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ASA
AMAGB
ASA - ABSA Group Limited - Unaudited interim financial results for the six
months ended 30 June 2010
ABSA GROUP LIMITED
Authorised financial services and registered credit provider (NCRCP7)
Incorporated in the Republic of South Africa
Registration number: 1986/003934/06
ISIN: ZAE000067237
JSE share code: ASA
Issuer code: AMAGB
(Absa, Absa Group, the Group or the Company)
ABSA GROUP LIMITED: PROFIT AND DIVIDEND ANNOUNCEMENT
UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2010
GROUP 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 3 862 3 826 1 7 621
Profit attributable 3 842 3 272 17
to ordinary 6 840
equity holders of
the Group
Statement of
financial
position(Rm)
Total assets 718 204 748 627 (4) 710 796
Loans and advances 499 976 521 615 (4) 506 163
to customers
Deposits due to 359 943 371 279 (3) 356 365
customers
Off-statement of
financial
position(Rm)
Assets under 153 469 149 523 3 155 114
management and
administration
Financial
performance (%)
Return on average 15,0 16,3 15,5
equity
Return on average 1,08 1,02 1,02
assets
Operating
performance (%)
Net interest margin 3,17 2,86 2,92
on average
assets
Net interest margin 3,89 3,58 3,74
on average
interest-bearing
assets
Impairment losses 1,50 1,86 1,74
on loans and
advances as % of
average loans
and advances to
customers
Non-performing 7,6 6,6 7,0
advances as % of
loans and advances
to customers
Non-interest income 46,2
as % of total 48,7 48,1
operating income
Cost-to-income 53,6 46,6 49,6
ratio
Effective tax rate, 26,8 23,9 23,8
excluding
indirect taxation
Share
statistics(million)
Number of shares in 718,2 718,2 718,2
issue
Weighted average 716,1 677,9 693,2
number of shares
Weighted average 720,7 696,1 711,5
diluted number of
shares
Share
statistics(cents)
Headline earnings 539,3 564,4 (4) 1 099,4
per share
Diluted headline 535,9 550,5 (3) 1 072,0
earnings per share
Earnings per share 536,5 482,7 11 986,7
Diluted earnings 533,1 470,9 13 962,2
per share
Dividends per 225 225 - 445
ordinary share
relating to income
for the
period/year
Dividend 2,4 2,5 2,5
cover(times)
Net asset value per 7 420 6 576 13 7 038
share
Tangible net asset 7 236 6 442 12 6 865
value per share
Capital adequacy(%)3
Absa Group 15,8 13,9 15,6
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 Group.
3 These ratios are unaudited.
GROUP STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
30 June 31 December
2010 20091 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Net interest income 11 293 10 772 5 21 854
Interest and similar 27 590 35 493 (22) 65 247
income
Interest expense and
similar charges (16 297) (24 721) 34 (43 393)
Impairment losses on loans
and advances (3 704) (4 834) 23 (8 967)
Net interest income after
impairment losses on loans 7 589 5 938 28 12 887
and advances
Net fee and commission 7 059 6 903 2 14 289
income 1.1
Fee and commission 8 144 7 799 4 16 301
income
Fee and commission (1 085) (896) (21) (2 012)
expense
Net insurance premium 2 165 1 844 17 3 787
income
Net insurance claims and
benefits paid (1 166) (1 010) (15) (2 215)
Changes in investment and
insurance liabilities (565) 10 >(100) (560)
Gains and losses from
banking and trading 1 378 1 281 8 2 575
activities 1.2
Gains and losses from
investment activities 469 454 3 1 464
1.3
Other operating income 373 727 (49) 892
Operating profit before
operating expenditure 17 302 16 147 7 33 119
Operating expenditure (11 700) (11 389) (3) (23 227)
Operating expenses (11 264) (9 782) (15) (20 857)
2.1
Other impairments (83) (1 179) 93 (1 457)
2.2
Indirect taxation (353) (428) 18 (913)
Share of post-tax results
of associates and joint 15 (1) >100 (50)
ventures
Operating profit before 5 617 4 757 18 9 842
income tax
Taxation expense (1 506) (1 138) (32) (2 340)
Profit for the period/year 4 111 3 619 14 7 502
Note
1Comparatives have been reclassified. Refer to the "Reclassifications and
Restatements" section.
GROUP 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
translation of foreign (37) (280) 87 (668)
operations
Movement in cash flow 646 (507) >100 (665)
hedging reserve
Fair value
gains/(losses) arising 1 794 (817) (148)
during the period/year >100
Amount removed from
other comprehensive income
and recognised in the
profit and loss component
of the statement of (897) 113 >(100) (776)
comprehensive income
Deferred tax (251) 197 >(100) 259
Movement in available-for- (98) (319) 69 (326)
sale reserve
Fair value losses
arising during the (179) (234) 24 (306)
period/year
Amount removed from
other comprehensive income
and recognised in the
profit and loss component
of the statement of - (205) 100 (205)
comprehensive income
Amortisation of
government bonds -release
to the profit and loss
component of the statement 46 41 12 104
of comprehensive income
Deferred tax 35 79 (56) 81
Movement in retirement
benefit surplus and (4) - (100) 52
obligation
(Decrease)/increase in
retirement benefit surplus (6) - (100) 104
Increase in retirement
benefit obligation - - - (33)
Deferred tax 2 - 100 (19)
Total comprehensive income
for the period/year 4 618 2 513 84 5 895
Profit attributable to:
Ordinary equity holders of the 3 842 3 272 17 6 840
Group
Non-controlling interest -
ordinary shares 107 113 (5) 241
Non-controlling interest -
preference shares 162 234 (31) 421
4 111 3 619 14 7 502
Total comprehensive income
attributable to:
Ordinary equity holders of the 4 322 2 160 >100 5 238
Group
Non-controlling interest -
ordinary shares 134 119 13 236
Non-controlling interest -
preference shares 162 234 (31) 421
4 618 2 513 84 5 895
CONDENSED NOTES TO THE GROUP 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 income1
Asset management and other 67
related fees 55 (18) 103
Consulting and 227 187 21 428
administration fees
Credit-related fees and 6 333 6 071 4 12 494
commissions
Credit cards2 939 889 6 1 860
Cheque accounts 1 614 1 606 0 3 231
Electronic banking 1 848 1 633 13 3 501
Other 739 845 (13) 1 601
Savings accounts 1 193 1 098 9 2 301
Insurance commission 482 486 (1) 1 088
received
Other fees and commissions 75 107 (30) 199
Pension fund payment 262 273 (4) 545
services
Project finance fees 107 127 (16) 262
Trust and other fiduciary 603 481 25 1 182
services3
Portfolio and other 484 375 29 947
management fees
Trust and estate 119 106 12 235
income
8 144 7 799 4 16 301
Fee and commission expense1 (1 085) (896) (21) (2 012)
7 059 6 903 2 14 289
Notes
1 1The disclosure of net fee and commission income changed from nature to
function during 2009, and certain fees and commissions received, previously
disclosed net of fees and commissions paid, have been reclassified to
indicate gross amounts received and paid. Comparatives for June 2009 have
been reclassified accordingly, on a basis consistent with the change made
in December 2009.
