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JSE ABSP
ABSP
ABSP - Absa Bank Limited - Absa Bank Limited: Profit and dividend announcement
unaudited interim financial results for the six months ended 30 June 2010
ABSA BANK LIMITED
Authorised financial services and registered credit provider (NCRCP7)
Incorporated in the Republic of South Africa
Registration number: 1986/004794/06
ISIN: ZAE000079810
JSE share code: ABSP
(Absa Bank, the Bank or the Company)
ABSA BANK LIMITED: PROFIT AND DIVIDEND ANNOUNCEMENT UNAUDITED INTERIM
FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2010
BANK SALIENT FEATURES
Six months ended Year
ended
30 June 31
December
2010 20091 Change 20091
(Unaudited) (Unaudited) % (Audited)
Statement of comprehensive
income(Rm)
Headline earnings2 3 000 2 854 5 5 986
Profit attributable to 2 963 2 238 32 5 315
ordinary
equity holder of the Bank
Statement of financial
position(Rm)
Total assets 675 162 716 308 (6) 673 774
Loans and advances to 484 583 503 519 (4) 490 205
customers
Deposits due to customers 352 623 363 195 (3) 349 371
Financial performance (%)
Return on average equity 13,8 14,5 14,4
Return on average assets 0,90 0,82 0,84
Operating performance (%)
Net interest margin on average 3,08 2,79 2,81
assets
Net interest margin on average 3,66 3,35 3,52
interest-bearing assets
Impairment losses on loans and 1,47 1,81 1,69
advances as % of average loans
and
advances to customers
Non-performing advances as % 7,5 6,6 7,0
of
loans and advances to
customers
Non-interest income as % of 41,8 43,8 44,0
total
operating income
Cost-to-income ratio 54,0 46,9 49,7
Effective tax rate, excluding 26,2 20,4
indirect taxation 21,3
Share statistics (million)
(including "A" ordinary shares)
Number of shares in issue 367,7 359,1 367,7
Weighted average number of 367,7 359,1 362,1
shares
Weighted average diluted 367,7 359,1 362,1
number of
shares
Share statistics(cents)
Headline earnings per share 815,9 794,9 3 1 653,1
Diluted headline earnings per 815,9 3 1 653,1
share 794,9
Earnings per share 805,8 623,3 29 1 467,8
Diluted earnings per share 805,8 623,3 29 1 467,8
Dividends per ordinary share 598,4 431,7 39 676,5
relating to income for the
period/year
Dividend cover (times) 1,4 1,8 2,4
Net asset value per share 12 284 10 931 12 11 606
Tangible net asset value per 12 135 10 855 12 11 464
share
Capital adequacy(%)3
Absa Bank 14,9 13,7 14,7
Notes
1Comparatives have been reclassified and restated. Refer to the
"Reclassifications and Restatements" section.
2After allowing for R162 million (30 June 2009: R234 million) profit
attributable to preference equity holders of the Bank.
3This ratio is unaudited.
BANK STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year
ended
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Net interest income 10 289 9 729 6 19 888
Interest and similar 26 505 33 670 (21) 62 533
income
Interest expense and (16 216) (23 941) 32 (42 645)
similar charges
Impairment losses on loans and (3 532) (4 527) 22 (8 392)
advances
Net interest income after 6 757 5 202 30 11 496
impairment losses on loans and
advances
Net fee and commission income 6 116 5 928 3 12 247
1.1
Fee and commission income 6 535 6 288 4 12 993
Fee and commission expense (419) (360) (16) (746)
Gains and losses from banking 1 116 1 165 (4) 2 547
and trading activities
1.2
Gains and losses from 4 27 (85) 68
investment activities
1.3
Other operating income 160 477 (66) 736
Operating profit before 14 153 12 799 11 27 094
operating expenditure
Operating expenditure (9 929) (9 657) (3) (19 835)
Operating expenses (9 555) (8 130) (18) (17 635)
2.1
Other impairments (82) (1 175) 93 (1 436)
2.2
Indirect taxation (292) (352) 17 (764)
Share of post-tax results of 15 (1) >100 (50)
associates and joint ventures
Operating profit before income 4 239 3 141 35 7 209
tax
Taxation expense (1 111) (668) (66) (1 469)
Profit for the period/year 3 128 2 473 26 5 740
BANK STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)
Six months ended Year
ended
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Other comprehensive income
Exchange differences on (77) 19 (201)
translation of foreign (95)
operations
Movement in cash flow hedging 644 (485) >100 (661)
reserve
Fair value 1 791 >100 (143)
gains/(losses)arising during (787)
the period/year
Amount removed from other (897) >(100) (776)
comprehensive income and
recognised in the profit and
loss component of the
statement of comprehensive 113
income
Deferred tax (250) 189 >(100) 258
Movement in available-for-sale (87) 73 (329)
reserve (321)
Fair value losses arising (168) 29 (309)
during the period/year (236)
Amount removed from other - 100 (205)
comprehensive income and
recognised in the profit and
loss component of the
statement of the comprehensive (205)
income
Amortisation of 46 12 104
government bonds -release to
the profit and loss component
of the statement of 41
comprehensive income
Deferred tax 35 79 (56) 81
Movement in retirement benefit (4) (100) 75
surplus -
(Decrease)/increase in (6) (100) 104
retirement benefit surplus -
Deferred tax 2 - 100 (29)
Total comprehensive income for 3 604 >100 4 624
the period/year 1 572
Profit attributable to:
Ordinary equity holder of the 2 963 2 238 32 5 315
Bank
Preference equity holders of 162 234 (31) 421
the Bank
Non-controlling interest 3 1 >100 4
3 128 2 473 26 5 740
Total comprehensive income
attributable to:
Ordinary equity holder of the 3 439 1 337 >100 4 199
Bank
Preference equity holders of 162 234 (31) 421
the Bank
Non-controlling interest 3 1 >100 4
3 604 1 572 >100 4 624
CONDENSED NOTES TO THE BANK STATEMENT OF COMPREHENSIVE INCOME
1. NON-INTEREST INCOME
Six months ended Year
ended
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
1.1 Net fee and commission
income
Fee and commission income
Asset management and other
related fees 53 39 36 100
Consulting and administration 54 61 (11) 127
fees
Credit-related fees and 6 176 5 816 6 12 061
commissions
Credit cards1 867 810 7 1 710
Cheque accounts 1 592 1 569 1 3 168
Electronic banking 1 847 1 626 14 3 490
Other3 682 720 (5) 1 405
Savings accounts 1 188 1 091 9 2 288
Insurance commission received 100 178 (44) 323
Other fees and commissions 30 52 (42) 88
Project finance fees3 107 127 (16) 268
Trust and other fiduciary 15 15 - 26
services2
Portfolio and other 9 7 29 10
management fees
Trust and estate income 6 8 (25) 16
6 535 6 288 4 12 993
Fee and commission expense (419) (360) (16) (746)
6 116 5 928 3 12 247
Notes
1Includes merchant and issuing fees.
