ABSA forecasts massive profit decline

• Estimates decline of between 60% and 70% • Says Covid-19 is mainly to blame

ABSA forecasts massive profit decline

The Managing Director (MD) of ABSA, Keabetswe Pheko-Moshagane, and the bank’s Finance Director, Cynthia Morapedi, are expected to report a down beat financial performance for the first half of the year, thanks to the Covid-19 pandemic.

ABSA has cautioned that its consolidated interim results for the period ended 30 June 2020 will be substantially lower than the results reported for the period ended 30 June 2019. According to projections disclosed to the market, the bank’s profit before tax (PBT) is expected to be lower by between 60 percent and 70 percent (P230 million to P270 million) than what it reported for the corresponding period in 2019.

In the last period, PBT amounted to P387 million, representing growth of 49 percent year-on-year. This performance was influenced by growth in income, contained costs and favourable credit losses. Total income was up year-on-year by 9 percent translating to an increase of P67 million, propelled by balance sheet growth of 6 percent and an increase in net fees and commission income by 5 percent year-on-year.

According to ABSA, it all seemed to go well until the world faced what economists believe is set to be the worst recession since World War II as the coronavirus pandemic continues to disrupt economies, including Botswana.  ABSA’s board says the outbreak of Covid-19 has had a significant impact on the economy and business community across different industries at large.

“In our business, the impact has been significant on the credit impairment provisions line, given the size of our business as well the strategies we deployed to support our customers during this difficult time, through extension of payment holidays and other relief programs,” the board wrote, adding that this surge in credit impairments provisions has materially impacted “our profit before tax in comparison to prior period results”.

The full details will be provided to shareholders at the announcement of the half-year financial results due to be released in September 2020. Shareholders of ABSA and potential investors are advised to exercise caution when trading in the bank’s securities until the results are formally published.

This will be the first time Pheko-Moshagane and Morapedi report declining profits. Pheko-Moshagane succeeded Reinette van der Merwe who returned to her native South Africa at the end of March 2019.

She has over 10 years banking experience and has been the Chief Operating Officer of Barclays since 2015. She joined Barclays in 2010 as the Head of Core Banking Applications and was later promoted to the position of Head of Technology, overseeing the execution of bank’s projects, programmes and initiatives aimed at ensuring the business operates in a stable environment. Prior to joining Barclays, she worked in South Africa where she held several positions as a consultant with various companies.

Morapedi was appointed the Finance Director of the Bank and Executive Director of the Board effective 24 July 2020. A Chartered Accountant with over 16 years work experience, Morapedi joined the bank in October 2015 as Financial Controller and has since cemented and successfully led the team into a dynamic and high performing unit while significantly contributing to the Finance Department. Prior to joining the bank, she amassed vast finance experience as a leader responsible for areas such as financial reporting, business planning, performance and analytics, tax management, treasury operations, general administration, governance and control.