Blue weighs on Absa

Johannesburg - Financial services group Absa warned the market on Friday that poor investment performances will weigh on its earnings.

The group said in a Stock Exchange News Service (Sens) announcement it expects headline earnings per share for the year to end-December to be 25% to 35% lower than in 2008.

"The financial performance of the group has been particularly impacted by the effect of adverse market conditions on its investment banking cluster," said group financial director Jacques Schindehütte.

The group took strain in its investment banking division and has had to write down the value of its stake in microlender Blue Financial Services.

Investment banking has been a stellar performer for Absa over the last three years, but the financial crisis has weighed on the number of deals while the value of assets have gone down.

This includes Absa's 24% stake in Blue Financial Services, which earlier this week disclosed it had sustained massive losses. Blue's South African subsidiary is technically bankrupt, with liabilities exceeding assets.

However, the group said its bad debt position had improved and it did not expect further deterioration in its impairment ratio, relative to that reported in the interim results.

Absa shares were down 1.6% (205c) at R126.95 per share on Friday.

- Fin24.com

*The author holds shares in Absa.