2The Bank provides custody, trustee, corporate administration, investment
management
and advisory services to third parties, which involves the Bank making
allocation and
purchase and sale decisions in relation to a wide range of financial
instruments. Some
of these arrangements involve the Bank accepting targets for benchmark levels
of
returns for the assets under the Bank`s care.
3 Line items within fee and commission income have been reclassified for June
2009 to align with the December 2009 disclosures.
Included above are net fees and commissions linked to financial instruments
not at fair value
Fee and commission income
Credit cards 427 381 12 811
Cheque accounts 1 592 1 569 1 3 168
CONDENSED NOTES TO THE BANK STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year
ended
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
1.1 Net fee and commission
income (continued)
Electronic banking 1 847 1 626 14 3 490
Other 504 425 19 1 029
Savings accounts 1 188 1 091 9 2 288
5 558 5 092 9 10 786
Fee and commission expense (88) (93) 5 (193)
5 470 4 999 9 10 593
1.2 Gains and losses from
banking and trading activities
Associates and joint ventures 42 (58) >100 (13)
Dividends received - - - 45
Profit/(loss) realised on 42 (58) >100 (58)
disposal
Available-for-sale unwind from
reserve (46) 176 (74) 115
Equity instruments - 217 (100) 219
Statutory liquid asset (46) (41) (12) (104)
portfolio
Financial instruments
designated at fair value (494) 149 >(100) 91
through profit or loss
Debt instruments 17 (40) >100 (31)
Debt securities in issue (10) (8) (25) (125)
Deposits from banks and due to
customers (793) (43) >(100) (434)
Equity instruments (88) (141) (38) 59
Loans and advances to banks and
customers 377 357 6 610
Statutory liquid asset 3 24 (88) 12
portfolio
Financial instruments held for
trading
Derivatives and trading 1 579 915 73 2 373
instruments
Ineffective hedges 35 (17) >100 (19)
Cash flow hedges 43 (7) >100 (3)
Fair value hedges (8) (10) 20 (16)
1 116 1 165 (4) 2 547
CONDENSED NOTES TO THE BANK STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year
ended
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
1.3 Gains and losses from
investment activities
Available-for-sale unwind from
reserve
Equity instruments - - - 1
Financial instruments
designated at fair value
through profit or loss
Equity instruments 3 27 (89) 66
Subsidiaries
Dividends received 1 - 100 1
4 27 (85) 68
CONDENSED NOTES TO THE BANK STATEMENT OF COMPREHENSIVE INCOME
2. OPERATING EXPENDITURE
Six months ended Year ended
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
2.1 Operating expenses
Amortisation of intangible 47 45 4 62
assets
Auditors` remuneration 65 63 3 113
Cash transportation 283 178 59 371
Depreciation 562 497 13 1 052
Equipment costs 105 89 18 199
Information technology 1 007 795 27 1 620
Investment property charges - - - 4
Marketing costs 286 366 (22) 799
Operating lease expenses on 440 415 6 815
property
Other operating costs1 808 658 23 1 615
Printing and stationery 116 107 8 239
Professional fees 423 367 15 828
Staff costs 5 071 4 223 20 9 242
Other staff costs2 224 126 78 287
Salaries 4 312 3 949 9 8 065
Share-based payments and
incentive schemes 414 64 >100 729
Training costs 121 84 44 161
Telephone and postage 342 327 5 676
9 555 8 130 18 17 635
Average number of employees
employed 30 982 33 313 (7) 31 511
by the Bank
Number of employees employed
by the 30 518 31 446 (3) 30 627
Bank at interim/year-end
Notes
1Other operating costs include accommodation, travel and entertainment costs.
2Other staff costs include recruitment costs, membership fees to professional
bodies, staff parking, redundancy fees, study assistance, staff relocation
and refreshment costs.
CONDENSED NOTES TO THE BANK STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year
ended
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
2.2 Other impairments
Financial instruments 21 28 (25) 36
Amortised cost 5 - 100 -
instruments
Available-for-sale 16 28 (43) 36
instruments
Other 61 1 147 (95) 1 400
Computer software
development costs 4 - 100 -
Equipment - - - 9
Goodwill - 37 (100) 37
Investments in associates
and joint venturesSquared 50 1 067 (95) 1 328
Repossessed properties 7 43 (84) 26
82 1 175 (93) 1 436
Notes
During the previous year, the Bank sold contractual rights it had generated
in Ambit Management Services (Proprietary) Limited. The company was dormant
and consequently the goodwill previously recognised on this investment has
been written off.
