Absa compensates P1bn shareholder value destruction with dividend pay
• ABSA Group Limited (being the majority shareholder) has immunised the minorities from the impact of separation costs incurred in 2020 and thus waived a portion of their dividend
In a move expected to boost investor confidence, ABSA Bank Limited has resolved to approve a differentiated final dividend totalling P176 million.
Analysts argue that although the profitability of the bank has declined drastically, the divided pay could be critical in protecting and reversing lost value the bank surrendered on the Botswana Stock Exchange (BSE).
The decline in the bank’s share price by 18.4 percent on a year-to-date basis followed the suspension of dividend pay during the interim period. As a result, ABSA is the second worst loser on the BSE, having lost about a billion pula in market capitalisation.
This week the bank announced that minority shareholders would receive a final dividend of 26.499 thebe per share and Absa Group Limited (AGL) a final dividend of 17.799 thebe per share. The bank says Absa Group Limited (being the majority shareholder) has immunised the minorities from the impact of separation costs incurred in 2020 and to this effect waived a portion of their dividend. This was declared on 26 March 2021 and, subject to regulatory approval, will be payable on 20 May 2021 to those shareholders registered at the close of business on 10 May 2021 with an ex-dividend date of 6 May 2021.
The dividend pay comes even as profitability for the period remained subdued showing a 46 percent decline compared to the previous reporting period. The bank’s MD, Keabetswe Pheko-Moshagane, says profitability for the year has been significantly impacted by the outbreak of COVID -19 locally, regionally and globally, which impacted transactional volumes and margins across all segments. “Impairments also increased significantly due to a change in risk classification of customer portfolios on the back of increased credit default risk,” she says, adding that there is margin compression on interest income due to interest rate cuts and sluggish momentum of asset growth.
Expected credit losses increased significantly, exceeding the bank’s combined expected credit losses over the past three years. Pheko-Moshagane says the negative downturn of macro-economic variables, predominantly GDP, coupled with a significant increase in credit risk across portfolios required the bank to prudently recognise impairment provisions. “At a total charge of P263 million and 674 percent growth year-on-year, credit impairments remain the biggest driver of the decline in our profitability for the current year,” the MD says.
The bank’s total balance sheet grew 9 percent year-on-year, exceeding the P20 billion mark. Gross customer loans and advances to customers grew by 4 percent year-on-year to P14.5 billion from P13.8 billion. The growth in loans was realised across all business segments as the bank continued to focus on client penetration and acquisition to drive up volumes, the MD says, adding that customer deposits increased by 11 percent year-on-year to P15.9 billion from P14.4 billion driven by growth across “our business segments”. “This growth was realised through the uptake of our superior product offering by our customers.”