ABSA share price: Full year results update and outlook
In the below article we summarize FY20 results from the ABSA Group and take a look at how the share price is reacting to the news.
ABSA FY20 Results
As has been the sector trend amongst banks who have already reported earnings, the current pandemic disruption to the economy has equated to credit impairments from both the retail and corporate banking divisions weighing on the group results for Absa Bank Limited. While pre provision profit for the group was up around 7%, a 163% increase in credit impairments saw normalized headline earnings per share down 51% over the year.
No dividend was declared for the period, unlike with peers Standard Bank Group Ltd and FirstRand Ltd who have recently announced small dividends with their latest results updates. The withholding of a dividend for the period by ABSA looks to preserve capital amidst the current economic environment. The group is however hoping to reinstate its dividend for the FY21 interim period.
H2: ABSA FY 2021 Outlook
The ABSA Group has given the following 2021 guidance in it results presentation:
- Low to mid-single digit growth in net interest income, based on improved customer loan growth
- Non-interest revenue growth is expected to improve, but is likely to remain low
- Low single digit growth in operating expenses expected, resulting in flat operating JAWS
- Credit loss ratio is likely to decrease substantially
- RoE is expected to improve materially to low double digits
- Group CET1 capital ratio should increase
- Expect to gradually resume paying dividends from the first half of 2021, starting with a dividend payout ratio of 30% and increasing to 50% medium term
The ABSA Group: Technical Analysis
The share price of ABSA remains in a firm uptrend. In the short term however the bank has moved into overbought territory whilst at historical resistance (13580). Traders respecting the uptrend might hope for a pullback from overbought territory towards support at 12160 to look for long entry.
In Summary
- Full year normalized HEPS down 51%
- A significant rise in impairment charges was noted from both the retail and corporate business units
- No final dividend has been declared
- The group hopes to reinstate a dividend after the first half of 2021
- Earnings and impairments are expected to improve significantly in 2021
- A technical view of ABSA’s share price shows the long term trend to be up, although overbought in the near term
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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