2Includes merchant and issuing fees.
3The Group provides custody, trustee, corporate administration, investment
management
and advisory services to third parties, which involves the Group making
allocation and
purchase and sale decisions in relation to a wide range of financial
instruments. Some
of these arrangements involve the Group accepting targets for benchmark
levels of
returns for the assets under the Group`s care.
CONDENSED NOTES TO THE GROUP STATEMENT OF COMPREHENSIVE INCOME
1.1 Net fee and commission income (continued)
Six months ended Year ended
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Included above are net fees and commissions linked to financial instruments
not at fair value
Fee and commission income
Credit cards 435 395 10 831
Cheque accounts 1 614 1 606 0 3 231
Electronic banking 1 848 1 633 13 3 501
Other 607 553 10 1 293
Savings accounts 1 193 1 098 9 2 301
5 697 5 285 8 11 157
Fee and commission expense (88) (93) 5 (193)
5 609 5 192 8 10 964
1.2 Gains and losses from
banking and trading
activities
Associates and joint 42 (54) >100 (13)
ventures
Dividends received - - - 45
Profit/(loss)realised 42 (54) >100 (58)
on disposal
Available-for-sale unwind 175
from reserve (46) >(100) 115
Equity instruments - 216 (100) 219
Statutory liquid asset (46) (41) (12) (104)
portfolio
Financial instruments 163
designated at fair value (502) >(100) (63)
through profit or loss
Debt instruments 16 (40) >100 (31)
Debt securities in 3 (8) >100 (125)
issue
Deposits from banks (43)
and due to customers (780) >(100) (434)
Equity instruments (104) (142) 27 (99)
Loans and advances to 372
banks and customers 360 (3) 614
Statutory liquid 3 24 (88) 12
asset portfolio
Financial instruments held
for trading
Derivatives and 1 849 1 014 82 2 555
trading instruments
Ineffective hedges 35 (17) >100 (19)
CONDENSED NOTES TO THE GROUP STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year
ended
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
1.2 Gains and losses from
banking and trading
activities (continued)
Cash flow hedges 43 (7) >100 (3)
Fair value hedges (8) (10) 20 (16)
1 378 1 281 8 2 575
1.3 Gains and losses from
investment activities
Associates and joint
ventures
Profit realised on - 15 (100) 15
disposal
Available-for-sale unwind
from reserves
Equity instruments - - - 1
Financial instruments 301
designated at fair value 191 (37) 830
through profit or loss
Cash, cash balances 71
and balances with central 107 51 312
banks
Debt instruments 72 33 >100 78
Equity instruments 12 197 (94) 440
Financial instruments held
for trading
Derivatives and trading 8 (25) >100 (41)
instruments
Investments linked to 173
investment contracts 270 56 669
Cash, cash balances 223
and balances with central 461 >100 (50)
banks
Debt instruments 113 (4) >100 (5)
Equity instruments (304) (46) >(100) 724
Subsidiaries
Loss realised on disposal - (10) 100 (10)
469 454 3 1 464
CONDENSED NOTES TO THE GROUP STATEMENT OF COMPREHENSIVE INCOME
2. OPERATING EXPENDITURE
Six months ended Year ended
30 June 31
December
2010 2009 2009
(Unaudite (Unaudite Change (Audited)
d) d)
Rm Rm % Rm
2.1 Operating expenses
Amortisation of intangible 76 71 7 116
assets
Auditors` remuneration 77 75 3 134
Cash transportation 335 230 46 467
Depreciation 601 537 12 1 129
Equipment costs 135 133 2 278
Information technology 1 054 847 24 1 729
Investment property charges - - - 4
Marketing costs 329 362 (9) 875
Operating lease expenses on 486 464 5 910
property
Other operating costs1 1 277 1 176 9 2 381
Printing and stationery 132 127 4 283
Professional fees 470 406 16 908
Staff costs 5 875 4 943 19 10 806
Other staff costs2 263 139 89 321
Salaries 5 029 4 589 10 9 423
Share-based payments and
incentive schemes 447 104 >100 867
Training costs 136 111 23 195
Telephone and postage 417 411 0 837
11 264 9 782 15 20 857
Average number of employees
employed by the Group 36 638 38 466 (5) 36 989
Number of employees employed
by the 36 356 36 920 (2) 36 150
Group at interim/year-end
Notes
1Other operating costs include accommodation costs, 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 GROUP 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 22 32 (31) 38
Amortised cost 6 4 50 2
instruments
Available-for-sale 16 28 (43) 36
instruments
Other 61 1 147 (95) 1 419
Computer software 4 - 100 19
development costs
Equipment - - - 9
Goodwill - 37 (100) 37
Investments in
associates and joint 50 1 067 (95) 1 328
venturesSquared
Repossessed properties 7 43 (84) 26
83 1 179 (93) 1 457
Notes
During the previous year, the Group 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 Group`s best estimate of the price the Group 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 GROUP 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 holders of 3 842 3 272 17 6 840
the Group
Adjustments for:
IFRS 3 business combinations
(goodwill) - 27 (100) 37
IAS 16 net profit on
disposal of property and (4) (23) 83 (58)
equipment
IAS 21 recycled foreign
currency translation reserve,
disposal of investments in - - - (23)
foreign operations
IAS 27 net loss on
disposal of subsidiaries - 7 (100) 10
IAS 28 net (profit)/loss
on disposal of associates and (42) 24 >(100) 35
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 (1) (4) 75 11
joint ventures
IAS 36 impairment of - - - 6
equipment
IAS 38 impairment and net
profit on disposal of 3 (47) >100 (42)
intangible assets
IAS 39 release of
available-for-sale reserves 33 (158) >100 (115)
IAS 39 impairment and net
profit on disposal of 12 10 20 16
available-for-sale assets
IAS 40 change in fair value
of (17) (50) 66 (52)
investment properties
Headline earnings 3 862 3 826 1 7 621
Note
1The net amount is reflected after taxation and non-controlling interest.
