24games Ancestry24 Answerit Blueworld Careers24 Channel24 Fin24 Food24 GoTravel24 Health24 Kalahari.net Mobile My Account News24 Nuus24 Parent24 Property24 Spaces Sport24 Weather24 Wheels24 Women24

Entrepreneurship Q&A

Do you have questions on the financing needs of your business? Fin24.com has a panel of experts on standby to answer queries.

PODCAST: Lessons from Abroad

Think it's easier to start a business in the US as opposed to SA? Listen to Fin24.com's entrepreneurship experts.

Where am I? Fin24.com

Absa slides on bad news forecast

Jul 30 2010 11:11 Marc Ashton & Reuters Print this article | Email article

Company Data

Johannesburg - Share prices in Absa Group [JSE:ASA] fell more than 3% in early trade on Friday, after the bank said it was hit by slack demand for loans and expects lower first-half profit.

The bank, which is majority owned by Britian's Barclays, said after the market closed on Thursday it expects first-half earnings to drop by up to 5% from the previous year.

Shares in South Africa's biggest retail lender were R134.45 at 10:15, down 3.17% compared with a 1.14% decline in the Top-40 index.

"The operating environment for the six months to end-June 2010 was subdued and revenue levels have not grown during the period," the group said in a trading statement released on Thursday. "Consumer appetite for credit remained low and volumes in all businesses have remained under pressure."

Mixed views on prospects

I-Net Bridge analyst consensus ratings have Absa rated as a "hold" ahead of next week's results release, while investment banking group JP Morgan has an "overweight" recommendation on the stock.

The expectation is for earnings to grow by as much as 20% for the full year, indicating that analysts expect a more aggressive second half.

An "overweight" recommendation indicates the analyst expects the stock will outperform the other company in the sector.

JP Morgan is not the only firm with an upbeat outlook on Absa.

Deutsche Securities also has a "buy" rating on the bank, but said it maintains its preference for competitor FirstRand [JSE:FSR].

"Although the earnings recovery in banks is looming, we expect Absa to report relatively unexciting first-half figures with fully diluted headline earnings per share only expected to grow 3% to 565c per share," analyst Voyt Krzychylkiewicz told clients.

Krzychylkiewicz added that a sluggish operating environment and "stubborn" bad debts could continue to hurt Absa and may have a negative effect on its "young" private equity portfolio, which is still in the early phase of its life cycle.

Much of Absa's outperformance in the last six years has been driven by a stellar showing by investment banking unit Absa Capital, which includes private equity.

However, exposure to about R1bn in defaulted single stock futures positions and a sharp fall-off in valuations in 2009 meant that the business unit did not make a meaningful contribution over the last 12 months.

In the year to end-December 2009, Absa Capital contributed just R288m in profit, compared to R2.2bn the previous year.

Stockbrokerage Barnard Jacobs Mellet Holdings [JSE:BJM] said it preferred FirstRand and Standard Bank Group [JSE:SBK] over Absa: "These two banks seem to have more conservative and prudent lending practices relative to their peers."

- Fin24.com

page
1

Share this page

Comment on this story

(No bad language or hate speech, please)

All comments are moderated before displaying on the site

Sharon Aug 16 2010 14:15

Yay, I am now free from ABSA Bank, have moved all my accounts and investments to a bank that is professional and knows what customer service service is all about. Well done Standard Bank.

jonno Jul 31 2010 16:39

Last i heard, they are bankrupt - get out and quick

Georg Jul 31 2010 14:00

Maria Ramos is the CEO of ABSA. Previously she was the CEO of Transnet, the company who neglected their pensioners. Gave them a lousy 2% annual inflation countering increase. Now that Ramos has left Transnet someone else has to mop up the mess she left behind with regard to the pensioners. She also received a R3 million annual bonus at Transnet. I wonder if her appointment at ABSA is not the reason for their decline. I hope ABSA top guns are reading these postings. I am also looking elsewhere to take my banking business at the moment.

Juicylucy Jul 30 2010 18:28

Its surprising how little people know about banks. ABSA, Standard Bank etc... are all owned by foreign banks like Barclays and other banks in china and so forth. The banks are bust due to the excesses of the past and they have received massive government bailouts overseas and they are now trying to fix up there balance sheets by hording all the cash they can to make there balance sheets look better. What people don't understand is that BANKS DON'T NEED YOUR MONEY right now because the foreign government bailouts are providing them with all the cash that they need. So Barcleys Bank uses some uk government money to prop up ABSA's balance sheet, THEY DON'T NEED YOUR MONEY they need to HANG ON TO THE CASH to fix there bust balance sheets. People investing in property can forget about new complexes and apartments and new shopping centers etc. for the next 15 yrs. We've spent the last 15 yrs borrowing and spending and flipping properties to each other, but now its time to pay all this debt back. So forget about banks, they will only rob you, cash is king for the next 10yrs. Businesses will suffer badly due to the world wide credit crunch which is about to get worse, as banks are still hiding the true level of bad debts they have.

Sharon Jul 30 2010 15:58

Serves them right! Slack demand for loans, i think it is more than we are not approving loans. I applied for a bond through ABSA - I have been a client of theirs since the late 1980's (still under United Building Society). I have platinum status and investments with them. They offered me a 85% bond. I was applying for half of what I qualified for. I am in the process of moving all my investments and accounts from ABSA to Standard Bank as they were very helpfull in sorting out my bond. I expect their shares to plumet more as they have been directly implicated in two huge fraud scandals (Fedentia and Maureen Clifford). So I dont want to keep my money with a bunch of crooks!