SquaredDuring the previous year, indications existed that the carrying amount
of the investments in associates, that arose as a result of client defaults
on single stock futures within Absa Capital, would not be recoverable. The
recoverable amount is the fair value less cost to sell and was based on the
Bank`s best estimate of the price the Bank would achieve in an arm`s length
sale transaction of these investments. These investments have consequently
been impaired in the current and comparative periods
CONDENSED NOTES TO THE BANK STATEMENT OF COMPREHENSIVE INCOME
3. HEADLINE EARNINGS
Six months ended Year
ended
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Headline earnings1 is
determined as follows:
Profit attributable to
ordinary equity holder of the 2 963 2 238 32 5 315
Bank
Adjustments for:
IFRS 3 business combinations
(goodwill) - 27 (100) (113)
IAS 16 net profit on 82
disposal of property and (4) (22) (49)
equipment
IAS 21 recycled foreign -
currency translation reserve,
disposal of investments in - - (25)
foreign operations
IAS 28 net (profit)/loss
on disposal of associates and (42) 42 >(100) 50
joint ventures
IAS 28 impairment of
investments in associates and 36 768 (95) 956
joint ventures
IAS 28 headline earnings
component of share of post-tax
results of associates and joint (1) (4) 75 11
ventures
IAS 36 impairment of - - - 6
assets
IAS 38 impairment and net
profit on disposal of 3 (47) >100 (56)
intangible assets
IAS 39 release of
available-for- sale reserves 33 (158) >100 (115)
IAS 39 impairment and net
profit on disposal of available-
for-sale assets 12 10 20 16
IAS 40 change in fair
value of investment properties - - - (10)
Headline earnings 3 000 2 854 5 5 986
Note
1The net amount is reflected after taxation and non-controlling interest.
BANK STATEMENT OF FINANCIAL POSITION
30 June 31
December
2010 20091 20091
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Assets
Cash, cash balances and 16 950
balances with central banks 17 079 1 15 526
Statutory liquid asset 35 846 32 189 11 33 943
portfolio
Loans and advances to banks 36 007 47 641 (24) 35 036
Trading portfolio assets 50 731 58 763 (14) 47 303
Hedging portfolio assets 3 515 2 824 24 2 558
Other assets 11 910 12 845 (7) 7 219
Current tax assets 161 521 (69) 107
Non-current assets held for - 2 017 (100) -
sale
Loans and advances to 484 583 503 519 (4) 490 205
customers 1
Loans to Absa Group companies 10 327 15 763 (34) 16 232
Investments 15 596 14 981 4 16 849
Investments in associates and
joint ventures 441 779 (43) 473
Goodwill and intangible 548 276 99 522
assets
Investment property 1 737 1 607 8 1 705
Property and equipment 6 582 5 570 18 6 010
Deferred tax assets 99 63 57 86
Total assets 675 162 716 308 (6) 673 774
Liabilities
Deposits from banks 43 601 45 581 (4) 40 160
Trading portfolio liabilities 37 252 54 534 (32) 36 957
Hedging portfolio liabilities 1 286 1 188 8 565
Other liabilities 11 295 15 604 (28) 9 089
Provisions 807 976 (17) 1 486
Current tax liabilities - 39 (100) 31
Deposits due to customers 352 623 363 195 (3) 349 371
Debt securities in issue 162 685 173 014 (6) 169 788
Loans from Absa Group - 3 946 (100) 3 464
companies
Borrowed funds 13 359 11 823 13 13 530
2
Deferred tax liabilities 2 319 2 435 (5) 1 915
Total liabilities 625 227 672 335 (7) 626 356
Equity
Capital and reserves
Attributable to equity holders
of the Bank:
Ordinary share capital 303 303 - 303
Ordinary share premium 10 465 9 415 11 10 465
Preference share capital 1 1 - 1
Preference share premium 4 643 4 643 - 4 643
Other reserves 3 090 2 897 7 2 566
Retained earnings 31 312 26 640 18 29 340
49 814 43 899 13 47 318
Non-controlling interest 121 74 64 100
Total equity 49 935 43 973 14 47 418
Total equity and liabilities 675 162 716 308 (6) 673 774
Note
1Comparatives have been reclassified and restated. Refer to the
"Reclassifications and Restatements" section.
CONDENSED NOTES TO THE BANK STATEMENT OF FINANCIAL POSITION
1. NON PERFORMING ADVANCES - 30 JUNE 2010 (Unaudited)
Expected
recoveries
and fair Total
Outstanding value of Net identified
balance collateral exposure impairment
Rm Rm Rm Rm
Home Loans 23 590 19 061 4 529 4 529
Absa Vehicle and Asset 2 985 1 785 1 200 1 200
Finance
Card 1 821 292 1 529 1 529
Personal Loans 1 042 270 772 772
Absa Private Bank 1 544 1 322 222 222
Other 1 437 757 680 680
Total Retail banking 32 419 23 487 8 932 8 932
Absa Business Bank 4 188 2 803 1 385 1 385
Absa Small Business 439 355 84 84
Total Absa Business Bank 4 627 3 158 1 469 1 469
Total Absa Capital 419 83 336 336
Total non-performing 37 465 26 728 10 737 10 737
advances
Non-performing advances as
% of loans and advances to 7,5
customers
CONDENSED NOTES TO THE BANK STATEMENT OF FINANCIAL POSITION
1. NON-PERFORMING LOANS - 30 JUNE 2009 (Unaudited)
Expected
recoveri
es and Total
Outstandi fair identified
ng value of Net impairment
balance collater exposure
al
Rm Rm Rm Rm
Home Loans 22 111 18 978 3 133 3 133
Absa Vehicle and Asset 2 965 1 758 1 207 1 207
Finance
Card 1 963 475 1 488 1 488
Personal Loans 690 202 488 488
Absa Private Bank 1 302 1 104 198 198
Other 949 519 430 430
Total Retail banking1 29 980 23 036 6 944 6 944
Absa Business Bank 3 023 2 052 971 971
Absa Small Business 463 340 123 123
Total Absa Business Bank1 3 486 2 392 1 094 1 094
Total Absa Capital 578 479 99 99
Total non-performing advances 34 044 25 907 8 137 8 137
Non-performing advances as %
of loans and advances to 6,6
customers
Note
1Comparatives have been reclassified for the move of Absa Small Business from
Retail banking to Absa Business Bank.