GROUP STATEMENT OF FINANCIAL POSITION
30 June 31
December
2010 20091 20091
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Assets
Cash, cash balances and 22 391
balances with central banks 22 380 (0) 20 597
Statutory liquid asset 35 846 32 213 11 33 943
portfolio
Loans and advances to banks 37 226 48 392 (23) 36 032
Trading portfolio assets 56 140 61 784 (9) 52 302
Hedging portfolio assets 3 515 2 824 24 2 558
Other assets 22 674 21 310 6 17 777
Current tax assets 326 620 (47) 234
Non-current assets held for - 2 017 (100) -
sale
Loans and advances to 499 976 521 615 (4) 506 163
customers 1
Reinsurance assets 443 847 (48) 719
Investments 28 159 24 346 16 29 564
Investments in associates
and joint ventures 454 789 (42) 487
Goodwill and intangible 1 323 956 38 1 245
assets
Investment property 2 255 2 047 10 2 195
Property and equipment 7 164 6 121 17 6 606
Deferred tax assets 323 355 (9) 374
Total assets 718 204 748 627 (4) 710 796
Liabilities
Deposits from banks 38 713 40 923 (5) 36 541
Trading portfolio 46 516 58 002 (20) 44 245
liabilities
Hedging portfolio 1 286 1 188 8 565
liabilities
Other liabilities 15 309 18 907 (19) 12 212
Provisions 978 1 109 (12) 1 684
Current tax liabilities 10 237 (96) 59
Deposits due to customers 359 943 371 279 (3) 356 365
Debt securities in issue 163 697 175 686 (7) 171 376
Liabilities under investment
contracts 13 836 11 053 25 12 446
Policyholder liabilities
under 2 799 2 740 2 3 136
insurance contracts
Borrowed funds 13 359 11 823 13 13 530
2
Deferred tax liabilities 2 461 2 635 (7) 2 147
Total liabilities 658 907 695 582 (5) 654 306
Equity
Capital and reserves
Attributable to ordinary
equity
holders of the Group:
Share capital 1 433 1 379 4 1 432
Share premium 4 805 3 071 56 4 784
Other reserves 1 694 1 738 (3) 1 178
Retained earnings 45 362 41 038 11 43 153
53 294 47 226 13 50 547
Non-controlling interest - 1 175 16 1 299
ordinary shares 1 359
Non-controlling interest - 4 644 - 4 644
preference shares
4 644
Total equity 59 297 53 045 12 56 490
Total equity and liabilities 718 204 748 627 (4) 710 796
Note
1Comparatives have been reclassified and restated. Refer to the
"Reclassifications and Restatements" section.
CONDENSED NOTES TO THE GROUP 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 23 643 19 109 4 534 4 534
Absa Vehicle and Asset 3 093 1 837 1 256 1 256
Finance
Card 2 831 611 2 220 2 220
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 33 590 23 906 9 684 9 684
Absa Business Bank 4 455 2 970 1 485 1 485
Absa Small Business 439 355 84 84
Total Absa Business Bank 4 894 3 325 1 569 1 569
Total Absa Capital 419 83 336 336
Total non-performing 38 903 27 314 11 589 11 589
advances
Non-performing advances as %
of loans and advances to 7,6
customers
CONDENSED NOTES TO THE GROUP STATEMENT OF FINANCIAL POSITION
1. NON-PERFORMING LOANS - 30 JUNE 2009 (Unaudited)
Expected
recoveries
and fair Total
Outstanding value of Net identified
balance collateral exposure impairment
Rm Rm Rm Rm
Home Loans 22 237 19 090 3 147 3 147
Absa Vehicle and Asset 3 120 1 851 1 269 1 269
Finance
Card 2 652 761 1 891 1 891
Personal Loans 690 202 488 488
Absa Private Bank 1 302 1 104 198 198
Other 949 519 430 430
Total Retail banking1 30 950 23 527 7 423 7 423
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 35 014 26 398 8 616 8 616
advances
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 GROUP STATEMENT OF FINANCIAL POSITION
1. NON-PERFORMING ADVANCES - 31 DECEMBER 2009 (Audited)
2.
3.
4.
Expected
recoveries
and fair Total
Outstanding value of Net identified
balance collateral exposure impairment
Rm Rm Rm Rm
Home Loans 22 200 18 311 3 889 3 889
Absa Vehicle and Asset 2 598 1 476 1 122 1 122
Finance
Card 2 488 565 1 923 1 923
Personal Loans 802 224 578 578
Absa Private Bank 1 463 1 232 231 231
Other 956 438 518 518
Total Retail banking1 30 507 22 246 8 261 8 261
Absa Business Bank 4 312 2 983 1 329 1 329
Absa Small Business 465 362 103 103
Total Absa Business Bank1 4 777 3 345 1 432 1 432
Total Absa Capital 805 562 243 243
Total non-performing advances 36 089 26 153 9 936 9 936
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 GROUP STATEMENT OF FINANCIAL POSITION
2. BORROWED FUNDS
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Subordinated callable notes 13 359 11 823 13 13 530
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 600 - 100 -
2022
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 1 886 1 886 - 1 886
2018
6,00% 20 3 000 3 000 - 3 000
September 2019
5,50% 7 1 500 - 100 1 500
December 2028
Accrued interest 745 403 85 575
Fair value adjustment 3 (191) >100 (156)
Redeemable cumulative option-
holding preference shares - - - -
Preference dividend rate
72% of the prime - 158 (100) 158
overdraft rate1
Redemption of preference
shares held by Absa Group
Limited Employee Share - (9) 100 (9)
Ownership Administrative
Trust
Shares held by the Absa
Group Limited Employee Share
Ownership Administrative - (3) 100 -
Trust
Note
1Option exercise dates of 1 July 2007 to 1 July 2009, 1 March, 1 June, 1
September or 1 December each year.
CONDENSED NOTES TO THE GROUP STATEMENT OF FINANCIAL POSITION
2. BORROWED FUNDS (CONTINUED)
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
Cancellation of preference
shares held by Absa Group
Limited Employee Share - - - (3)
Ownership Administrative
Trust1
Redemption of preference
shares held by Batho Bonke
Capital (Proprietary) Limited - (146) 100 (146)
13 359 11 823 13 13 530
Portfolio analysis
Subordinated callable notes
designated at fair value 731 693 5 718
through profit or loss
Financial liabilities at
amortised cost
Subordinated callable 7 699 5 567 38 7 221
notes
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
Notes
1The cancellation of the preference shares for the Absa Group Limited
Employee Share Ownership Administrative Trust relate to employees who
resigned and therefore their shares were not redeemed.
