| Fri 10 Feb 2012, 7:30 | | ABSP - ABSA Bank Limited - Profit and dividend announcement; audited condensed |
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JSE ABSP
ABSP
ABSP - ABSA Bank Limited - Profit and dividend announcement; audited condensed
consolidated financial results for the year ended 31 December 2011
ABSA BANK LIMITED
Registration number: 1986/004794/06
Authorised financial services and registered credit provider (NCRCP7)
Incorporated in the Republic of South Africa
ISIN: ZAE000079810
JSE share code: ABSP
(Absa, Absa Bank, the Bank or the Company)
PROFIT AND DIVIDEND ANNOUNCEMENT; AUDITED CONDENSED CONSOLIDATED FINANCIAL
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011
CONSOLIDATED SALIENT FEATURES
31 December
2011 2010(1) Change 2009(1)
(Audited) (Audited) % (Audited
)
Statement of comprehensive
income(Rm)
Headline earnings(2) 7 957 6 412 24 5 986
Profit attributable to 7 901 6 432 23 5 315
ordinary equity holder of the
Bank
Statement of financial
position
Total assets (Rm) 742 436 690 410 8 684 619
Loans and advances to 486 910 495 733 (2) 501 050
customers (Rm)
Deposits due to customers (Rm) 431 762 382 131 13 360 216
Loans-to-deposits ratio (%)(3) 87,0 91,0 94,5
Off-statement of financial
position(Rm)
Assets under management and 22 741 21 861 4 31 534
administration(4)
Financial performance (%)
Return on average equity(3) 15,8 14,2 14,4
Return on average assets(5) 1,13 0,93 0,83
Return on average risk- 2,07 1,71 1,68
weighted assets(5)
Operating performance (%)
Net interest margin on average 3,80 3,62 3,46
interest-bearing assets(5)
Impairment losses on loans and 1,00 1,12 1,65
advances as % of average loans
and advances to customers(5)
Non-performing advances as % 6,9 7,5 6,8
of loans and advances to
customers(5)
Non-interest income as % of 42,8 41,0 44,0
total operating income(3)
Cost-to-income ratio(3) 55,6 56,7 49,7
Effective tax rate, excluding 27,7 27,1 20,4
indirect taxation
Share statistics (million)
(including "A" ordinary
shares)
Number of ordinary shares in 374,1 374,1 367,7
issue
Weighted average number of 374,1 369,9 362,1
ordinary shares in issue
Diluted weighted average 374,1 369,9 362,1
number of ordinary shares in
issue
Share statistics (cents)
Headline earnings per share 2 127,0 1 733,4 23 1 653,1
Diluted headline earnings per 2 127,0 1 733,4 23 1 653,1
share
Basic earnings per share 2 112,0 1 738,8 21 1 467,8
Diluted earnings per share 2 112,0 1 738,8 21 1 467,8
Dividends per ordinary share 1 034,4 959,2 8 676,5
relating to income for the
year
Dividend cover (times)(3) 2,1 1,8 2,4
Net asset value per share(3) 14 058 12 955 9 11 606
Tangible net asset value per 13 871 12 781 9 11 464
share(3)
Capital adequacy (%)(5)
Absa Bank 16,2 14,8 14,7
Notes
(1) Comparatives have been reclassified. Refer to note 20.
(2) After allowing for R284 million (31 December 2010: R320 million) profit
attributable to preference equity holders of the Bank.
(3) These ratios have been calculated by management based on extracted audited
information contained in the audited annual consolidated financial
statements.
(4) Comparatives have been restated for the inclusion of assets managed by Absa
Capital on behalf of clients, alternative asset management and exchange-
traded funds, in order to align assets under management and administration
to current market practice.
