Absa to 'lag' peers

Johannesburg - Market watchers believe Absa's share price will underperform its rivals in 2010, although the stock has some room left for growth.

After Absa reported a 24% decline in earnings for the year to end-December on Tueday, analysts at research house Quickval described the financial giant's performance as "inferior", saying the bank's competitors will more likely give shareholders reason to smile.

Quickval has set a short-term target price of R155.24 for Absa shares, which were trading at R133.30 on Wednesday morning.

Derivatives trading firm Global Trader advised clients it expects Absa to reach R142.50/share, at which point investors are advised to take their profits.

On Tuesday, Absa was the first of the financial services giants to release results, reporting its headline earnings had dipped to R7.6bn for the year. Its full-year dividend was slashed by 25% to 445c/share.

Analysts at stockbrokerage Barnard Jacobs Mellet (BJM) and asset manager Coronation Fund Managers said Absa's results had come in "slightly better than market expectations". However, pressure will remain on the group to grow its earnings base.

Group deputy CEO Louis von Zeuner said diversification will be a key forcus for Absa in 2010. He said the group would invest heavily in infrastructure, including information technology, expanding its presence in Africa and rolling out a new full-service corporate banking offering.

"Ideally, we would like to have at least 50% of our earnings coming from non-retail banking operations in terms of our earnings mix," he said.

- Fin24.com