CONDENSED NOTES TO THE GROUP STATEMENT OF FINANCIAL POSITION
30 June 31
December
2010 2009 2009
(Unaudited) (Unaudited) Change (Audited)
Rm Rm % Rm
3.FINANCIAL GUARANTEE
CONTRACTS
Financial guarantee contracts 614 1 025 (40) 1 007
4.CONTINGENCIES
Guarantees1 11 637 9 075 28 10 484
Irrevocable facilities2 41 407 30 290 37 54 517
Letters of credit 5 307 4 851 9 5 007
Other contingencies 5 8 (38) 5
58 356 44 224 32 70 013
Notes
1Guarantees include performance guarantee contracts and payment guarantee
contracts.
2Irrevocable facilities are commitments to extend credit where the Group
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 GROUP STATEMENT OF FINANCIAL POSITION
5. COMMITMENTS
30 June 31
December
2010 2009 2009
(Unaudite (Unaudite Change (Audited)
d) d)
Rm Rm % Rm
Authorised capital expenditure
Contracted but not provided 1 055 1 521 (31) 928
for1
Note
1The Group 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 1 126 1 211 (7) 1 157
Later than one year and no 2 216
later than five years 2 135 (4) 2 135
Later than five years 351 408 (14) 307
3 612 3 835 (6) 3 599
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 Group. Leases are negotiated for an
average term of three to five years and rentals are renegotiated annually.
CONDENSED NOTES TO THE GROUP 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 Group 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 Group 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 Group 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 Group for losses incurred in the past and is therefore deemed to be of an
operating nature.
The Group 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 GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2010
Total equity
attributable Non- Non-
to ordinary controlling controlling
equity interest- interest-
holders of ordinary preference Total equity
the Group shares shares
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Rm Rm Rm Rm
Opening balance 50 547 1 299 4 644 56 490
Transfer from share-
based payment 24 - - 24
reserve
Share buy-back in
respect of Absa (49) - - (49)
Group Limited Share
Incentive Trust
Elimination of
treasury shares
held by Absa Group 20 - - 20
Limited Share
Incentive Trust
Elimination of
treasury shares 27 - - 27
held by Absa Life
Limited
Other reserves 516 - - 516
Transfer from share-
based payment (25) - - (25)
reserve
Share-based 5 - - 5
payments for the
period
Other comprehensive 484 - - 484
income
Movement in general
credit risk reserve (14) - - (14)
Movement in
insurance 5 - - 5
contingency reserve
Movement in
associates` and 19 - - 19
joint ventures`
retained earnings
reserve
Disposal of
associates and 42 - - 42
joint ventures -
release of reserves
Retained earnings 2 209 - - 2 209
Transfer from share-
based payment 1 - - 1
reserve
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2010 (CONTINUED)
Total equity
attributable Non- Non-
to ordinary controlling controlling
equity interest- interest-
holders of ordinary preference Total equity
the Group shares shares
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Rm Rm Rm Rm
Transfer to
general credit 14 - - 14
risk reserve
Transfer to
insurance (5) - - (5)
contingency
reserve
Transfer to
associates` and (19) - - (19)
joint ventures`
retained earnings
reserve
Disposal of
associates and (42) - - (42)
joint ventures -
release of
reserves
Profit
attributable to 3 842 107 162 4 111
equity holders of
the Group
Other
comprehensive
income - movement (4) - - (4)
in retirement
benefit surplus
and obligation
Dividends paid (1 578) (92) (162) (1 832)
during the period
Net acquisition of - 18 - 18
subsidiaries
Other
comprehensive - 27 - 27
income - foreign
currency
translation
effects
Balance at 30 June 53 294 1 359 4 644 59 297
2010
Total comprehensive income amounts to R4 618 million.
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2009
Total equity
attributable Non- Non-
to ordinary controlling controlling
equity interest- interest-
holders of ordinary preference Total equity
the Group shares shares
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Rm Rm Rm Rm
Opening balance as 47 280 4 644 52 966
previously reported 1 042
Restatement of opening 327 - - 327
balance1
Restated opening 47 607 - - 53 293
balance
Shares issued 885 - - 885
Costs incurred (0) - - (0)
Transfer from share-
based payment reserve 26 - - 26
Share buy-back in
respect of Absa Group (25) - - (25)
Limited Share
Incentive Trust
Elimination of
treasury shares held
by Absa Group Limited (12) - - (12)
Share Incentive Trust
Elimination of
treasury shares held (29) - - (29)
by Absa Life Limited
Elimination of
treasury shares held
by Absa Group Limited 0 - - 0
Employee Share
Ownership
Administrative Trust
Other reserves (1 272) - - (1 272)
Transfer from share-
based payment reserve (26) - - (26)
Share-based payments (29) - - (29)
for the period
Other comprehensive (1 112) - - (1 112)
income
Movement in general
credit risk reserve (12) - - (12)
Movement in insurance
contingency reserve 9 - - 9
Movement in
associates` and joint (1) - - (1)
ventures` retained
earnings reserve
Disposal of associates - -
and joint ventures - (101) (101)
release of reserves
Note
1Comparatives have been restated. Refer to the "Reclassifications and
Restatements" section.
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 20091 (CONTINUED)
Total equity
attributable Non- Non-
to ordinary controlling controlling
equity holders interest- interest-
of the Group ordinary preference Total equity
shares shares
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Rm Rm Rm Rm
Retained earnings 46 - - 46
Repurchase of
preference shares
held by Batho (1 089) - - (1 089)
Bonke
Capital(Proprietar
y) Limited
Transfer from - -
share-based (0) (0)
payment reserve
Transfer to
general credit 12 - - 12
risk reserve
Transfer to
insurance (9) - - (9)
contingency
reserve
Transfer to
associates` and 1 - - 1
joint ventures`
retained earnings
reserve
Disposal of
associates and 101 - - 101
joint ventures -
release of
reserves
Profit
attributable to 3 272 113 234 3 272
equity holders of
the Group
Dividends paid (2 242) (36) (234) (2 512)
during the period
Net acquisition of - 50 - 50
subsidiaries
Other
comprehensive - 6 - 6
income - foreign
currency
translation
effects
Balance at 30 June 47 226 1 175 4 644 53 045
2009
Total comprehensive income amounts to R2 513 million.
