ABSA Group share price gaps higher following interim results

Key Takeaways

1. Stable income growth

In the first half of 2024, ABSA reported a total income of R53.708 billion, a 3% increase from the previous year

2. Mixed performance metrics

Key performance indicators showed mixed results, with headline earnings per ordinary share decreasing by 5% to 1,228.4 cents, while the net asset value per ordinary share rose by 6% to 18,014 cents

3. Return on Equity and Cost-to-Income Ratio

The return on equity (RoE) declined to 14.0% from 15.7% in 2023, and the cost-to-income ratio increased to 52.7% from 50.6%, reflecting higher operating costs.

4. Growth in loans and deposits

ABSA’s financial strength is highlighted by a 5% growth in both gross loans and advances to R1.359 trillion and deposits to R1.395 trillion, showcasing effective management and expansion in key markets.

5. Risk management and liquidity

The Stage 3 loans ratio to gross loans and advances slightly increased to 6.14% from 5.82%, indicating careful risk management. The liquidity coverage ratio stands at 126.2%, down from 140.8%, and the Common Equity Tier 1 ratio remains solid at 12.7%, ensuring a strong capital position.

Stable income growth amidst challenging conditions

In the first half of 2024, the Pan-African financial services provider reported a total income of R53.708 billion, reflecting a 3% increase from the previous year. This growth underscores the solidified presence across 16 countries and the strength of a diversified portfolio.

Performance metrics and shareholder value

Key performance indicators showed mixed results for the reporting period. Headline earnings per ordinary share decreased by 5% to 1,228.4 cents, while basic earnings per ordinary share fell by 9% to 1,188.0 cents. However, net asset value per ordinary share increased by 6% to 18,014 cents, showcasing an ability to grow shareholder value. The return on equity (RoE) decreased to 14.0% from 15.7% in 2023, and the cost-to-income ratio rose to 52.7% from 50.6%. Despite these challenges, ABSA maintained a stable dividend per ordinary share of 685 cents.

Growth in loans, deposits and risk management

The group’s financial position remains strong, with gross loans and advances growing by 5% to R1.359 trillion and deposits increasing by 5% to R1.395 trillion. This growth highlights effective management across key markets. The Stage 3 loans ratio to gross loans and advances increased slightly to 6.14% from 5.82%, indicating a cautious approach to risk management. Liquidity coverage ratio stands at 126.2%, down from 140.8% in 2023, and the Common Equity Tier 1 ratio remains sound at 12.7%.

The group believes that by leveraging its broad footprint, technological advancements, and strategic partnerships, they are well-positioned to navigate the complexities of the financial markets and deliver steady growth and value for our customers and shareholders.

ABSA Group – technical analysis

The share price of ABSA has gapped higher through the 200 day simple moving average and looks to be targeting resistance at the 17020 level. Traders who are long might consider using a close below gap support at 15980 as a stop loss indication. For more material gains, traders would want to see the price closing above the 17020 level to unlock a potential move towards the 18340 resistance level. A move above 17020 (should it occur) would suggest traders who are long trail their respective stops to a close below a one or two day low.