MARIAM ISA, Johannesburg | Monday
ABSA, South Africa’s dominant retail bank, hopes to cut its cost-to-income ratio to the 60% level and boost its return on equity above 21% by March 2002.
Group Chief Executive Nallie Bosman told reporters after the group unveiled its interim results that he believed it could speed up its previous targets for those key ratios by about one year to the 2002 target.
Absa’s return on equity rose to 17.8% in the six months to September 30 from 15.5% in the same period last year, while the bank managed to trim its cost-to-income ratio, significantly higher than its peers, to 64.7% from 67.2% in the same period.
Absa unveiled an 18.5% jump in its interim earnings per share, in line with expectations, and said it expected the trend to hold this year.
The bank said its headline earnings rose to 168.5 cents per share in the six months to September 30 from 142.1 cents in the same period the previous year. Analysts had expected Absa’s earnings to grow by between 17 and 20%.
”We think the share is oversold, I have a ”Buy” rating on it,” a banking analyst said. He declined to give a target value for the share, but said Absa was poised to reap the rewards of an expected pickup in the domestic economy, with most of its assets in the retail sector.
Absa’s dividend climbed by 17.3% to 44 cents. Its attributable income was up 20.4% at R1.09bn.
The group said its net income before taxes rose by an impressive 36%, but a five percent increase in the company’s average tax rate had curbed the gain.
Earnings were slightly boosted by income from two newly acquired subsidiaries, microlender Unifer Holdings Ltd and National Bank of Commerce Ltd – which added a net R37m for the period under review.
Absa said South Africa’s stable interest rate environment, reflecting the lowest rates for the country in 12 years – failed to stimulate the anticipated level of credit demand, with consumers still worried about the possibility of rate hikes. – Reuters