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2009
Total
equity Non- Non-
attributab controlli controlli
le to ng ng
ordinary interest- interest- Total
equity ordinary preferenc equity
holders of shares e shares
the Group
(Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm
Restated opening balance 47 607 1 042 4 644 53 293
Shares issued 2 571 - - 2 571
Repurchase of preference
shares held by Batho Bonke
Capital (Proprietary) Limited 3 - - 3
Costs incurred (0) - - (0)
Transfer from share-based
payment reserve 67 - - 67
Share buy-back in respect of
Absa Group Limited Share (86) - - (86)
Incentive Trust
Elimination of treasury shares
held by Absa Group Limited
Share Incentive Trust 16 - - 16
Elimination of treasury shares
held by Absa Life Limited 38 - - 38
Elimination of treasury shares
held by Absa Group Limited
Employee Share Ownership 0 - - 0
Administrative Trust
Elimination of gains from
derivative instruments on 2 - - 2
shares
Other reserves (1 832) - - (1 832)
Transfer from share-based
payment reserve (68) - - (68)
Share-based payments for the 47 - - 47
year
Other comprehensive income (1 654) - - (1 654)
Movement in general credit
risk reserve (23) - - (23)
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2009 (CONTINUED)
Total
equity Non- Non-
attributab controlli controlli
le to ng ng
ordinary interest- interest- Total
equity ordinary preferenc equity
holders of shares e shares
the Group
(Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm
Movement in insurance
contingency reserve 25 - - 25
Movement in associates` and
joint ventures retained (50) - - (50)
earnings reserve
Disposal of associates and
joint ventures - release of (109) - - (109)
reserves
Retained earnings 2 161 - - 2 161
Repurchase of preference
shares held by Batho Bonke
Capital (Proprietary) Limited (1 089) - - (1 089)
Transfer from share-based
payment reserve 1 - - 1
Transfer to general credit
risk reserve 23 - - 23
Transfer to insurance
contingency reserve (25) - - (25)
Transfer to associates` and
joint ventures retained 50 - - 50
earnings reserve
Disposal of associates and
joint ventures - release of 109 - - 109
reserves
Profit attributable to equity
holders of the Group 6 840 241 421 7 502
Other comprehensive income -
movement in retirement benefit
surplus and obligation 52 - - 52
Dividends paid during the year (3 800) (51) (421) (4 272)
Net acquisition of - 72 - 72
subsidiaries
Other comprehensive income -
foreign currency translation - (5) - (5)
effects
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2009 (CONTINUED)
Total
equity Non- Non-
attributab controlli controlli
le to ng ng
ordinary interest- interest- Total
equity ordinary preferenc equity
holders of shares e shares
the Group
(Audited) (Audited) (Audited) (Audited
)
Rm Rm Rm Rm
Balance at 31 December 2009 50 547 1 299 4 644 56 490
Total comprehensive income amounts to R5 895 million.
CONDENSED NOTES TO THE GROUP 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 holders during the
period/year
16 February 2010 final
dividend number 47 of 220
cents per ordinary share
(9 February 2009: 330 1 580 2 245 (30) 2 245
cents)
3 August 2009 interim -
dividend number 46 of 225
cents per ordinary share - - 1 616
Dividends paid on
treasury shares held by (2) (3) 33 (5)
Absa Life Limited
Dividends paid on shares -
held by Batho Bonke
Capital(Proprietary)
Limited in terms of the - - (56)
bridging finance
arrangement
1 578 2 242 (30) 3 800
Dividends paid to ordinary
equity holders relating to
income for the period/year
5 August 2010 interim
dividend number 48 of 225
cents per ordinary share 1 616 1 616 - 1 616
(3 August 2009: 225 cents)
Dividends paid on
treasury shares held by - - - (2)
Absa Life Limited
Dividends paid on shares
held by Batho Bonke
Capital(Proprietary)
Limited in terms of the - - - (56)
bridging finance
arrangement
16 February 2010 final
dividend number 47 of 220
cents per ordinary share - - - 1
580
1 616 1 616 - 3 138
CONDENSED NOTES TO THE GROUP STATEMENT OF CHANGES IN EQUITY
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 non-
controlling 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: 4 734,5 162 234 (31) 234
cents)
3 August 2009 interim
dividend number 7 of 3 799,3
cents per preference share - - 187
-
162 234 (31) 421
Dividends paid to non-
controlling 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: 3 799,3 158 187 (16) 187
cents)
16 February 2010 final
dividend number 8 of 3 280,3
cents per preference share - - - 162
158 187 (16) 349
CONDENSED GROUP STATEMENT OF CASH FLOWS
Six months ended Year ended
30 June 31
December
2010 2009 2009
(Unaudite (Unaudite Change (Audited)
d) d)
Rm Rm % Rm
Net cash generated from 3 163 1 086 5 011
operating activities >100
Net cash (utilised)/generated
from investing activities (246) 1 372 >(100) (2 218)
Net cash utilised from
financing activities (2 334) (3 004) 22 (1 419)
Net increase/(decrease)in cash
and cash equivalents 583 (546) >100 1 374
Cash and cash equivalents at
the 6 976 5 600 25 5 600
beginning of the period/year
1
Effect of exchange rate
movements on cash and cash 2 2 - 2
equivalents
Cash and cash equivalents at
the end of the period/year 7 561 5 056 50 6 976
2
NOTES TO THE CONDENSED GROUP
STATEMENT OF CASH FLOWS
1. Cash and cash equivalents
at the beginning of the
period/year
Cash, cash balances and
balances 5 176 4 726 10 4 726
with central banks
Loans and advances to banks 1 800 874 >100
874
6 5 600 25 5 600
976
2. Cash and cash equivalents
at the end of the period/year
Cash, cash balances and
balances 4 685 3 630 29 5 176
with central banks
Loans and advances to banks 2 876 1 426 >100 1 800
7 561 5 056 50 6 976
GROUP PROFIT CONTRIBUTION BY BUSINESS AREA
Six months ended Year
ended
30 June 31
December
2010 20091 2009
(Unaudite (Unaudited Change (Audited)
d) )
Rm Rm %
Banking operations
Retail banking 1 060 916 16 1 945
Home Loans (201) (721) 72 (1 299)
Absa Vehicle and Asset 50 13 >100 265
Finance
Card 531 304 75
811
Personal Loans 170 51 >100 20
Retail Bank 510 1 269 (60) 2 148
Absa Business Bank 1 375 1 518 (9) 3
235
Absa Capital 700 129 >100
288
Underlying performance 747 917 (19) 1
275
Single stock futures (47) (788) 94
impairments (987)
Corporate centre 271 368 (26) 544
Capital and funding centre (8) (97) 92
(35)
Non-controlling interest - (162) (234) 31
preference shares (421)
Total banking 3 236 2 600 24 5
556
Bancassurance 606 672 (10) 1
284
Profit attributable to
ordinary equity holders of the 3 842 3 272 17 6 840
Group
Headline earnings adjustments 20 554 (96)
781
Headline earnings 3 862 3 826 1 7
621
Note
1Comparatives have been reclassified for the move of Absa Small Business from
Retail banking to Absa Business Bank.
