In its half year results for the year ending June 2019, Absa Group said all its subsidiaries outside of South Africa, collectively known as Absa Regional Operations (ARO), continued to increase their contribution to group earnings.
“We’ve made significant progress with Absa’s reorganisation following the implementation of our new strategy in March 2018, and we are beginning to see the benefits,” said René van Wyk, Absa Group CEO.
Absa Group Limited, one of Africa’s largest financial services providers reported a 3 percent increase in earnings for the period.
“There is still, however, significant work to be done before we can reach our growth, returns and cost targets - a difficult task in a challenging environment,” van Wyk said. ARO is implementing its new operating model, aligned to the group strategy which devolves accountability and decision-making closer to the customer interface.
“ARO remains a key contributor to the Group’s performance and with our strong focus on entrenching our brand across the African continent, we have built a strong base to drive growth and to attain our pan-African aspirations,” said Deputy CEO of Absa Group and ARO CEO, Peter Matlare.
Matlare explained that the results reflect a financial institution that has paid attention to market demand and the need to focus on regionally sourced earnings and growth.
“Our investments in digitalisation and new ways of banking allow us to challenge existing models and positions Absa for growth. Our investment focus is to ensure that our brand delivers sustainable returns in complex markets, which require a deep understanding of local requirements and the need to always put the client at the heart of the business,” he added.
Parallel to the reorganisation work across business units, Absa continues to make good progress in separating its operations from Barclays PLC, and in enhancing its digital capability, the bank’s report added.
Regarding its contribution by its largest business unit, Retail and Business Banking South Africa (RBB SA), the group said it is showing faster than market growth in key product areas, in line with its commitment to regain its leading position.
The RBB SA increased its share of home loans new business, with home loan registrations growing 16 percent, more than double the growth in total home loan registrations in South Africa during the first half. Retail deposits grew 12 percent while the market increased 9 percent. New personal loans increased 20 percent which led to the RBB SA reporting a 4 percent increase in earnings.
Corporate and Investment Banking (CIB) earnings decreased 5 percent on a pan-African basis, following a difficult trading period in South Africa. However, the client franchise continued to perform well with notable client acquisitions across the countries in which Absa has a presence. The corporate franchise extended its track record of double-digit revenue growth.
“Despite the tough operating environment, we have been able to maintain revenue momentum in our key target areas, with total revenue growth improving to 6%,” said Jason Quinn, Absa Group Financial Director.
RBB SA, which accounts for more than 60 percent of Absa group income, has largely completed its reorganisation and expects to reap further benefits from its integration with Absa’s wealth and investment management and insurance business. The integration, which is underway, will result in a seamless offer for customers between banking and non-banking services.
At CIB, significant work has been undertaken to form an integrated pan-African franchise with a single growth strategy that covers all of the countries where Absa has a presence.
After launching ChatBanking on WhatsApp, Samsung Pay, Timiza and Jumo, earlier, Absa significantly enhanced its Absa application in the first half of the year, resulting in a 20 percent increase in the number of app users.
Absa Group, which has a presence in 12 countries in Africa and an office in London, said normalised headline earnings increased to R8.3 billion during the period from R8.04 billion during the same period in 2018. Income and costs both grew at 6 percent.
Regarding its second half growth prospects, the group said as South Africa’s economic growth outlook appears muted, with gross domestic product expected to grow 0.5 percent in 2019, prospects for stronger growth are constrained by the slowing global economy, plus weak business sentiment and decelerating household income growth in South Africa. In the group’s ARO markets, GDP is expected to grow 5.5 percent.
“While Absa’s return on equity is likely to be marginally lower in 2019, the group remains committed to its RoE target of between 18 and 20 percent in 2021,” Quinn affirmed.