ABSA pass the R100 billion revenue threshold

ABSA pass the R100 billion revenue threshold

ABSA Group shareholders are smiling all the way to the bank as the bank has surpassed its revenue threshold of R100 billion reaching R104. 5 billion in revenue for its 2023 financial year ended in February.

ABSA has proved resilient evident in its performance report. Despite weaker markets and economic shocks that affected the globe, the bank, especially in the African region performed well. The Group CEO of ABSA Group Arrie Rautenbach says operations in South Africa were especially challenging because of the power cuts, supply chain logistical challenges and a sticky inflation coupled with high interest rates which discouraged growth prospects for both customers and clients.

“Despite a challenging climate, Absa remains resilient and the underlying franchise is strong and growing. We are seeing the benefits of the strategic choices we made in 2018, as is evident from our diversified business, growing customer franchise and engaged workforce,” said Rautenbach.

Africa is without challenges and at times the economic environment can be tricky, however, according to the Group CEO, ABSA experienced the strongest performance in the African region which reported growth well ahead of South Africa.

Arrie Rautenbach says, normalised headline earnings increased 1% as pre-provision growth of 6% reflected continued momentum in the business, offset by higher credit impairments, particularly in South Africa, Absa’s largest market by revenue. Strong revenue growth of 8% to R104.5 billion meant that the Group crossed the R100 billion revenue threshold for the first time, with stronger growth being generated within Africa Regions.

“The Group’s customer base expanded 4% to 12.2 million in 2023 from 11.7 million a year earlier and customer experience scores, which measure the quality of service experienced by customers, increased across all business units.

Absa is driving organisational health gains through a journey that commenced with a strengthened leadership team and a re-organised business model in 2022. In 2023, the Group rallied behind a co-created corporate purpose and a refreshed set of values as it drives a culture shift in order to promote sustainable outcomes,” explained Rautenbach.

Rautenbach says the success is also an indication of organisational health, the employees are more likely to recommend ABSA as a bank of preference; this is shown by the Employee promoter score which has increase materially over the period.

“The Group’s broad-based black economic empowerment transaction, which placed 7% of Group shareholding (equivalent to R11.2 billion at the time) in the hands of employees and communities, is anticipated to further support this culture shift,” he said.

In addition to its investment in the B-BBEE transaction, Absa invested in other areas for future growth, recruiting additional frontline staff, acquiring new technology and refreshing its brand. These were among costs that contributed to a 10% increase in operating expenses. Absa expanded its employee base and at the same time invested more in new digital capabilities to enhance customer experience both in branches and online. The number of digitally active customers increased from 3.4 million to 3.8 million.

Absa’s results showed the benefit of diversification and Africa regions grew to 29% of total Group pre-provision profit, compared with 20% in 2018. The Group’s Corporate and Investment Banking arm now contributes a third of Group pre-provision profit, compared with 28% in 2018.

Absa acquired HSBC Mauritius’ Wealth, and Personal Banking and Business Banking businesses, pending regulatory approvals, during the year. Further afield, the Group has established an office in Beijing as it looks to be a facilitator of trade flows into Africa through a strategic presence in the North, West and East of the globe.

“This expansion is testament to our ambition to grow in strategic markets, as we look to further diversify our operations,” concluded Rautenbach.

ABSA Group growth points:

  • Revenue increased 8% to R104.5 billion
  • Operating costs increased 10% to R54.5 billion
  • Cost-to-income ratio increased to 52.1% (from 51%)
  • Pre-provision profit increased 6% to R50.1 billion
  • Impairments increased 13% to R15.5 billion
  • Headline earnings increased 1% to R20.9 billion
  • Return on equity declined to 15.3% (from 16.4%)
  • Group CET 1 ratio declined to 12.5% (from 12.8%)
  • Dividend per share increased 5% to R13.70 per share

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