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Johannesburg - Absa Group, the R95.5bn bank, slashed its dividend a quarter and raised the prospect of continuing pain in the commercial sector which was bedevilled by bad debt.
"We expect the impairments for the group to be a bit better than last year," said CEO Maria Ramos in a conference call on Tuesday morning.
She added, however: "We still have some concerns on the commercial side where we continue to see quite a bit of risk."
Absa, the country's largest mortage lender and the first of the major South African banks to report financial figures this year, posted a 23.5% decline in full-year headline earnings of R7.6bn. The dividend, as expected, came in at 445c per share.
Impairments totalled R4.1bn in the second half of its financial year bringing its total charge to R8.9bn. This was down slightly from the R4.8bn it recorded in the first quarter.
Commercial bad debt was likely to peak toward the end of the first half of the 2010 financial year while consumer bad debt appeared to have peaked, at the end of the third quarter, it said.
Ramos, however, cautioned that the weak job environment in South Africa continued to pose a trading worry for the bank.
Outlook muted
Ramos was downbeat on growth prospects for the bank this year saying business volumes were "likely to remain muted".
Economic recovery depended on government infrastructure projects and spend and its knock-on effect to the job market, she said.
Earnings from Absa's commercial banking business fell 17.9% to R2.3bn as credit impairments trebled to R872m. This represents around 0.75% as a percentage of total advances to customer.
Absa's bancassurance operations had also seen an increase in the number of claims which had knocked this business unit, Ramos said.
Absa is still stinging from its folly in the Single Stock Futures (SSF) market which saw it take on nearly R1bn in shares at property developer Pinnacle Point Group, IT firm ConvergeNet, industrial group Sekunjalo and Blue Financial services.
Absa has written down the total carrying value of these investments from a shade over R1bn to R147m and last week announced it had unloaded its Pinnacle Point stake.
"I am confident that we have dealt fully with our highly publicised Single Stock Futures exposure," said Ramos.
- Fin24.com