Separation fee in Barclays divorce drags down Absa’s interim earnings

A R719m “Barclays separation” fee dragged Absa’s overall interim headline earnings down by 4% to R7.3bn, its first half results released on Monday showed.

According to Absa, this drop in headline earnings was due to new, stricter accounting rules. Under the previously used accounting rules, headline earnings grew 3% to R8bn.

Absa declared a R4.90 interim dividend for the six months to end-June, 3% higher than the R4.75 paid in the matching period.

The group’s biggest earnings generator, its South African retail and business banking (RBB) division, grew its contribution by 4.2% to R4.2bn. RBB contributed 57% of Absa’s total headline earnings.

Its second biggest earnings generator, South African corporate and investment banking (CIB) division, suffered a 5.6% decline to R1.7bn, while its rest of Africa banking division grew earnings 8.2% to R1.6bn.

CIB’s 23% contribution to the group’s headline earnings was only slightly ahead of the rest of Africa banking division’s 22%.

Absa managed to cut its head office costs to R131m from R148m.

The group’s headcount decreased 1%, which the results statement said was largely due to reductions in rest of Africa and a disposal in its wealth, investment management and insurance (WIMI) division.

Marketing costs were up 6% to R834m, and cash transportation costs increased 14% to R612m.

Credit impairments fell 9% to R3.4bn, resulting in a 0.83% credit loss ratio from 0.96%.

Absa CEO Maria Ramos said in the results statement that she expected the bank’s credit loss ratio to improve further in the second half of its financial year.

“Based on these assumptions, and excluding any unforeseen major political, macroeconomic or regulatory developments, our guidance for 2018 is largely unchanged,” Ramos said.

“We expect our loan and deposit growth to improve in 2018, with stronger loan growth in rest of Africa, CIB and retail SA. Our net interest margin is likely to decline slightly this year. ”