South African lender Absa posted headline earnings of R20.9 billion for the year ended December 2023, up 1% compared to the corresponding period in 2022.
Revenue climbed 8% to R104.5 billion, while credit impairments rose by 13% to R15.5 billion, as impairments in the secured lending businesses surged, especially in South Africa, Absa's largest market by revenue.
The dividend per share increased 5% to R13.70 per share.
Absa Bank's Product Solutions Cluster (PSC) reported an increase in gross loans and advances during the current financial year, primarily attributed to new business in home loans and vehicle and asset finance.
Delinquencies increased due to economic pressure on customers, resulting in a higher Non-Performing Loans (NPL) ratio.
The subdued residential property market has led to a year-on-year decline in demand, with application volumes dropping by 17% compared to the previous financial year. However, Absa said it maintained its share of home loans at 23.8%.
It said that although there are signs of recovery in overall confidence in the South African property market, consumer caution persists.
The overall Absa Homeowner Sentiment remained stable at 78% in quarter four of 2023, with a slight decrease from 79% a year prior.
Buying sentiment decreased to 64% in quarter four of 2023 from 67%previously.
Selling sentiment also decreased, though showing improvement throughout 2023, dropping from 52% in quarter four of 2022 to 48%.
“Despite a challenging climate, Absa remains resilient, and the underlying franchise is strong and growing,” said Arrie Rautenbach, Absa Group chief executive officer.
“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,” he said.
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.
The lender said that the economic environment remains uncertain, with continued geopolitical tensions and elections in several of Absa’s operating markets this year.
Absa expects the South African economy to grow by a muted 1.1% in 2024 given infrastructure shortfalls and the higher interest rate environment which is placing significant pressure on many consumer-facing sectors.
However, Absa believes that the current policy rate is the peak for this cycle and that the South African Reserve Bank is likely to deliver a measured pace of cuts beginning in the second half of 2024.
The bank's share price has lost a fraction more than 10% over the past year.
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