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Absa Group reports improving revenue growth momentum for 2019; earnings up slightly amid sluggish economy

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Simon Kabayo
Simon Kabayohttps://eagle.co.ug
Reporter whose work is detailed

Absa Group Limited has reported improving revenue growth for the 2019 financial year, with headline earnings growing slightly.

Absa Regional Operations (ARO) comprising Absa Group’s African operations excluding South Africa delivered strong financial performance in 2019 with earnings growth of 16 per cent, enhancing the overall Group’s position.

Revenue grew by 14 per cent, Pre-provision profits increased by 17 per cent and Cost-to-income ratio improved to 57.8 per cent. While separating, ARO has grown its retail primary customer base in 2019 to 1.5 million customers.

“We delivered a resilient performance against a challenging macroeconomic backdrop. We maintained balance sheet momentum and growth was broad-based across most businesses,” said Daniel Mminele, Absa Group Chief Executive.

“We will continue to drive the execution of our strategic objectives with agility, and take advantage of emerging opportunities, while managing risks more effectively in response to changes in the operating environment,” he said

Absa Group revenue increased six per cent while headline earnings, the measure most analysts use to gauge profit, rose to one percent as impairments increased.

“Our revenue growth is showing an improving trend, with strong deposit growth of 12% and customer loan growth of nine percent for the Group,” said Absa Group Financial Director, Jason Quinn.

Overall, Absa’s balance sheet, revenue and earnings growth were in line with peers after lagging for a number of years.

March 2016: Barclays PLC announces that it will reduce its ownership of Barclays Africa Group Limited (now called Absa Group Limited) from 62.3 per cent to a minority shareholding, over time. This comes as global bank regulations tighten after the 2008 financial crisis, making it less attractive for international banks to own stakes in banks abroad.

December 2017: PLC concludes the sell-down, leaving the UK Company with a 14.9 per cent  stake in the Group. Barclays PLC indicates that this is its long-term desired ownership level, and says that it does not plan to effect further sales at this time.

Absa launched its growth strategy in March 2018 after Barclays PLC ceased to be the controlling shareholder in the Pan African banking group. Absa is on track to complete its separation programme, one of the largest in the banking sector in terms of size and complexity, on time and within budget by the middle of 2020.

July 2018: The Group’s name is changed from Barclays Africa Group Limited to Absa Group Limited, and the decision to change subsidiary names to ‘Absa’ is announced. A refreshed brand is unveiled in South Africa.

November 2019: Barclays Bank Uganda and Barclays Bank Mozambique are renamed as Absa. February 2020: All remaining Barclays-branded subsidiaries are renamed as ‘Absa’

Retail and Business Banking in South Africa continues to show signs of turnaround as the unit gained ground in key areas, recording increases in customer loans and deposits. Revenue momentum increased and costs were well contained. However, an increase in impairments eroded earnings.

Gross loans and advances grew by 7 per cent to R530 billion, deposits grew by 10 per cent to R373 billion, Non-interest income grew by 6 per cent, Cost-to-income ratio improved to 57.7 per cent from 58.4 per cent in 2018 and Customer growth of 1 per cent to 9.7 million.

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