Absa ramps up IT spend

Johannesburg - South Africa's largest retail lender Absa Group [JSE:ASA] will spend up to R8bn on IT infrastructure in the next three years to meet growth targets and assist in regulatory compliance.

This spend, combined with rising staff costs, is likely to increase pressure on Absa's earnings over the next few years.

"I can confirm that we are looking at that spend across various parts of our business and we are looking to make sizeable investments to deal with capacity  growth and some of the regulatory changes," said deputy group CEO Louis Von Zeuner on Thursday, following the release of Absa's interim results to end-June on Wednesday.

In a note to clients, investment firm Deutsche Bank told clients Absa's rising expenditure is likely to take its toll on the bank's bottom line.

"The risk of faster cost growth and more stubborn bad debts suggest investors may have to brace themselves for negative earnings growth," Deutshce Bank noted.
 
On Wednesday, Absa reported a decrease in headline earnings per share, down 4% to 539c.
 
Absa Group CEO Maria Ramos told investors that the group saw a number of opportunities in Africa for both Absa and investment banking division Absa Capital.
 
"These are at different stages of progress," she said but pointed to approval of Tuesday of an Initial Public Offering of its business in Tanzania as a sign that its expansion strategy was moving forward.
 
 - Fin24.com