| Tue 21 Apr 2009, 11:00 | | ASA - ABSA Group - Comments by the group Chief Executive at the 2009 annual |
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ASA
AMAGB
ASA - ABSA Group - Comments by the group Chief Executive at the 2009 annual
general meeting
ABSA GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1986/003934/06)
ISIN: ZAE000067237
JSE share code: ASA
Issuer code: AMAGB
(Absa Group or the Group)
COMMENTS BY THE GROUP CHIEF EXECUTIVE AT THE 2009 ANNUAL GENERAL MEETING (AGM)
The Group Chief Executive of Absa Group, Maria Ramos, will make the following
comments on the macroeconomic environment and trading conditions during the
first quarter of 2009, at the AGM of the Group on 21 April 2009:
At the release of the Group`s year-end results to 31 December 2008, we cautioned
that global recessionary conditions, brought about by the global credit crisis,
were expected to persist during the course of the current financial year. These
conditions have proved to be worse than anticipated as the depth and breadth of
this crisis remains severe and uncertain.
South Africa has not been immune to these developments which, together with the
increasingly difficult conditions experienced by the consumer, have resulted in
downward pressure on domestic growth rates. South Africa`s gross domestic
product (GDP) contracted by 1,8% in the fourth quarter of 2008 and the most
recent indicators for the first quarter of 2009 show little improvement.
The recent declines in interest rates and consequent easing of inflationary
pressure are expected to provide some relief to the consumer and should
stimulate spending in the medium to longer term. In addition, increased
infrastructure development should underpin growth during this period.
In the near-term, however, we do not expect a significant recovery in light of
the potential risk of higher unemployment and declining consumer confidence
levels, given the deteriorating macroeconomic environment.
Accordingly the Group has also been impacted by these macroeconomic effects. The
operating performance, in particular, has been adversely affected by these
challenging trading conditions.
The Group`s retail banking operations have been impacted by the weak consumer
environment, which has resulted in lower than expected transaction volume growth
as well as higher delinquencies. Retail impairments have also risen.
The credit quality of new loans booked, though, has improved owing to the
implementation of tighter lending criteria over the past two years. However,
this has resulted in a contraction of advances growth.
The effect of distressed consumers has also become evident in the commercial
bank, which experienced a general slowdown in business activity, resulting in
lower transaction volumes and advances growth. Deteriorating delinquency trends
in the commercial banking portfolio have also resulted in an increased
impairment charge compared to the corresponding prior period for this cluster.
The impairment charge for investment banking remains limited. Investor appetite
for debt capital market activity continues to be muted, as expected, while
secondary market or trading activity shows good growth and momentum. The private
equity portfolio, however, has been adversely affected by the volatile equity
markets.
The bancassurance operation has been impacted by reduced new business volumes
and volatile investment markets. Net inflows from clients in the asset
management business, though, continue to be positive.
Interest margins remain under pressure as a result of the Group no longer
benefiting from the positive endowment effect on capital, given the sharp
decline in interest rates and the impact of the repricing mismatch in a
declining interest rate environment.
It should also be noted that the once off Visa initial public offering gain,
which was included in the earnings base of the first half of the previous
corresponding period, will not be repeated in the current financial year.
The Group has continued to focus on deposit growth, particularly in the retail
and the commercial bank, which has resulted in healthy liquidity ratios being
maintained.
The capital position remains sound with a Tier 1 capital ratio of 11,6% and
total capital ratio of 14,1% as at 31 December 2008. The Group remains
adequately capitalised above the minimum regulatory requirement and board
approved targets.
In summary, the weak economic environment, deteriorating collateral values, risk
of retrenchments and volatile investment markets present an ongoing challenge to
the Group`s overall operating performance in the current period and for the year
ahead.
Therefore, under guidance of the board, management continues to implement a
number of comprehensive measures to protect future earnings and to preserve
value for all stakeholders. The strategic and operational focus remains on:
* strong customer service and support to assist customers in these adverse
conditions;
* increasing our customer numbers and market share in transactional banking
and deposits;
* disciplined management of debt collections and prudent new lending to
ensure that the quality of the book remains sound;
* rigorous cost curtailment while ensuring that we retain the valuable
support of our staff which we believe has been a core differentiator for
the Group; and
* prudent and efficient management and allocation of capital.
In view of the current uncertain and volatile trading conditions, we shall
endeavour to update shareholders accordingly as the year progresses.
Johannesburg
21 April 2009
Enquiries:
Absa Investor Relations
Ms Nerina Bodasing
Tel: +27 11 350 2598
Fax: +27 11 350 5924
Email: nerina.bodasing@absa.co.za
Sponsor:
Merrill Lynch South Africa (Proprietary) Limited
Date: 21/04/2009 11:00:02 Produced by the JSE SENS Department.
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