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In a trading update released on Thursday, Absa said its normalised headline profit per share for the six months to end June may be between five and six times bigger than for the first half of 2020.
This is in part due to a strong recovery in debt repayments, and "materially lower" credit impairments. The bank says its credit loss ratio (which measures debt write-offs against total loans) is now only marginally above its target range of between 75 to 100 basis points.
Last year, Absa’s headline profit fell by 51% after impairments nearly trebled to R20.6 billion. Customers struggled to repay debt amid the economic devastation caused by the pandemic. Its credit loss ratio rose to above 1.9%.
But the business has seen a strong recovery, and for the first three months of the year, the company says the headline profit from its retail and business banking was higher than a year ago, before the first hard lockdown.
The bank saw continued "strong" new home loans and vehicle finance business.
Absa Corporate and Investment Bank saw substantial growth in headline profit thanks to strong revenue growth and materially lower credit impairments.
Group customer deposits increased by high single digits year-on-year, and its interest income grew by mid-single digits. Non-interest income decreased by mid- to high-single digits, due in part to "materially higher" life insurance claims.
Operating expenses fell by low single-digits.
After suspending dividends last year, Absa expects to declare a payout at its interim results announcement, which is scheduled for 16 August 2021.
The company was rocked by the unexpected resignation of its CEO Daniel Mminele last month. He left the bank after just 15 months amid reports of a strained working relationship with his executive committee. The board said Mminele and the board were not aligned on "strategy and culture transformation".
Absa’s share price fell a percent to R122.40 on Thursday morning. It is up 70% from its lowest point a year ago.