CONDENSED NOTES TO THE BANK STATEMENT OF FINANCIAL POSITION
1. NON PERFORMING ADVANCES - 31 DECEMBER 2009 (Audited)
Expected
recoveries
and fair Total
Outstanding value of Net identified
balance collateral exposure impairment
Rm Rm Rm Rm
Home Loans 22 157 18 274 3 883 3 883
Absa Vehicle and Asset 2 486 1 395 1 073 1 073
Finance
Card 1 864 370 1 494 1 494
Personal Loans 802 224 578 578
Absa Private Bank 1 463 1 232 231 231
Other 956 438 518 518
Total Retail banking1 29 710 21 933 7 777 7 777
Absa Business Bank 4 037 2 800 1 237 1 237
Absa Small Business 465 362 103 103
Total Absa Business Bank1 4 502 3 162 1 340 1 340
Total Absa Capital 805 562 243 243
Total non-performing 35 017 25 657 9 360 9 360
advances
Non-performing advances as
% of loans and advances to 7,0
customers
Note
1Comparatives have been reclassified for the move of Absa Small Business from
Retail banking to Absa Business Bank.
CONDENSED NOTES TO THE BANK STATEMENT OF FINANCIAL POSITION
2. BORROWED FUNDS
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Subordinated callable notes
The subordinated debt instruments listed below qualify as secondary capital in
terms of the Banks Act, No 94 of 1990 (as amended).
Interest rate Final maturity
date
10,75% 26 March 2015 - 1 100 (100) 1 100
8,75% 1 September 1 500 1 500 - 1 500
2017
8,80% 7 March 2019 1 725 1 725 - 1 725
8,10% 27 March 2020 2 000 2 000 - 2 000
10,28% 3 May 2022 600 - 100 -
Three-month 26 March 2015
JIBAR + 0,75% - 400 (100) 400
Three-month 3 May 2022
JIBAR + 2,10% 400 - 100 -
CPI - Linked notes, fixed at
the following coupon rates:
6,25% 31 March 2018 1 886 1 886 - 1 886
6,00% 20 September 3 000 3 000 - 3 000
2019
5,50% 7 December 1 500 - 100 1 500
2028
Accrued interest 745 403 85 575
Fair value adjustment 3 (191) >100 (156)
13 359 11 823 13 13 530
Portfolio analysis
Subordinated callable notes
designated at fair value
through profit or loss 731 693 6 718
Subordinated callable notes
held at amortised cost 7 699 5 567 38 7 221
Amortised cost subordinated
callable notes in a fair value
hedging relationship 4 929 5 563 (11) 5 591
13 359 11 823 13 13 530
CONDENSED NOTES TO THE BANK STATEMENT OF FINANCIAL POSITION
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
3. FINANCIAL GUARANTEE
CONTRACTS
Financial guarantee 614 1 024 (40) 1 007
contracts
4. CONTINGENCIES
Guarantees1 11 057 8 825 25 9 829
Irrevocable facilities2 41 282 30 290 36 54 346
Letters of credit 4 951 4 729 5 4 581
Other contingencies 5 8 (38) 5
57 295 43 852 31 68 761
Notes
1Guarantees include performance guarantee contracts and payment guarantee
contracts.
2Irrevocable facilities are commitments to extend credit where the Bank does
not have the right to terminate the facilities by written notice.
Commitments generally have fixed expiry dates. Since commitments may expire
without being drawn upon, the total contract amounts do not necessarily
represent future cash requirements.
CONDENSED NOTES TO THE BANK STATEMENT OF FINANCIAL POSITION
5. COMMITMENTS
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Authorised capital
expenditure
Contracted but not provided 681 1 283 (47) 728
for1
Note
1 The Bank has capital commitments in respect of construction of buildings,
computer equipment and property purchases. Management is confident that
future net revenues and funding will be sufficient to cover these
commitments.
Operating lease payments
due1
No later than one year 1 116 1 196 (7) 1 150
Later than one year and no 2 196
later than five years 2 129 (3) 2 132
Later than five years 352 408 (14) 307
3 597 3 800 (5) 3 589
Note
1The operating lease commitments comprise a number of separate operating
leases in relation to properties and equipment, none of which is
individually significant to the Bank. Leases are negotiated for an average
term of three to five years and rentals are renegotiated annually.
CONDENSED NOTES TO THE BANK STATEMENT OF FINANCIAL POSITION
6. ACQUISITION AND DISPOSAL OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
6.1 Disposal of investment in Pinnacle Point Group Limited
During the period under review, the Bank invested a further R95 million in and
converted a R125 million loan to Pinnacle Point Group Limited (Pinnacle Point)
to equity in terms of an underwriting agreement.
On completion of this transaction, the Bank disposed of its investment in
Pinnacle Point for R150 million of which R95 million was received on
transaction date. The remainder of the consideration is receivable in 2011 and
2012.
This transaction has not resulted in any profit being recognised in the
current period, although additional profit of R55 million may be recognised in
2011 and 2012 on receipt of the remaining consideration.
6.2 Disposal of investment in Virgin Money South Africa (Proprietary) Limited
On 30 June 2010, the Virgin Money South Africa (Proprietary) Limited (VMSA)
joint venture arrangement was terminated and restructured into a trademark
licence agreement.
The termination resulted in the Bank selling its 50% interest in VMSA for R1,
while acquiring VMSA`s credit card and home loan business for R1.
