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Financial services group Absa on Monday (13 March) published its financial results for the full year ending December 2022, showing strong growth despite the challenging environment.
The group reported revenue up 15% to R98.9 billion, with net interest income rising 13% to R60.5 billion and non-interest income increasing 18% to R38.42 billion.
Group headline earnings increased by 14% to R20.26 billion from R17.83 billion the year prior. Headline earnings per share was recorded at 2,443 cents.
The group declared a full year dividend of ,300 cents per ordinary share, up 65.6% from 785 cents the year before.
Return on equity (RoE) improved to 15.6% from 14.6%, and net asset value (NAV) per share grew 4% to 16,255 cents.
South African headline earnings grew 17% to R17.61 billion, as pre-provision profit grew 24% to R36.5 billion. Total revenue increased 13% to R74.3 billion, with non-interest income down 9% and net interest income rising 11%.
South Africa contributed 87% of group earnings.
Absa noted that its solid results came despite global and local uncertainty. While the Covid-19 threat receded, this gave way to shakier global relations with the Russia/Ukraine war and the Chinese economic slowdown playing a big part in the current landscape.
“Energy and food markets were particularly disrupted, adding to broader supply chain pressures globally and pushing inflation to multi-decade highs in many countries. Global financial conditions tightened significantly through the year, placing pressure on many categories of financial assets including emerging markets,” it said.
The South African economy faced not only this difficult external environment but also the debilitating impact of sharply heightened electricity load shedding, particularly as Eskom’s operational difficulties deepened significantly in the later stages of the year, Absa said.
Because of the economic headwinds, Absa has revised its GDP growth prospects for South Africa to below 1% for the 2023 due to severe short-term electricity constraints.
However, in anticipates a slow improvement toward GDP growth of 2.0% by 2026, “with an expectation that load shedding will gradually dissipate”.
Looking ahead, the outlook for the global, regional and domestic environment remains very uncertain, the bank said.
“Geopolitical uncertainty, particularly surrounding the Russia/Ukraine conflict and rising tension between the West and China look likely to impact the outlook for some time. Global financial conditions are expected to tighten further, as central banks continue to express concern over underlying inflation pressure even as headline inflation eases.”
Global financial markets are expected to remain volatile and financial flows into emerging markets are expected to remain vulnerable.
For South Africa, the electricity supply is expected to remain a significant risk for the economy for the foreseeable future. Headline inflation is expected to fall back within the Reserve Bank’s 6% upper target, although Absa expects only small changes in interest rates through the year.
“Absa believes that the Financial Action Task Force greylisting will not materially impact the economic outlook for 2023, although it could be a threat to the country’s longer-term outlook should remedial action to lift the adverse listing not take place. The Group already complies with rigorous international anti-financial crime standards and regulation,” it said.
“On balance, Absa believes that the risks to growth are tilted towards the downside, as the more depressed global environment, the impacts of high domestic inflation and tighter monetary policy in most ARO countries are likely to provide a headwind to growth.”
Read: Former Absa CEO Daniel Mminele heads to Nedbank