ABSA sees massive H1 headline earnings drop as COVID-19 weigh on the business
Banking group ABSA has reported a drop in interim profits impacted by its 297 per cent increase in credit impairments which resulted in an 82 per cent plunge in headline earnings and no interim or full year dividend is forecasted for 2020. ABSA CEO, Daniel Mminele joins CNBC Africa for more.
Mon, 24 Aug 2020 10:57:20 GMT
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AI Generated Summary
- ABSA reports significant drop in interim profits due to a surge in credit impairments, leading to a sharp decline in headline earnings for the first half of the year.
- CEO Daniel Mminele emphasizes the importance of prudent judgments and provisions in anticipation of potential losses amid the uncertainty created by the pandemic.
- ABSA remains cautiously optimistic about a potential recovery in the second half of the year, while focusing on preserving cash and maintaining liquidity buffers to ensure financial stability.
South African banking group ABSA has experienced a significant drop in interim profits, mainly due to a 297% increase in credit impairments, leading to an 82% decline in headline earnings for the first half of the year. ABSA CEO, Daniel Mminele, recently spoke to CNBC Africa about the challenges the bank is facing and its strategic approach to navigate the current economic environment. The uncertainty brought on by the COVID-19 pandemic has forced ABSA to make prudent judgments and provisions, anticipating potential losses in the future. Despite the tough conditions, Mminele remains confident in the bank's disciplined and cautious approach in managing these impairments. Looking ahead, ABSA is hopeful for a recovery in the second half of the year, as signs of economic activity are beginning to emerge with increased demand for loan products such as mortgages and vehicle financing. However, the bank is mindful of the projected 8.3% contraction in the South African economy for 2020, which will undoubtedly impact its business. The CEO highlighted that even though headline earnings saw a significant decrease, ABSA's revenue growth remained resilient, growing by 3% year-on-year and surpassing 40 billion. This was achieved through effective cost management strategies and the implementation of remote working models in response to the crisis. ABSA's focus on preserving cash and maintaining liquidity buffers continues to be a priority amidst the challenging economic landscape. While the bank temporarily restrains its growth ambitions to ensure financial stability, it remains committed to supporting its clients and contributing to the overall economic recovery. The future outlook for ABSA hinges on its ability to adapt to the changing market dynamics, while leveraging its strong capital and liquidity positions to weather the ongoing storm.