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Home Companies & Markets

Absa projects double-digit growth in revenue

mm by Kabelo Adamson
September 14, 2023
in Companies & Markets
Reading Time: 2 mins read
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Absa projects double-digit growth in revenue

Keabetswe Pheko Moshagane Absa MD. Pic Gaolathe Rulaganyang

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Despite the anticipated headwinds in the operating environment, Absa Bank Botswana remains resolute in growth and prosperity and said a strong balance sheet will enable it to capitalise on the vast opportunities offered by the market, the bankโ€™s Managing Director (MD), Keabetswe Pheko-Moshagane has said.

She was speaking during the 2023 interim results presentation on Thursday in Gaborone. Pheko-Moshaganeย saidย Absa expects its revenue to grow in the double digits range, Return on Equity (ROE) to remain within the mid 20’s, and cost-to-income ratio to be in the lower 50’s.

In the near term, Pheko-Moshagane said the bank will focus on continuous improvement and enhancement of its technology platforms, participate in growing meaningfully in various sections, and maintain a sound balance sheet with adequate capital and liquidity levels. Absa will also focus on delivering on its ESG commitments, with deliberate efforts to achieve ambitions of being a leader in sustainable finance in the domestic market in line with the government reset and mindset change agenda, Pheko-Moshagane noted.

Pheko-Moshagane said Absaโ€™s delivery against the shared strategy is evidenced by yet another solid financial performance. During the period under review, Profit before tax increased by 13 percent, pre-provision profit increased by 21 percent while revenue grew 17 percent year on year. During the same period, cost-to-income ratio declined to 52 percent from 54 percent.

โ€œPleasingly, our Return on Equity continued on the growth trajectory, increasing to 26 percent from 23 percent in the prior year,โ€ she said. โ€œWe still run a solid bank with a Capital adequacy ratio of 2 percent, enabling a 19 percent growth in interim dividend.โ€ The Absa Bank Botswana stated that the bank has made good progress in its growth ambitions across its business segments. โ€œThis affirms our commitment of being a primary and strategic partner for our customers, and in turn, deliver shareholder value,โ€ she said.

For the period, Absa recorded a revenue of a little over P1 billion, an increase of 17 percent from the previous corresponding period. โ€œOur revenue is now at a position higher than pre-COVID levels, which depicts the recovery of our business post the COVID slump,โ€ said Absa Finance Director, Cynthia Morapedi. โ€œAt a segmental level, our RBB franchise total revenue grew by 8 percent while the Corporate and Investment Banking arm grew 41 percent.โ€

Within this revenue growth, Morapedi said gross interest income increased 31 percent, which she indicated was achieved by a compound of the momentum the bank saw in its loan book together with an improved return on our portfolio assets. โ€œThe growth in interest income was negated by the increase in interest expense of 52 percent,โ€ she said. Due to inflation and other economic constraints, Absa says its customersโ€™ ability to save was impacted.

โ€œBusinesses also experienced delayed conversions due to supply chain disruptions and thereby the cost of doing business escalated,โ€ revealed Morapedi. โ€œThese factors impacted market liquidity and led to a sharp rise in the market cost of deposits, hence the increase in interest expense.โ€ This therefore culminated in net interest income growth of 23 percent year on year. According to Morapedi, growing non-interest income remains a key priority for Absa.

โ€œWe will continue with our strategic intent to drive fee income and make sure that we diversify our revenue streams,โ€ she asserted. โ€œOn aggregate, gross fee and commission income grew by 8 percent year on year.โ€ This performance, Morapedi explained, was backed by the significant recovery in sales and trading portfolio due to a material improvement in transactional volumes as well as improved product uptake.

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