(5) These ratios are unaudited.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December
2011 2010(1) 2009(1)
(Audited) (Audited) Change (Audited)
Rm Rm % Rm
Assets
Cash, cash balances and balances 19 505 17 343 12 15 526
with central banks
Statutory liquid asset portfolio 57 473 48 215 19 33 943
Loans and advances to banks 55 803 26 251 >100 35 036
Trading portfolio assets 79 603 57 647 38 47 303
Hedging portfolio assets 4 299 4 662 (8) 2 558
Other assets 12 948 9 678 34 7 219
Current tax assets 84 5 >100 107
Non-current assets held for sale 35 - 100 -
1
Loans and advances to customers 486 910 495 733 (2) 501 050
2,3,4
Loans to Group companies 7 164 8 071 (11) 16 232
Investment securities 8 331 12 906 (35) 16 849
Investments in associates and 412 406 1 473
joint ventures
Goodwill and intangible assets 700 643 9 522
Investment properties 1 840 1 771 4 1 705
Property and equipment 7 268 6 987 4 6 010
Deferred tax assets 61 92 (34) 86
Total assets 742 436 690 410 8 684 619
Liabilities
Deposits from banks 44 702 21 740 >100 40 160
Trading portfolio liabilities 49 232 43 530 13 36 957
Hedging portfolio liabilities 2 456 1 881 31 565
Other liabilities 10 536 7 788 35 9 089
Provisions 1 457 1 533 (5) 1 486
Current tax liabilities 255 929 (73) 31
Deposits due to customers 431 762 382 131 13 360 216
5
Debt securities in issue 128 051 162 526 (21) 169 788
6
Loans from Group companies 1 438 - 100 3 464
Borrowed funds 14 051 13 649 3 13 530
7
Deferred tax liabilities 1 104 2 073 (47) 1 915
Total liabilities 685 044 637 780 7 637 201
Equity
Capital and reserves
Attributable to equity holders of
the Bank:
Ordinary share capital 303 303 - 303
Ordinary share premium 11 465 11 465 - 10 465
Preference share capital 1 1 - 1
Preference share premium 4 643 4 643 - 4 643
Retained earnings 37 217 32 449 15 29 340
Other reserves 3 605 3 704 (3) 2 566
57 234 52 565 9 47 318
Non-controlling interest 158 65 >100 100
Total equity 57 392 52 630 9 47 418
Total liabilities and equity 742 436 690 410 8 684 619
Note
Comparatives have been reclassified. Refer to note 20.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December
2011 2010
(Audited) (Audited) Change
Rm Rm %
Net interest income 22 110 21 244 4
Interest and similar income 49 210 52 264 (6)
8.1
Interest expense and similar charges (27 100) (31 020) 13
8.2
Impairment losses on loans and advances (4 876) (5 578) 13
3
Net interest income after impairment 17 234 15 666 10
losses on loans and advances
Non-interest income 16 514 14 787 12
Net fee and commission income 13 393 12 416 8
Fee and commission income 14 421 13 378 8
9.1
Fee and commission expense (1 028) (962) (7)
9.1
Gains and losses from banking and trading 2 504 1 851 35
activities
9.2
Gains and losses from investment 54 24 >100
activities 9.3
Other operating income 563 496 14
Operating profit before operating 33 748 30 453 11
expenditure
Operating expenditure (22 462) (21 180) (6)
Operating expenses (21 485) (20 440) (5)
10.1
Other impairments (73) (109) 33
10.2
Indirect taxation (904) (631) (43)
Share of post-tax results of associates 47 (8) >100
and joint ventures
Operating profit before income tax 11 333 9 265 22
Taxation expense (3 140) (2 507) (25)
Profit for the year 8 193 6 758 21
Other comprehensive income
Foreign exchange differences on 218 (234) >100
translation of foreign operations
Movement in cash flow hedging reserve (242) 1 153 >(100)
Fair value gains arising during the 1 964 3 422 (43)
year
Amount removed from other (2 300) (1 820) (26)
comprehensive income and recognised in
the profit and loss component of the
statement of comprehensive income
Deferred tax 94 (449) >100
Movement in available-for-sale reserve (24) 170 >(100)
Fair value (losses)/gains arising (65) 150 >(100)
during the year
Amortisation of government bonds 20 92 (78)
-release to the profit and loss
component of the statement of
comprehensive income
Deferred tax 21 (72) >100
Movement in retirement benefit asset (47) 19 >(100)
(Decrease)/increase in retirement (66) 27 >(100)
benefit surplus
Deferred tax 19 (8) >100
Total comprehensive income for the year 8 098 7 866 3
Profit attributable to:
Ordinary equity holder of the Bank 7 901 6 432 23
Preference equity holders of the Bank 284 320 (11)
Non-controlling interest 8 6 33
8 193 6 758 21
Total comprehensive income attributable
to:
Ordinary equity holder of the Bank 7 806 7 540 4
Preference equity holders of the Bank 284 320 (11)
Non-controlling interest 8 6 33
8 098 7 866 3
Earnings per share:
Basic earnings per share (cents) 2 112,0 1 738,8 21
Diluted earnings per share (cents) 2 112,0 1 738,8 21
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December
2011
(Audited)
Total equity
attributable
to equity Non-
holders of controllin
the Bank g interest Total
equity
Rm Rm Rm
Balance at the beginning of the 52 565 65 52 630
year
Total comprehensive income for the 8 090 8 8 098