Well deserved Jul 30 2010 14:51

I am another case of finance applications being declined exactly when you need them. When times are good they throw money at people and when times are bad they run a mile. Surely this business model is ass about face - rethink ABSA or you will soon see continuing declining earnings. Have you ever tried to get a credit committee to understand your needs and situation? All they care about is covering their backsides from bad debt and not the actual needs of the customer.

privatebanker Jul 30 2010 14:45

I am a private banker, earn in excess of R50000 a month, applied for building loan of 50000 and got given a mere 30000. Already paid of all my debt with them but they would not even allow for a vehicle loan the other days. ABSA sucks!!!! need to get out and PS Private bank is a roomer

Serves them Jul 30 2010 14:14

@realist - Thanks for the link, will have look at it. I am definitely taking my money elsewhere.

Bank Greed Jul 30 2010 13:49

well deserved, what goes around comes around, now its your turn absa

realist Jul 30 2010 13:44

@Serves them - Try www.Enablis.co.za they are really into helping entrupeneurs. Join ang you get free helps with your business. Something Banks do not. That said BANKS TAKE NOTE : There comes a time when the blood from the stone is squeezed out. At that point when business is down owners avoid banks where they can. This is what happens when about the only thing you Banks do not charge for is to walk in the door. I suspect that someone is thinking on how to introduce that charge too. The way I look at it if it costs me R500.00 a month to run a bank account I would rather look for an alternative.

Jim Jul 30 2010 13:25

The more I read about Banks the more I realise that as stupid as it sounds for the man in the street, that putting your cash under the matress is not a bad idea. It doesnt cost to draw, or deposit, or borrow, and the interest rate is hardly worth it these days in a Bank account so why bank?.

ABSA BS Jul 30 2010 13:08

What a laugh - are we meant to feel sorry for them. It's not the slack demand for loans it's their refusal to grant loans! I am not even talking about new loans - their absurd lending criteria even applies for an advance on an existing bond.

Exactly Jul 30 2010 13:06

I recently tried to get a bond fom ABSA and qualify for a lot more than I was asking for. They came back and only offered 85% of the total and a rate much higher than any of the other banks. Their service is terrible, their fees are a sham and I am shortly moving on to another bank.

Just Wondering Jul 30 2010 12:40

Did the commentators read the last paragraph?

James Minnet Jul 30 2010 12:40

No pity from me you greedy scumbags.

Nordic Jul 30 2010 12:27

Anybody surprised? I've banked with Absa all my life, finance my car through Absa, and bought my first property through them. However, last year, I tried to acquire two more properties and both bond applications were turned down by Absa but approved by all three the other banks. I wonder why? Obviously I've taken up the bonds with the other banks... and I probably pay them just as much as I would/could/should have Absa. But they don't want my money. It's not a slack demand for loans; it's their ridiculous lending criteria.

Johan Jul 30 2010 12:24

NO WONDER ..... I recetly applied for a bon on my farm that is fully paid and still with Absa, i paid this 20year bond of in 6 years, Value of property is R1,500,000-00 Applied for a loan of R390,000.00 My income is in excess of R20,000.00 + I have additional income, credit record is Clear, Only debts i have is a Credit Card with R15,000.00 O/S Have investments to the value of R330,000.00. Gues what, they declined my application.......

Viking Jul 30 2010 12:21

Yippeeee! They deserve it. I have a new name for absolute bad service. Maybe they should change their payoff line to "Maybe tomorrow, never". Absolutely shocking

trebor Jul 30 2010 12:10

Tried financing R5m on R9m unencumbred assets for bussiness expansion, no luck. Bought property in Pta for kids university, 15% deposit. And I am a Private Bank Client!!!

Selwyn Jul 30 2010 11:49

ABSA is known for their shitty service and lousy attitude towards their clients. They have a totally restrictive attitude towards loans. Their fees are totally over the top. Apparantly, at present their approval rate of bonds is running at 15%. Now I wonder why their profits and share prices have dropped. It starts at the top!! Get decent executives to run the show. People who KNOW what banking and customer service is all about.

alan Jul 30 2010 11:42

I laugh when I read tha the bank is doing badly due to less loans being made - anyone TRIED to get a loan from thewm lately? No chance - they are not interested unless you are so wealthy, you don't need a loan. By the way, what happened to good service Absa?

Serves them Jul 30 2010 11:38

No wonder. I am looking to get a professional accounting business of the ground in Cape Town and need X amount. These guys require 90% security. Where are the days the bank partnered you and assisted you in growing your business. New Mafia institution if you ask me.


Your name	*
Email	*
Comment	*
	Please enter the text in the image below as is into the given textbox: *

	Disclaimer Fin24.com encourages freedom of speech and the expression of diverse views. The views of users published on Fin24.com are therefore their own and do not represent the views of Fin24.com. All posts are monitored by Fin24.com's editors and grossly derogatory posts will be deleted. The Fin24.com editorial team will delete your comment should you post abusive comments, use vulgar language or make discriminatory observations.

More...

Indicators

Last updated: Fri 00:00

View data hub

Company Snapshot

Make money from art

Sep 02 2010 12:48

Art's nicer to look at than stock and bond certificates, but can it make you money? Fin24.com spoke to the experts about this alternative investment class. Time: 3:00

Not working? Click here More videos

Nicolaasmith

Only daily parallel rate indexing can do the trick in a hypeirnflationary economy. Here you will find everything SAICA banned from continued being published on their public Discussion Forum about SA accountants - including CA(SA)s&nb... Read their blog...

Lessons from Abroad

Think it's easier to start a business in the US as opposed to SA? In our entrepreneurship section, Fin24.com speaks to the experts whether the grass is always greener. Time: 12:10 Listen Here...