A profit on disposal of R88 million has been recognised of which R46 million
has been included in headline earnings as it relates to VMSA`s indemnification
to the Bank for losses incurred in the past and is therefore deemed to be of
an operating nature.
The Bank is in the process of finalising the fair values of the assets and
liabilities on acquisition in terms of IFRS 3 - Business Combinations, which
allows for provisional amounts to be recognised for a 12-month period from the
acquisition date.
CONDENSED BANK STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2010
Total equity
attributable
to equity Non-
holder of controlling
the Bank interest Total
equity
(Unaudited) (Unaudited) (Unaudited)
Rm Rm Rm
Opening balance 47 318 100 47 418
Other reserves 524 - 524
Transfer from share-based payment (25) - (25)
reserve
Share-based payments for the 8 - 8
period
Other comprehensive income 480 - 480
Movement in associates` and joint
ventures` retained earnings reserve 19 - 19
Disposal of associates and joint
ventures - release of reserves 42 - 42
Retained earnings 1 972 - 1 972
Transfer from share-based payment 25 - 25
reserve
Transfer to associates` and joint
ventures` retained earnings reserve (19) - (19)
Disposal of associates and joint
ventures - release of reserves (42) - (42)
Contribution to Absa Group Limited
Share Incentive Trust (51) - (51)
Profit attributable to ordinary
equity holder of the Bank 2 963 - 2 963
Profit attributable to preference
equity holders of the Bank 162 - 162
Other comprehensive income -
movement in retirement benefit (4) - (4)
surplus
Ordinary dividends paid during the (900) - (900)
period
Preference dividends paid during
the period (162) - (162)
Net acquisition of subsidiaries - 18 18
Profit attributable to non-
controlling equity holders of the - 3 3
Bank
Balance at 30 June 2010 49 814 121 49 935
Total comprehensive income amounts to R3 604 million.
CONDENSED BANK STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2009
Total equity
attributable
to equity Non-
holders of controlling
the Bank interest Total
equity
(Unaudited) (Unaudited) (Unaudited)
Rm Rm Rm
Opening balance as previously 44 640 23 44 663
reported
Restatement of opening balance1 331 - 331
Restated opening balance 44 971 23 44 994
Other reserves (1 042) - (1 042)
Transfer from share-based payment (24) - (24)
reserve
Share-based payments for the (34) - (34)
period
Other comprehensive income (901) - (901)
Movement in associates` and joint
ventures` retained earnings reserve (1) - (1)
Disposal of associates and joint
ventures - release of reserves (82) - (82)
Retained earnings (30) - (30)
Transfer from share-based payment 24 - 24
reserve
Transfer to associates` and joint
ventures` retained earnings reserve 1 - 1
Disposal of associates and joint
ventures - release of reserves 82 - 82
Contribution to Absa Group Limited
Share Incentive Trust (25) - (25)
Profit attributable to ordinary
equity holder of the Bank 2 238 - 2 238
Profit attributable to preference
equity holders of the Bank 234 - 234
Ordinary dividends paid during the (2 350) - (2 350)
period
Preference dividends paid during
the period (234) - (234)
Net acquisition of subsidiaries - 50 50
Profit attributable to non-
controlling equity holders of the - 1 1
Bank
Balance at 30 June 2009 43 899 74 43 973
Total comprehensive income amounts to R1 572 million.
Note
1Comparatives have been restated. Refer to the "Reclassifications and
Restatements" section.
CONDENSED BANK STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2009
Total equity
attributable
to equity Non-
holders of controllin
the Bank g interest Total
equity
(Audited) (Audited) (Audited)
Rm Rm Rm
Restated opening balance 44 971 23 44 994
Shares issued 1 050 - 1 050
Other reserves (1 373) - (1 373)
Transfer from share-based payment (68) - (68)
reserve
Share-based payments for the year 39 - 39
Other comprehensive income (1 191) - (1 191)
Movement in capital reserve (3) - (3)
Movement in associates` and joint
ventures` retained earnings reserve (50) - (50)
Disposal of associates and joint
ventures - release of reserves (100) - (100)
Retained earnings 2 670 - 2 670
Transfer from share-based payment 68 - 68
reserve
Transfer to associates` and joint
ventures` retained earnings reserve 50 - 50
Disposal of associates and joint
ventures - release of reserves 100 - 100
Contribution to Absa Group Limited
Share Incentive Trust (88) - (88)
Profit attributable to ordinary
equity holder of the Bank 5 315 - 5 315
Profit attributable to preference
equity holders of the Bank 421 - 421
Other comprehensive income -
movement in retirement benefit 75 - 75
surplus
Ordinary dividends paid during the (2 850) - (2 850)
year
Preference dividends paid during (421) - (421)
the year
Net acquisition of subsidiaries - 73 73
Profit attributable to non-
controlling equity holders of the - 4 4
Bank
Balance at 31 December 2009 47 318 100 47 418
Total comprehensive income amounts to R4 624 million.
