COVID-19 PANDEMIC RESPONSE
Absa has revealed, its subsidiaries in countries outside of South Africa extended COVID-19 payment relief to more than 60,000 retail and business banking customers.
Absa also mobilised its citizenship programme to support communities across presence markets. Absa and its employees directed R83 million towards COVID-19 response initiatives across the continent.
On a good note, Absa Group’s 2020 financial results indicated positive underlying trends, including a 2% increase in income and strong growth in pre-prevision profit. (Pre-provision profit is profit before setting aside funds for impairments.)
Operating expenses remained well-managed, declining 2%.
Combining resilient revenue growth with lower costs produced positive operating JAWS – a measure of efficiency – of 3%, improving cost-to-income ratio noticeably to 56%.
Corporate and Investment Banking headline earnings declined by 17% as impairments increased six-fold. Pre-provision profit increased by 22%, supported by income growth of 14%, with all core operating business units delivering solid revenue growth.
Absa Regional Operations (ARO)
ARO earnings declined 56%, or 65% in constant currency. Pre-provision profit grew 3% as ARO continued to benefit from its well-diversified portfolio, both by activity and geography.
“While there is some way to go before economies stabilise, the roll-out of vaccines globally hold the promise of greater stability and we look forward to playing our role in the recovery and re-setting for the future,” said Mminele.