Absa Group Ltd. Reports Surprising Profit Amid Recovery in South Africa
Absa Group Ltd. reported a profit of 22.06 billion rand, above analysts’ expectations due to South African recovery. Interim CEO Charles Russon emphasized targeted strategies for value generation. Despite challenges in Ghana’s hyperinflationary economy, improvements in credit-loss ratios and a higher dividend signal positive prospects for Absa.
Absa Group Ltd. has reported a profit exceeding analysts’ expectations, attributed primarily to a recovery in South Africa, its home market. The headline earnings rose 9.9% to 22.06 billion rand ($1.21 billion) for the three months ending December, surpassing the forecast of 21.6 billion rand set by seven analysts in a Bloomberg survey.
Interim Chief Executive Officer Charles Russon commented, “Our organization rallied in the second half, refining our focus areas to ensure that our actions are targeted and precise in generating value and earnings uplift.” This resurgence aligns with strong consumer demand in South Africa, benefiting firms like Shoprite Holdings Ltd. and Nedbank Group Ltd., particularly following improvements in the state-run power utility’s operations.
However, Absa faces challenges in other regions, notably Ghana, where inflation rates have surged. The Bank categorized Ghana’s economy as hyperinflationary for the quarter ending December 31, with a cumulative three-year inflation rate exceeding 100%. This environment impacted profit after tax, resulting in a loss of 653 million rand.
Despite these hurdles, Absa anticipates concluding hyperinflation accounting in Ghana by mid-2025. Moreover, net interest income growth has slowed to 4.5%, a significant decline from the previous year’s 21%, attributed to elevated cash-reserve requirements in some African countries.
Impairments have decreased by 8% to 14.3 billion rand, contributing to an improved credit-loss ratio of 1.03%. This remains above Absa’s target range of 75 to 100 basis points but is notably superior to its peers, which have reduced their credit losses below 1%. Furthermore, Absa announced a full-year dividend of 14.6 rand per share, surpassing analysts’ expectation of 14.36 rand.
The bank’s performance reflects its focused strategy in a recovering South African economy while managing challenges posed by inflationary pressures in other regions.
Absa Group Ltd.’s reported profit surpasses analysts’ projections due to an upturn in South Africa. Despite encountering difficulties in Ghana owing to hyperinflation, the bank’s strong earnings performance and improved credit-management measures are noteworthy. The announced dividend showcases confidence in future growth, supporting the narrative of recovery within the South African economy.
Original Source: www.livemint.com