CONDENSED NOTES TO THE BANK STATEMENT OF CHANGES IN EQUITY
DIVIDENDS PER SHARE
Six months ended Year ended
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Dividends paid to ordinary
equity holder during the
period/year
16 February 2010 final
dividend number 47 of 244,8
cents per ordinary share (9
February 2009: 429,6 cents) 900 1 300 (31) 1 300
29 May 2009 special
dividend paid to Absa Group - 1 050 (100) 1 050
Limited
3 August 2009 interim
dividend number 46 of 139,3
cents per ordinary share - - - 500
900 2 350 (62) 2 850
Dividends paid to ordinary
equity holder relating to
income for the period/year
5 August 2010 special
dividend paid to Absa Group
Limited (29 May 2009
special dividend paid to 1 000 1 050 (5) 1 050
Absa Group Limited)
5 August 2010 interim
dividend number 48 of 326,4
cents per ordinary share (3
August 2009: 139,3 cents) 1 200 500 >100 500
16 February 2010 final
dividend number 47 of 244,8
cents per ordinary share - - - 900
2 200 1 550 42 2 450
CONDENSED NOTES TO THE BANK STATEMENT OF CHANGES IN EQUITY
1. DIVIDENDS PER SHARE (CONTINUED)
Six months ended Year ended
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Dividends paid to
preference equity holders
during the period/year
16 February 2010 final
dividend number 8 of 3
280,3 cents per preference
share (9 February 2009: 4 162 (31) 234
734,5 cents)
234
3 August 2009 interim
dividend number 7 of 3
799,0 cents per preference - - 187
share
-
162 234 (31) 421
Dividends paid to
preference equity holders
relating to income for the
period/year
5 August 2010 interim
dividend number 9 of 3
197,5 cents per preference
share (3 August 2009: 3 158 (16)
799,0 cents)
187 187
16 February 2010 final
dividend number 8 of 3
280,3 cents per preference - - - 162
share
158 187 (16) 349
CONDENSED BANK STATEMENT OF CASH FLOWS
Six months ended Year
ended
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Net cash generated from 2 215 3 450 (36)
operating activities
3 622
Net cash utilised from (176) (784) 78 (1
investing activities 291)
Net cash utilised from (1 613) (2 842) 43 (909)
financing activities
Net increase/(decrease) in 426 (176) >100
cash and cash equivalents 1 422
Cash and cash equivalents 5 403 3 981 36
at the beginning of the
period/year 1 3 981
Effect of exchange rate 1 (1) >100 -
movements on cash and cash
equivalents
Cash and cash equivalents 5 830 3 804 53 5 403
at the end of the
period/year 2
NOTES TO THE CONDENSED
BANK STATEMENT OF CASH
FLOWS
1. Cash and cash
equivalents at the
beginning of the
period/year
Cash, cash balances and
balances 4 543 3 942 15 3 942
with central banks
Loans and advances to 860 39 >100 39
banks
5 403 3 981 36 3 981
2. Cash and cash
equivalents at the
end of the period/year
Cash, cash balances and
balances 4 100 3 059 34 4 543
with central banks
Loans and advances to 1 730 745 >100
banks 860
5 830 3 804 53 5 403
BANK PROFIT CONTRIBUTION BY BUSINESS AREA
Six months ended Year
ended
30 June 31
December
2010 20091 20091
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Banking operations
Retail banking 975 810 20 1 897
Home Loans (201) (706) 72 (1 291)
Absa Vehicle and Asset 52 17 >100 265
Finance
Card 486 280 74 787
Personal Loans 170 51 >100 20
Retail Bank 468 1 168 (60) 2 116
Absa Business Bank 1 367 1 457 (6) 3 193
Absa Capital 614 10 >100 192
Underlying performance 661 798 (17) 1 179
Single stock futures (47) (788) 94 (987)
impairments
Corporate centre 177 404 (56) 489
Capital and funding centre (8) (209) 96 (35)
Preference equity holders of
the Bank (162) (234) 31 (421)
Profit attributable to
ordinary equity holder of the 2 963 2 238 32 5 315
Bank
Headline earnings adjustments 37 616 (94) 671
Headline earnings 3 000 2 854 5 5 986
Note
1Comparatives have been reclassified for the move of Absa Small Business from
Retail banking to Absa Business Bank.
BANK REVENUE1 CONTRIBUTION BY BUSINESS AREA
Six months ended Year ended
30 June 31
December
2010 20092 20092
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Banking operations
Retail banking 10 225 10 249 (0) 20 699
Home Loans 1 618 1 588 2 3 106
Absa Vehicle and 1 074 1 130 (5) 2 221
Asset Finance
Card 1 535 1 490 3 3 073
Personal Loans 911 894 2 1 753
Retail Bank 5 087 5 147 (1) 10 546
Absa Business Bank 5 473 5 262 4 10 982
Absa Capital 2 375 2 076 14 4 150
Corporate centre (524) (206) >(100) (645)
Capital and funding centre 136 (55) >100 300
Total revenue 17 685 17 326 2 35 486
Notes
1Revenue includes net interest income and non-interest income.
2Comparatives have been reclassified for the move of Absa Small Business from
Retail banking to Absa Business Bank.
