ABSA GROUP more than doubled headline earnings to R18.6 billion in 2021 after the economy recovered faster than the bank expected and credit losses were reduced, interim group chief executive Jason Quinn said yesterday.
Headline earnings were also R2.3bn more than in 2019. A 785 cents dividend was declared compared with zero dividend the year before. High single digit revenue growth was expected in the 2022 financial year, Quinn said in an online presentation.
The 2021 payout ratio was 20 percent, but the aim was to progressively increase the dividend payout ratio to 50 percent in 2022, he said.
The group anticipated 2022 would be a year filled with uncertainty due to geopolitical upheavals, sharp moves in commodity prices and potential interruptions to supply, high inflation, and unpredictability about asset prices and flows into emerging markets.
In South Africa challenges included large sectoral differences such as commodity prices boosting mining, while households face steep increases in fuel and other prices. Eskom’s operations remained a downside risk, while further interest rate increases were expected.
Quinn said they expected credit losses to increase in 2022, but to remain within the bank’s targeted range, and the bank also retained “significant coverage to protect our book against any future losses.”
He said they expected revenue growth to be driven by improved non-interest income growth, in part due to lower Covid-19-related life insurance claims.
High single digit growth in customer loans and deposits was forecast, while the net interest margin would benefit from rising rates. Mid-single digit operating expense growth was expected.
Return on equity was expected to be similar to that of 2021.
Net asset value increased 13.5 percent to 148.68c in 2021 from 131.03c. The share price, which moved up 2.9 percent to R178.17 yesterday morning after the release of the results, is more than 19 percent above net asset value and 34 percent above the share price that it traded at 12 months ago.
Revenue for 2021 grew 5 percent to R85.9bn and operating expenses rose 1 percent to R48.6bn, resulting in a 56.6 percent cost-to-income ratio. Credit impairments fell 59 percent to R8.5bn from R20.57bn, improving the credit loss ratio to 0.77 percent from 1.92 percent.
Salaries, the largest component of staff costs, declined 2 percent due to a reduced headcount. Other staff costs fell 33 percent reflecting lower restructuring costs. Bonuses grew 106 percent, in line with improved results. Deferred cash and share-based payments increased
by 32 percent. The comparative period included a management adjustment of R5.36bn to reflect the deterioration of forward-looking macroeconomic variables and the substantial payment relief granted to customers.
Most of this was retained, although R1.24bn was released to reflect risks that had either materialised or dissipated.
edward.west@inl.co.za
BUSINESS REPORT ONLINE