No let-up for Absa as shares tumble

Johannesburg - Shares of Absa Group [JSE:ASA] continue to slide, dropping 2.9% to R135.04, after hitting their lowest level since late November. Shares in the bank have been hammered since Tuesday, when it stunned the market with a profit warning, citing an increase in mortgage-related bad debts.

The sell-off has lopped R15.5bn off the market value of the Barclays controlled bank, putting it on track for its biggest weekly drop since October 2008.

The steep sell-off may be a reaction to the fact that Absa, like other South African banks, has been trading at a lofty valuation, especially compared to overseas lenders, says Abri du Plessis, chief portfolio manager at Gryphon Asset Management.

Even after this week’s woeful performance Absa is still at 1.6 times its book value, according to Reuters data, making it more expensive than both Wells Fargo and Goldman Sachs.