RECLASSIFICATIONS AND RESTATEMENTS
Some items within the statement of financial position for the six months ended
30 June 2009 and for the year ended 31 December 2009 were reclassified and
restated in the current year:
BANK STATEMENT OF FINANCIAL POSITION - 30 JUNE 2009
(Unaudited) (Unaudited) (Unaudited)
As Reclassifications Reclassified
previously
Reported and restatements and restated
Rm Rm Rm
Assets
Cash, cash balances and 16 970 (20) 16 950
balances with central banks
1
Statutory liquid asset 32 189 - 32 189
portfolio
Loans and advances to banks 47 635 6 47 641
4
Trading portfolio assets 58 763 - 58 763
Hedging portfolio assets 2 824 - 2 824
Other assets 12 314 531 12 845
1+2
Current tax assets 521 - 521
Non-current assets held for 2 017 - 2 017
sale
Loans and advances to 503 331 188 503 519
customers
1+4
Loans to Absa Group companies 15 763 - 15 763
Investments 14 981 - 14 981
Investments in associates and
joint ventures 779 - 779
Goodwill and intangible 285 (9) 276
assets 1
Investment property 1 647 (40) 1 607
1
Property and equipment 5 570 - 5 570
Deferred tax assets 65 (2) 63
1
Total assets 715 654 654 716 308
Liabilities
Deposits from banks 46 543 (962) 45 581
4
Trading portfolio liabilities 54 534 - 54 534
Hedging portfolio liabilities 1 188 - 1 188
Other liabilities and sundry 16 623 (16 623) -
provisions
3
Other liabilities - 15 604 15 604
1+3
Provisions - 976 976
3
Current tax liabilities 39 - 39
Deposits due to customers 362 012 1 183 363 195
4
Debt securities in issue 173 014 - 173 014
Loans from Absa Group 3 946 - 3 946
companies
Borrowed funds 11 823 - 11 823
Deferred tax liabilities 2 296 139 2 435
1+2
Total liabilities 672 018 317 672 335
Equity
Capital and reserves
Attributable to equity holders
of the Bank:
Ordinary share capital 303 - 303
Ordinary share premium 9 415 - 9 415
Preference share capital 1 - 1
Preference share premium 4 643 - 4 643
Other reserves 2 897 - 2 897
Retained earnings 26 309 331 26 640
1
43 568 331 43 899
Non-controlling interest 68 6 74
1
Total equity 43 636 337 43 973
Total equity and liabilities 715 654 654 716 308
BANK STATEMENT OF FINANCIAL POSITION - 31 DECEMBER 2009
(Audited) (Audited) (Audited)
As
previously
reported Restatements Restated
Rm Rm Rm
Assets
Cash, cash balances and 15 526 - 15 526
balances with central banks
Statutory liquid asset portfolio 33 943 - 33 943
Loans and advances to banks 35 036 - 35 036
Trading portfolio assets 47 303 - 47 303
Hedging portfolio assets 2 558 - 2 558
Other assets 7 219 - 7 219
Current tax assets 107 - 107
Loans and advances to customers 487 672 2 533 490 205
4
Loans to Absa Group companies 16 232 - 16 232
Investments 16 849 - 16 849
Investments in associates and
joint ventures 473 - 473
Goodwill and intangible assets 522 - 522
Investment property 1 705 - 1 705
Property and equipment 6 010 - 6 010
Deferred tax assets 86 - 86
Total assets 671 241 2 533 673 774
Liabilities
Deposits from banks 43 235 (3 075) 40 160
4
Trading portfolio liabilities 36 957 - 36 957
Hedging portfolio liabilities 565 - 565
Other liabilities 9 089 - 9 089
Provisions 1 486 - 1 486
Current tax liabilities 31 - 31
Deposits due to customers 343 763 5 608 349 371
4
Debt securities in issue 169 788 - 169 788
Loans from Absa Group companies 3 464 - 3 464
Borrowed funds 13 530 - 13 530
Deferred tax liabilities 1 915 - 1 915
Total liabilities 623 823 2 533 626 356
Equity
Capital and reserves
Attributable to equity holders
of the Bank:
Ordinary share capital 303 - 303
Ordinary share premium 10 465 - 10 465
Preference share capital 1 - 1
Preference share premium 4 643 - 4 643
Other reserves 2 566 - 2 566
Retained earnings 29 340 - 29 340
47 318 - 47 318
Non-controlling interest 100 - 100
Total equity 47 418 - 47 418
Total equity and liabilities 671 241 2 533 673 774
COMMENTARY ON THE RECLASSIFICATIONS AND RESTATEMENTS
1. IFRS 3 - Business Combinations fair value adjustments
The acquisition of the majority interest in Ballito Junction Development
(Proprietary) Limited and Ngwenya River Estate (Proprietary) Limited was
accounted for provisionally in the June 2009 financial results in accordance
with IFRS 3 - Business combinations. The Bank finalised the fair values of the
assets and liabilities on acquisition within the 12-month window period as
allowed by IFRS 3. This resulted in a decrease in total assets of R36 million
which includes additional goodwill of R6 million being recognised, a decrease
in total liabilities of R53 million as well as R17 million negative goodwill
recognised in the statement of comprehensive income. This restatement only has
an impact on the value of the opening balances of the comparatives disclosed
for June 2009.
The acquisition of the majority interest in Abseq Properties (Proprietary)
Limited was accounted for provisionally in the June 2009 financial results in
accordance with IFRS 3 - Business combinations. The Bank finalised the fair
values of the assets and liabilities on acquisition within the 12-month window
period as allowed by IFRS 3. This resulted in an increase in total assets of
R34 million which includes reduced goodwill of R15 million being recognised,
an increase in total liabilities of R28 million as well as R6 million
additional non-controlling interest.
2. Retirement benefit fund
The Bank early adopted AC 504 - The Limit On a Defined Benefit Asset, Minimum
Funding Requirements and their interaction in the South African Pension Fund
Environment during 2009. This early adoption resulted in the Bank recognising
its defined benefit surplus as an asset, retrospectively. AC 504 requires the
Bank to assess whether it has an unconditional right to the surplus. This
right specifically relates to the surplus once the scheme has run off in the
normal course of business. The effective date for AC 504 is financial periods
starting on or after 1 April 2009, however the Bank elected early adoption as
this guidance was published before the Bank`s year-end and seeks to clarify an
existing accounting pronouncement.
In addition, the Bank changed its accounting policy in accordance with the
allowed alternative in IAS 19 - Employee Benefits to recognise actuarial gains
and losses on the Bank`s defined benefit pension plan. As a result of this
change in accounting policy, any adjustments to the surplus or deficit by
applying the limit to the asset in accordance with IAS 19 - Employee Benefits
will also be recognised in other comprehensive income. This new policy results
in more relevant information on the Bank`s performance by removing the
volatility from changes in actuarial assumptions and reserves.
3. Provisions
Provisions were previously disclosed as part of other liabilities and sundry
provisions and are now disclosed separately on the statement of financial
position at December 2009. Comparatives for June 2009 have been reclassified
to be consistent with the change made in December 2009.
4. Trading related activities
During the period under review, the Bank has reassessed its counterparty risk
for certain trading activities due to a change in interpretation of customer
agreements as well as a consideration of the risk inherent in its hedging
portfolios. This has resulted in comparatives being restated for June and
December 2009.