GROUP 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 11 282 11 531 (2) 22 977
Home Loans 1 633 1 598 2 3 133
Absa Vehicle and Asset 1 088 1 164 (7) 2 279
Finance
Card 2 100 2 097 0 4 261
Personal Loans 911 894 2 1 753
Retail Bank 5 550 5 778 (4) 11 551
Absa Business Bank 5 671 5 558 2 11 497
Absa Capital 2 556 2 315 10 4 446
Corporate centre (357) (84) >(100) (527)
Capital and funding centre 136 (54) >100 300
Total banking 19 288 19 266 0 38 693
Bancassurance 1 718 1 715 0 3 393
Total revenue 21 006 20 981 0 42 086
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 and statement of the
comprehensive income for the six months ended 30 June 2009 and the statement of
financial position for the year ended 31 December 2009 were reclassified and
restated:
GROUP STATEMENT OF FINANCIAL POSITION - 30 JUNE 2009
(Unaudited) (Unaudited) (Unaudited)
As Reclassificati Reclassifie
previously ons d
reported and and
restatements restated
Rm Rm Rm
Assets
Cash, cash balances and 22 411 (20) 22 391
balances
with central banks
1
Statutory liquid asset 32 213 - 32 213
portfolio
Loans and advances to banks 48 386 6 48 392
4
Trading portfolio assets 68 123 (6 339) 61 784
4
Hedging portfolio assets 2 824 - 2 824
Other assets 20 779 531 21 310
1+2
Current tax assets 620 - 620
Non-current assets held for 2 017 - 2 017
sale
Loans and advances to 521 427 188 521 615
customers 1+4
Reinsurance assets 847 - 847
Investments 24 346 - 24 346
Investments in associates and -
joint ventures 789 789
Goodwill and intangible 965 (9) 956
assets 1
Investment property 2 087 (40) 2 047
1
Property and equipment 6 121 - 6 121
Deferred tax assets 357 (2) 355
1
Total assets 754 312 (5 685) 748 627
Liabilities
Deposits from banks 41 885 (962) 40 923
4
Trading portfolio liabilities 64 341 (6 339) 58 002
4
Hedging portfolio liabilities 1 188 - 1 188
Other liabilities and sundry (20 055)
provisions 20 055 -
3
Other liabilities - 18 907 18 907
1+2+3
Provisions - 1 109 1 109
3
Current tax liabilities 237 - 237
Deposits due to customers 370 096 1 183 371 279
4
Debt securities in issue 175 686 - 175 686
Liabilities under investment
contracts 11 053 - 11 053
Policyholder liabilities
under 2 740 - 2 740
insurance contracts
Borrowed funds 11 823 - 11 823
Deferred tax liabilities 2 496 139 2 635
1+2
Total liabilities 701 600 (6 018) 695 582
Equity
Capital and reserves
Attributable to ordinary
equity
holders of the Group:
Share capital 1 379 - 1 379
Share premium 3 071 - 3 071
Other reserves 1 738 - 1 738
Retained earnings 40 711 327 41 038
1+2
46 899 327 47 226
Non-controlling interest -
ordinary shares 1 169 6 1 175
1
Non-controlling interest -
preference shares 4 644 - 4 644
Total equity 52 712 333 53 045
Total equity and liabilities 754 312 (5 685) 748 627
GROUP STATEMENT OF COMPREHENSIVE INCOME - 30 JUNE 2009
(Unaudited) (Unaudited) (Unaudited)
As
previously
reported Reclassificati Reclassifie
ons d
Rm Rm Rm
Net interest income 10 772 - 10 772
Interest and similar 35 493 - 35 493
income
Interest expense and
similar charges (24 721) - (24 721)
Impairment losses on loans and
advances (4 834) - (4 834)
Net interest income after
impairment losses on loans and 5 938 - 5 938
advances
Net fee and commission income 6 903 - 6 903
Fee and commission income 7 629 170 7 799
5
Fee and commission expense (726) (170) (896)
5
Net insurance premium income 1 844 - 1 844
Net insurance claims and (1 010) - (1 010)
benefits paid
Changes in investment and
insurance liabilities 10 - 10
Gains and losses from banking
and trading activities 1 281 - 1 281
Gains and losses from
investment activities 454 - 454
Other operating income 727 - 727
Operating profit before
operating expenditure 16 147 - 16 147
Operating expenditure (11 389) - (11 389)
Operating expenses (9 782) - (9 782)
Other impairments (1 179) - (1 179)
Indirect taxation (428) - (428)
Share of post-tax results of
associates and joint ventures (1) - (1)
Operating profit before income 4 757 - 4 757
tax
Taxation expense (1 138) - (1 138)
Profit for the period 3 619 - 3 619
GROUP STATEMENT OF COMPREHENSIVE INCOME - 30 JUNE 2009 (continued)
(Unaudited) (Unaudited) (Unaudited
)
As
previously
reported Restatements Restated
Rm Rm Rm
Profit attributable to:
Ordinary equity holders of the 3 272 - 3 272
Group
Non-controlling interest - 113 - 113
ordinary shares
Non-controlling interest - 234 - 234
preference shares
3 619 - 3 619
GROUP STATEMENT OF FINANCIAL POSITION - 31 DECEMBER 2009
(Audited) (Audited) (Audited)
As
previously
reported Restatements Restated
Rm Rm Rm
Assets
Cash, cash balances and 20 597 -
balances 20 597
with central banks
Statutory liquid asset 33 943 - 33 943
portfolio
Loans and advances to banks 36 032 - 36 032
Trading portfolio assets 61 779 (9 477) 52 302
4
Hedging portfolio assets 2 558 - 2 558
Other assets 17 777 - 17 777
Current tax assets 234 - 234
Loans and advances to 503 630 2 533 506 163
customers 4
Reinsurance assets 719 - 719
Investments 29 564 - 29 564
Investments in associates and -
joint ventures 487 487
Goodwill and intangible assets 1 245 - 1 245
Investment property 2 195 - 2 195
Property and equipment 6 606 - 6 606
Deferred tax assets 374 - 374
Total assets 717 740 (6 944) 710 796
Liabilities
Deposits from banks 39 616 (3 075) 36 541
4
Trading portfolio liabilities 53 722 (9 477) 44 245
4
Hedging portfolio liabilities 565 - 565
Other liabilities 12 212 - 12 212
Provisions 1 684 - 1 684
Current tax liabilities 59 - 59
Deposits due to customers 350 757 5 608 356 365
4
Debt securities in issue 171 376 - 171 376
Liabilities under investment
contracts 12 446 - 12 446
Policyholder liabilities under
insurance contracts 3 136 - 3 136
Borrowed funds 13 530 - 13 530
Deferred tax liabilities 2 147 - 2 147
Total liabilities 661 250 (6 944) 654 306
Equity
Capital and reserves
Attributable to ordinary equity
holders of the Group:
Share capital 1 432 - 1 432
Share premium 4 784 - 4 784
Other reserves 1 178 - 1 178
Retained earnings 43 153 - 43 153
50 547 - 50 547
Non-controlling interest - 1 299 1 299
ordinary shares -
Non-controlling interest - 4 644 4 644
preference shares -
Total equity 56 490 - 56 490
Total equity and liabilities 717 740 (6 944) 710 796
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 Group finalised the fair values of the
assets and liabilities on acquisition within the 12-month window period as
allowed by IFRS3. 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 Group 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 Group 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 Group recognising
its defined benefit surplus as an asset, retrospectively. AC 504 requires the
Group 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 Group elected early adoption as this
guidance was published before the Group`s year-end and seeks to clarify an
existing accounting pronouncement.
