Absa said on Monday impairment losses jumped in the first half and said it expected its full-year performance to remain under pressure as defaults keep rising.
The company also confirmed in its interim results that earnings per share for the six months to end in June dropped 39% as it wrote down assets it bought after clients defaulted on futures contracts.
Absa, which is majority-owned by Britain’s Barclays, said impairment losses as a percentage of total loans rose to 1,86% from 0,93%. It reported an interim dividend of 225 cents per share.
”Business volumes are … likely to show limited growth. Arrears and non-performing loans are expected to continue rising. Margins are expected to remain under pressure due to the continued higher cost of funding,” Absa said.
Absa, the first of the local four big banks to report results, said performance for the year to end December was expected to remain under pressure.
The company, which owns South Africa’s biggest retail bank, warned late on Friday that EPS in the six months to end June fell 38,9% — below its own forecast range — due to an impairment on assets linked to single stock future defaults.
The company said it was writing down the value of stakes in companies it acquired in December after clients defaulted on single stock futures contracts and would take a pre-tax impairment of R1,095-billion.
Absa said headline earnings per share — the key profit gauge in South Africa which strips out certain one-off, non-trading and financial items — fell 19,4% to 564,4 cents, in line with its forecast for a drop of 15% to 25%.
South Africa is battling its first recession in 17 years and local banks have been hammered by impairments at their retail and corporate units as customers default on loans.
Absa’s peer Nedbank has forecast a 32% to 37% drop in first-half diluted headline earnings per share and is due to report results later this week.
Africa’s biggest bank by assets, Standard Bank, said last week it expected to report a 30% to 35% fall in first-half EPS and headline EPS. – Reuters