JSE-listed Absa banking group expects revenue for the six months ended June 30, 2022 to grow more than 10%, supported by strong growth in non-interest revenue, while revenue from life insurance are increasing and rising interest rates are driving growth in net interest income .
“As expected, non-interest revenue growth improved significantly, growing double-digit year-over-year. Life insurance revenue rebounded very strongly from a weak base that included significant Covid-19 claims and provisions,” Absa said in a business update for the five months ending May 2022.
Overall normalized earnings per share (Heps) for the period are expected to be more than 20% higher than those reported in the prior comparable period.
The bank further noted growth in gross customer loans, at double digits, while growth in corporate and investment banking (CIB) and retail corporate banking (RBB) is improving.
RBB growth over the five-month period was largely driven by home loans and vehicle and asset finance, despite the bank noting an increase in credit write-downs.
Looking ahead, the bank says it expects its credit writedowns to continue to rise year on year.
“Our credit writedowns are expected to increase year-over-year, resulting in a loan loss ratio in the upper half of our range through the cycle, compared to 88 basis points in the first half of 2021,” Absa said. .
“Given the uncertain macroeconomic outlook, our lending coverage remains strong, with conservative forward-looking provisions.”
The bank plans to increase its dividend payout ratio to 50% during the period, above the 30% announced in the first half of 2021.
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Increase in operational costs
Absa said it expects operating expenses to rise by nearly 10% for the half-year.
“Operating expenses are expected to grow in the low single digits year-over-year, reflecting performance costs, as well as continued growth in marketing and technology investments,” the bank said.
Last week, the bank announced plans to migrate its national grid branches to solar power, a move that will help it weather the country’s ongoing energy supply crisis. The bank will begin rolling out this plan at its Wilkoppies branch in Klerksdorp in the North West, with the intention of rolling it out to the rest of its branches nationwide.
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