Absa profit falls as South African banks’ bad loans increase
Absa Group Ltd.’s profit fell for the first time since 2020 after the South African lender’s bad loans jumped at home amid a tepid recovery in consumer confidence and high borrowing costs.
The bank’s net income fell 1.8% to 19.89 billion rand ($1.1 billion) in the year ended Dec. 31, missing the median estimate of 21.5 billion rand in a Bloomberg survey.
Impairments jumped 13%, while the lender’s credit-loss ratio — a measure of bad loans as a percentage of the total book — climbed to 1.18% in the period, the bank said in a filing on Monday. That’s above Absa’s target range of 75 to 100 basis points, and ahead of all its peers.
Absa’s shares fell as much as 3.6% in early Johannesburg trading, the most since Dec. 8. The bank’s costs increased faster than its income, while South Africa’s moribund economy is likely to keep the bad-loan ratio above the bank’s target range, Absa said.
“Absa’s earnings performance is disappointing,” said Adrienne Damant, an analyst at Avior Capital Markets Pty. Rival Nedbank Group Ltd. reported 14% earnings growth, while Capitec Bank Holdings Ltd.’s latest trading update showed that the credit experience improved significantly, she said.
Borrowing costs in South Africa are at the highest since 2009.
