/ 21 April 2009

Ramos: Global recessionary conditions worse than expected

Global recessionary conditions are worse than had been anticipated, Absa’s CEO Maria Ramos said on Tuesday.

”At the release of the group’s year-end results to 31 December 2008, we cautioned that global recessionary conditions, brought about by the global credit crisis, were expected to persist during the course of the current financial year.

”These conditions have proved to be worse than anticipated as the depth and breadth of this crisis remains severe and uncertain,” Ramos said in a speech prepared for delivery to the group’s annual general meeting.

She added South Africa had not been immune to these developments which, together with the increasingly difficult conditions experienced by the consumer, have resulted in downward pressure on domestic growth rates.

South Africa’s GDP contracted by 1,8% in the fourth quarter of 2008 and the most recent indicators for the first quarter of 2009 show little improvement, Ramos noted.

She said the recent declines in interest rates and consequent easing of inflationary pressure were expected to provide some relief to the consumer and should stimulate spending in the medium to longer term.

In addition, increased infrastructure development should underpin growth during this period.

”In the near-term, however, we do not expect a significant recovery in light of the potential risk of higher unemployment and declining consumer confidence levels, given the deteriorating macroeconomic environment,” Ramos said.

The Absa group had been impacted by these macroeconomic effects, she added.

”The operating performance, in particular, has been adversely affected by these challenging trading conditions.”

Ramos said the group’s retail banking operations had been impacted by the weak consumer environment, which had resulted in lower than expected transaction volume growth as well as higher delinquencies.

”In summary, the weak economic environment, deteriorating collateral values, risk of retrenchments and volatile investment markets present an ongoing challenge to the group’s overall operating performance in the current period and for the year ahead,” she said.

Ramos added that under the guidance of the board, management continued to implement a number of measures to protect future earnings and to preserve value for all stakeholders. — Sapa