In addition, the Group changed its accounting policy in accordance with the
allowed alternative in IAS 19 - Employee Benefits to recognise actuarial gains
and losses on the Group`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 Group`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 Group 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.
5. Net fee and commission income
The disclosure of net fee and commission income changed from nature to function
during 2009, and certain fees and commissions received, previously disclosed net
of fees and commissions paid, have been reclassified to indicate the gross
amounts received and paid. Comparatives for June 2009 have been reclassified
accordingly, on a basis consistent with the change made in December 2009.
PROFIT AND DIVIDEND ANNOUNCEMENT
Overview of results
The Group increased attributable earnings by 17% to R3 842 million, compared to
the six months ended 30 June 2009 (June 2009: R3 272 million). Headline earnings
for the period increased by 1% to R3 862 million (June 2009: R3 826 million).
The difference between the change in headline and attributable earnings relates
mainly to impairments recognised by Absa Capital against the value of equity
positions acquired resulting from single stock future defaults in the first half
of 2009.
Headline earnings per share (HEPS) declined by 4% to 539,3 cents per share, with
fully diluted HEPS decreasing by 3% to 535,9 cents per share. This decline was
driven by an increase in the weighted average number of shares in issue owing to
the successful conclusion, in 2009, of the Group`s broad-based black economic
empowerment transaction.
The Group recorded a 15,0% return on average equity (RoE) (June 2009: 16,3%) and
a return on average assets of 1,08% (June 2009: 1,02%) for the six months under
review.
Subdued asset growth, low transaction volume growth, the continued increase in
insurance claims and the weakness of equity markets impacted the revenue
performance for the period. Earnings were, however, positively influenced by a
decline in the retail credit impairment charge. The Group continued to make
investments in people and information technology during the period under review
in order to position the Group for future growth.
The Group`s retail banking operations and Absa Capital experienced positive
attributable earnings growth for the period. However, Absa Business Bank and the
Group`s bancassurance operations experienced a decline in attributable earnings
as a result of the challenging operating environment.
Operating environment
Fears over the sustainability of the global economic recovery remained top of
the global agenda over the past six months, fuelled by the sovereign debt crisis
in Southern Europe and the potential impact of fiscal austerity measures on
economic growth in the euro zone. This illustrates that the global economic
recovery will remain fragile and that the trajectory of the expected upturn will
not be smooth.
The South African economy started showing signs of recovery, with first quarter
GDP growing at an annualised rate of 4,6%. Output in the primary and secondary
sectors of the economy grew, but output levels in these sectors are yet to
recover to their pre-crisis levels. A similar picture emerges when viewing the
demand side of the economy. Although real household consumption and income grew
in the first quarter of 2010, they remain below their previous cyclical highs
and employment levels remain under pressure. Corporate credit extension has been
contracting for almost a year now, underscoring the challenging private sector
investment environment.
Consumer price inflation continued to trend lower since the start of this year,
falling from 6,2% in January to 4,2% in June. The generally more benign
inflation outlook, along with an inconsistent economic recovery, saw the prime
interest rate in March fall to its lowest level since the late 1970s. Financial
markets currently price in a better than even chance of a further rate cut later
in the year.
Group performance
Statement of financial position
The Group`s total assets as at 30 June 2010 at R718,2 billion remained
relatively unchanged from 31 December 2009, but declined by 4% from 30 June 2009
largely due to a decline in loans and advances to customers.
Loans and advances to customers
The Group experienced a decline in gross loans and advances of 4% from June
2009. The mortgage book, comprising 59% of the Group`s gross loans and advances,
remained unchanged from 31 December 2009, while instalment finance loans
declined significantly by 10% from 30 June 2009 and 6% from 31 December 2009
(annualised). The decline in advances was as a result of lower customer demand
and the continued focus on risk appetite. This, together with the focus on
pricing for risk at a customer level, lead to a decline in market share in some
products. For the first time since August 2008, growth in the instalment
finance book was experienced in the latter part of the period under review.
Personal and term loans grew strongly over the period and increased by 32% from
31 December 2009 (annualised) and 14% from June 2009. Due to continued customer
deleveraging, corporate loans declined by 18% from 30 June 2009 and 8% from 31
December 2009 (annualised).
Deposits due to customers
Deposits due to customers increased 2% to R359,9 billion from December 2009
(annualised). Absa achieved solid deposit growth in retail banking, particularly
from cheque accounts, savings and transmission accounts compared to June 2009,
thereby further cementing the Group`s leading market share in individual
deposits.
Net asset value
The Group`s net asset value (NAV) per share increased by 5% to 7 420 cents per
share (cps) compared to 7 038 cps as at 31 December 2009. Surplus capital was
generated from net profits after the payment of ordinary dividends. Since the
growth rate in NAV exceeds the growth in headline earnings, the Group`s RoE
declined from 15,5% for the year ended 31 December 2009 to 15,0% for the six
months ended 30 June 2010.
Capital to risk-weighted assets
The Group improved its healthy capital adequacy position during the period under
review. As at 30 June 2010, the capital adequacy ratios of the Group were 11,9%
(June 2009: 10,3%) at a core tier l level, 13,1% (June 2009: 11,5%) at tier l
level, while the total capital adequacy ratio was 15,8% ( June 2009: 13,9%).
