Absa Group Reports Strong Earnings Driven by South African Recovery

Absa Group Ltd. reported a 9.9% increase in headline earnings to 22.06 billion rand, exceeding analyst expectations. This growth was driven by recovery in South Africa despite challenges in Ghana’s hyperinflation. The bank’s net interest income growth slowed to 4.5%, while impairments dropped by 8%. Notably, Absa declared a higher full-year dividend of 14.6 rand per share.

Absa Group Ltd. has reported a profit that exceeds analyst expectations, driven primarily by recovery in South Africa, its home market. In the three months ending December, headline earnings rose by 9.9% to 22.06 billion rand ($1.21 billion), surpassing the 21.6 billion rand forecast by analysts surveyed by Bloomberg.

Interim Chief Executive Officer Charles Russon remarked on the organization’s strong performance, stating, “Our organization rallied in the second half… in generating value and earnings uplift.” This positive trend is attributed to robust consumer demand in South Africa following significant repairs to the power utility’s coal-fired plants, ensuring consistent electricity supply.

Despite facing challenges such as rising inflation in Ghana, which the bank classified as hyperinflationary due to a cumulative three-year inflation rate exceeding 100%, Absa managed to mitigate impacts on its profits. The inflation restrained profit after tax by 653 million rand, prompting the bank to anticipate concluding the hyperinflation accounting for Ghana by mid-2025.

Moreover, net interest income growth decelerated to 4.5% compared to 21% the previous year, as increased cash-reserve requirements in certain African nations hindered cash flow. Fortunately, impairments declined by 8% to 14.3 billion rand, enhancing the lender’s credit-loss ratio to 1.03% for the period, although it remains above the target range.

Additionally, Absa declared a full-year dividend of 14.6 rand per share, exceeding the analysts’ estimate of 14.36 rand. This development reflects the bank’s commitment to returning value to its shareholders amid fluctuating economic conditions.

Absa Group Ltd. demonstrated strong performance in its most recent quarter, surpassing analyst profit forecasts and reflecting a positive recovery in the South African market. Despite facing challenges in Ghana due to hyperinflation, the bank managed to improve its credit-loss ratio and declared a higher-than-expected dividend. Overall, the results highlight Absa’s strategic focus on generating value while navigating economic uncertainties.

Original Source: www.livemint.com