PROFIT AND DIVIDEND ANNOUNCEMENT
Introduction
Absa Bank increased attributable earnings by 32% to R2 963 million, compared
with the six months ended 30 June 2009 (June 2009: R2 238 million). Headline
earnings for the period improved by 5% to R3 000 million (June 2009: R2 854
million). Earnings per share increased by 29% to 805,8 cents per share and
headline earnings per share increased by 3% to 815,9 cents per share.
The Bank recorded a 13,8% return on average equity (June 2009: 14,5%) and
return on average assets of 0,90% (June 2009: 0,82%) for the six months under
review.
Commentary pertaining to the operating environment and the results of Absa
Bank and its subsidiaries is set out in the Absa Group`s financial results
announcement. The Absa Group announcement was released on the JSE Limited
Securities Exchange News Service and Absa Group`s website (www.absa.co.za) on
5 August 2010 and will be published in the press on 6 August 2010.
Basis of presentation and changes in accounting policies
The Bank`s interim results have been prepared in accordance with International
Financial Reporting Standards (IFRS). The disclosures comply with
International Accounting Standard (IAS) 34.
The accounting policies applied in preparing the financial results for the six
months ended 30 June 2010 are the same as the accounting policies in place for
the year ended 31 December 2009, with the exceptions mentioned below.
Revised IFRS 3 - Business Combinations affects acquisitions that are achieved
in stages and acquisitions where less than 100% of the equity is acquired. In
addition, acquisition related costs must be accounted for separately from the
business combination. The impact of this amendment on the Group was not
significant during the period under review.
Revised IAS 27 - Consolidated and Separate Financial Statements specifies that
changes in a parent`s ownership interest in a subsidiary that do not result in
the loss of control, must be accounted for as equity transactions. The revised
IFRS 3 has been applied prospectively to all business combinations from 1
January 2010. The requirements of IAS 27 have been applied prospectively to
transactions with non-controlling interests from 1 January 2010. The impact of
this amendment on the Group was not significant during the period under
review.
Changes in accounting policies
During 2009, the Bank changed its accounting policy in accordance with the
allowed alternative in IAS 19 - Employee Benefits to recognise actuarial gains
and losses on the Bank`s defined benefit pension plan. As a result of this
change in accounting policy, any adjustments to the surplus or deficit by
applying the limit to the asset in accordance with IAS 19 will also be
recognised in other comprehensive income. This new policy results in more
relevant information on the Bank`s performance by removing the volatility from
changes in actuarial assumptions and reserves.
Restatements
The fair values of certain assets acquired as part of business combinations
were determined provisionally in the prior year. The fair value of these
assets was finalised and adjusted in the current period in terms of the Bank`s
election to utilise a 12-month window period as allowed by IFRS 3 - Business
Combinations.
Reclassifications
During the period under review, the Bank has reassessed its counterparty risk
for certain trading activities due to a change in interpretation of customer
agreements as well as a reconsideration of the risk inherent in its trading
portfolios. This has resulted in comparatives being reclassified for June and
December 2009.
Declaration of dividend number 9: Absa Bank non-cumulative, non-redeemable
preference shares (Absa Bank preference shares)
The Absa Bank preference shares have an effective coupon rate of 63% of Absa
Bank`s prevailing prime overdraft lending rate (prime rate). Absa Bank`s
current prime rate is 10,0%.
Notice is hereby given that preference dividend number 9, equal to 63% of the
prime rate as at 31 August 2010 per Absa Bank preference share has been
declared for the period 1 March 2010 to 31 August 2010. The dividend is
payable on Monday, 30 August 2010 to shareholders of the Absa Bank preference
shares recorded in the register of members of the Company at the close of
business on Friday, 27 August 2010. Should the prime rate change prior to 30
August 2010, the actual amount of the dividend will be adjusted accordingly.
Based on the current prime rate, the preference dividend payable for the
period 1 March 2010 to 31 August 2010 would indicatively be 3 197,5 cents per
Absa Bank preference share.
In accordance with the provisions of Strate, the electronic settlement and
custody system used by the JSE, and the JSE Listings Requirements, the
following salient dates for the payment of the preference dividend are
applicable:
Last day to trade cum dividend Friday, 20 August 2010
Shares commence trading ex dividend Monday, 23 August 2010
Record date Friday, 27 August 2010
Payment date Monday, 30 August 2010
Share certificates may not be dematerialised or rematerialised between Monday,
23 August 2010 and Friday, 27 August 2010, both dates inclusive.
On Monday, 30 August 2010 the dividend will be electronically transferred to
the bank accounts of certificated shareholders who use this facility. In
respect of those who do not use this facility, cheques dated 30 August 2010
will be posted on or about that date. The accounts of those shareholders who
have dematerialised their shares (which are held at their participant or
broker) will be credited on Monday, 30 August 2010.
On behalf of the board
Sarita Martin
Company Secretary
Johannesburg
4 August 2010
Please note that the preference dividend calculation dates are 28 (29)
February and 31 August of each year and that the payment date may not be later
than 45 days after the preference dividend calculation date.
Enquiries
Jason Quinn
Group Financial Controller
Absa Group Limited
4th Floor, Absa Towers East, 170 Main Street, Johannesburg
Tel: +2711 350 7565, Fax: +2711 350 6487
E-mail: jason.quinn@absa.co.za
Alan Hartdegen
Head: Investor Relations
Absa Group Limited
3rd Floor, Absa Towers East, 170 Main Street, Johannesburg
Tel: +2711 350 2598, Fax: +2711 350 5924
E-mail: Alan.Hartdegen@absa.co.za
Sponsor
J.P. Morgan Equities Limited
Date: 04/08/2010 13:58:38 Produced by the JSE SENS Department.
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