Absa Bank`s core tier l ratio, as at 30 June 2010, was 10,7% (June 2009: 9,5%),
the tier l ratio was 12,0% (June 2009: 10,8%) and the total capital adequacy
ratio was 14,9% (June 2009: 13,7%).
Statement of comprehensive income
The subdued economic environment resulted in the Group`s total revenue remaining
largely unchanged. Revenue, net of impairments, increased by 7%. Operating
expenses increased by 15% owing to the continued investment in infrastructure
and people required to grow the business. This, together with an increase in
taxation of 32% and a reduction in non-controlling interest, resulted in an
increase in attributable earnings of 17% and headline earnings improved by 1%.
Net interest income
Net interest income increased by 5% to R11 293 million. The net interest margin
on average interest-earning assets improved by 31 basis points from 3,58% to
3,89%. The margin of the retail and commercial businesses remained largely
unchanged in spite of the significant negative endowment impact on capital and
pricing pressure on wholesale deposits. This was the result of improved pricing
for credit risk, a change in the advances composition in favour of higher margin
products and effective hedging strategies to ensure margin stability.
Credit impairments
After almost doubling in 2008, credit impairment charges have started to
decline. The Group recorded an impairment charge of R3 704 million for the six
months ended 30 June 2010 (June 2009: R4 834 million), a reduction of 23%. In
spite of a lower inflow into legal, non-performing advances remain high due to a
low cure rate and the impact of the debt review portfolio. Non-performing
advances, as a percentage of loans and advances to customers, at 7,6%, were
above the levels recorded for June 2009 (6,6%), and December 2009 (7,0%).
The Group`s credit impairment ratio improved to 1,50% from the 1,86% recorded
for the six months ended 30 June 2009 and the 1,74% recorded for the year ended
31 December 2009.
Non-interest income
Continued growth in customer numbers resulted in net fee and commission income
increasing by 2%. All business units showed an increase in net fees and
commissions, except for investment banking, which reflects the lack of business
flow in this area. Strong insurance premium growth was offset by higher
insurance claims. The Group experienced solid growth in net trading results of
12% to R1 217 million (June 2009: R1 082 million). Returns from equity-related
investments in the banking book declined by approximately R244 million, mainly
as a result of the inclusion of the profit on the sale of MasterCard shares
(R217 million) and unrealised gains on Visa (R115 million) in non-interest
income for the six months ended 30 June 2009. The listed value of the Visa
shareholding declined by R116 million in the current period. As a result, non-
interest income showed negative growth of 5%.
Operating expenses
Group operating expenses increased by 15%. The Group`s strategic initiatives,
however, resulted in additional investment in information technology as a result
of the replacement of legacy systems, the enhancement of end-to-end processes
and the implementation of systems to adopt the Basel II advanced internal
ratings-based approach. Excluding these investments and incentives aimed at
retaining talented employees, costs were contained to a 11% increase.
Taxation
The Group`s taxation increased by 32% to R1 506 million for the six months ended
30 June 2010 (June 2009: R1 138 million). The effective taxation rate for the
period increased to 26,8% from 23,9%.
Segmental performance
Retail banking
Retail banking increased headline earnings by 40% to R1 018 million (June 2009:
R728 million). The business grew attributable earnings by 16% to R1 060 million
(June 2009: R916 million). The improvement can largely be attributed to the
significant decline of 26% in the credit impairment charge. The cluster
experienced a 2% decline in total revenue, owing to subdued credit demand,
limited transaction volume growth and one-off items in the base. Revenue for
2009 included the gains on the mark-to-market of Visa and sale of MasterCard
shares. Operating costs remained well managed, and the cluster experienced a 9%
growth in operating expenses.
Absa Business Bank
Absa Business Bank experienced a decline in attributable and headline earnings
of 9%. Interest income remained at previous levels in spite of negative advances
growth and pressure on deposit margins. However, in line with the continued
focus on non-interest income, net fees and commissions increased by 7%, which
was underpinned by an increase in electronic and cash transactions of 13% and
24% respectively. The credit impairment charge declined by 9% with operating
expenses increasing by 14% as a result of continued investment in capacity
enhancement.
Absa Capital
Attributable earnings for Absa Capital increased by 443% to R700 million, with
headline earnings declining by 19% to R747 million (June 2009: R917 million).
Revenue from the markets business remained strong in spite of the significant
reduction in foreign currency client flows. Client activity in respect of
investment banking was below previous year levels and revenue declined by 8%.
The business continued to expand into Africa and attributable earnings from
sources outside of South Africa recorded growth of 60%. Continued investment in
systems, infrastructure and talent impacted cost growth.
Bancassurance
Absa`s insurance companies delivered strong premium growth with gross premium
income for Absa Life and Absa Insurance increasing by 29% and 12% respectively.
However, lower fee income, together with increases in short-term insurance
claims, combined to drive attributable earnings down 10% to R606 million. Absa
Life`s embedded value of new business increased by 29% to R211 million and
achieved a return on embedded value of 32,3% while Absa Insurance recorded an
underwriting margin of 9,1%. The return on the investment of shareholders` funds
increased by 11% to R118 million, reflecting the low interest rate environment.
Prospects
The business environment will remain challenging in spite of our expectation
that the economic upturn will continue and household spending will recover
slowly. In excess of one million job losses and high levels of household
indebtedness will continue to weigh on the willingness and ability of households
to take on new debt. Investment growth is expected to remain tepid until the
slack that was built up during the recession is fully utilised, thus making a
quick recovery in corporate credit demand unlikely. Although overall credit
growth is likely to remain weak, signs that the economic recovery is proceeding
suggest that interest rates are at or near their low point, but continuing
uncertainty around the impact of global events suggests that a cautious approach
may be maintained by the South African Reserve Bank. The Group expects little
change in trading conditions in the second half of the year.
Basis of presentation and changes in accounting policies
The Absa Group 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 Group changed its accounting policy in accordance with the
allowed alternative in IAS 19 - Employee Benefits to recognise actuarial gains
and losses on the Group`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 Group`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 Group`s election to
utilise a 12-month window period as allowed by IFRS 3 - Business Combinations.
Reclassifications
During the period under review, the Group 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 interim ordinary dividend number 48
Shareholders are advised that an interim ordinary dividend of 225 cents per
ordinary share was declared today, Wednesday, 4 August 2010. The interim
ordinary dividend is payable to shareholders recorded in the register of members
of the Company at the close of business on Friday, 27 August 2010.
In compliance with the requirements of Strate, the electronic settlement and
custody system used by the JSE Limited, the following salient dates for the
payment of the 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
Group Secretary
Johannesburg
4 August 2010
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 13:59:15 Produced by the JSE SENS Department.
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