JOHANNESBURG (Reuters) – Absa Group Ltd, South Africa’s third-biggest lender by assets, said on Friday its full-year profit was likely to rise 10% to 15%, driven by strong growth on the back of high interest rates.
The bank expects normalised headline earnings per share, which strips out exceptional and non-recurring items, of between 24.17 rand ($1.32) and 25.27 rand for the year ending Dec. 31.
Absa also forecast a “substantial pre-provision profit growth in the mid-20s” for the full year.
South African lenders, one of the biggest in the continent, had a good run last year, but a worsening operating environment in the country, primarily due to frequent rolling blackouts have dampened the mood for continued strong growth.
Increasing interest rates have also led to worries of bank loans going sour in a country jostling with high unemployment and anaemic growth.
Absa, which has over 80% of its assets in South Africa, said considering its strong Tier 1 capital ratio, a measure of a bank’s financial strength and ability to absorb losses, it could increase its dividend payout ratio to at least 50% for the year.
However its credit impairments, recognised as a loss in the financial statement, will increase significantly due to its exposure to sovereign loans to Ghana, Absa said, without revealing the extent of the losses.
The company is scheduled to announce its full-year earnings on March 13.
($1 = 18.2738 rand)
(Reporting by Promit Mukherjee; Editing by Shounak Dasgupta)