year
Profit for the year 8 185 8 8 193
Other comprehensive income (95) - (95)
Dividends paid during the year (3 184) - (3 184)
Contribution to the Absa Group (281) - (281)
Limited Share Incentive Trust
Movement in the share-based payment 44 - 44
reserve
Transfer from share-based payment - - -
reserve
Transfer from share-based payment (155) - (155)
reserve
Transfer to retained earnings 155 - 155
Value of employee services 44 - 44
Share of post-tax results of - - -
associates and joint ventures
Transfer to associates and joint 47 - 47
ventures reserve
Transfer from retained earnings (47) - (47)
Disposal of associates and joint - - -
ventures - release of reserves
Transfer to associates and joint 13 - 13
ventures reserve
Transfer from retained earnings (13) - (13)
Increase in the interest of non- - 21 21
controlling equity holders
Non-controlling interest arising - 64 64
from business combinations
Balance at the end of the year 57 234 158 57 392
2010
(Audited)
Total equity
attributable
to equity Non-
holders of controllin
the Bank g interest Total
equity
Rm Rm Rm
Balance at the beginning of the 47 318 100 47 418
year
Total comprehensive income for the 7 860 6 7 866
year
Profit for the year 6 752 6 6 758
Other comprehensive income 1 108 - 1 108
Dividends paid during the year (3 420) - (3 420)
Shares issued 1 000 - 1 000
Contribution to the Absa Group (236) - (236)
Limited Share Incentive Trust
Movement in the share-based payment 43 - 43
reserve
Transfer from share-based payment - - -
reserve
Transfer from share-based payment (46) - (46)
reserve
Transfer to retained earnings 46 - 46
Value of employee services 43 - 43
Share of post-tax results of - - -
associates and joint ventures
Transfer to associates and joint (8) - (8)
ventures reserve
Transfer from retained earnings 8 - 8
Disposal of associates and joint - - -
ventures - release of reserves
Transfer to associates and joint 60 - 60
ventures reserve
Transfer from retained earnings (60) - (60)
Increase in the interest of non- - 37 37
controlling equity holders
Non-controlling interest arising - 78 (78)
from business combinations
Balance at the end of the year 52 565 65 52 630
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December
2011 2010(1)
(Audited) (Audited) Change
Rm Rm %
Net cash generated from operating 3 464 1 750 98
activities
Net cash generated from investing 3 026 775 >100
activities
Net cash utilised in financing (3 465) (3 156) (10)
activities
Net increase/(decrease) in cash and 3 025 (631) >100
cash equivalents
Cash and cash equivalents at the 4 773 5 403 (12)
beginning of the year
1
Effect of exchange rate movements on 0 1 (100)
cash and cash equivalents
Cash and cash equivalents at the end of 7 798 4 773 63
the year
2
NOTES
1. Cash and cash equivalents at the
beginning of the year
Cash, cash balances and balances with 4 431 4 543 (2)
central banks
Loans and advances to banks 342 860 (60)
4 773 5 403 (12)
2. Cash and cash equivalents at the end
of the year
Cash, cash balances and balances with 7 226 4 431 63
central banks
Loans and advances to banks 572 342 67
7 798 4 773 63
Note
Comparatives have been reclassified. Refer to note 20.
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as at 31 December
1. NON-CURRENT ASSETS HELD FOR SALE
On 30 June 2011, the Bank, through its Absa Capital and Absa Business Bank
segments, transferred its investment in Sekunjalo Investments Limited,
with a carrying value of R43 million, to non-current assets held for sale.
A portion of this investment was subsequently sold in July 2011 and the
remaining portion was transferred to investment securities.
The Bank, through its Absa Capital segment, also transferred certain
investments designated at fair value through profit or loss with a
carrying value of R326 million to non-current assets held for sale on 30
June 2011. These investments were subsequently sold in August 2011.
The Bank, through its Corporate Real Estate business, concluded contracts
for the sale of several properties during 2011, with transfer due to take
place during 2012.
2. LOANS AND ADVANCES TO CUSTOMERS
2011 2010(1) 2009(1)
(Audited) (Audited) Change (Audited)
Rm Rm % Rm
Cheque accounts 31 370 30 696 2 38 360
Corporate overdrafts and 10 681 9 612 11 13 485
specialised finance loans
Credit cards 16 072 15 258 5 14 774
Foreign currency loans 8 564 5 602 53 6 659
Instalment credit 57 246 56 874 1 58 181
agreements
Gross advances 68 401 67 424 1 68 551
Unearned finance charges (11 155) (10 550) (6) (10 370)
Reverse repurchase 1 613 3 063 (47) 1 988
agreements
Loans to associates and 7 909 8 025 (1) 7 878
joint ventures
Microloans 1 690 1 766 (4) 2 417
Mortgages 287 710 302 516 (5) 301 352
Other(2) 3 179 2 961 7 3 407
Overnight finance 12 320 7 647 61 12 340
Personal and term loans 26 324 25 262 4 18 705
Preference shares 6 973 6 637 5 7 967
Wholesale overdrafts 26 647 32 638 (18) 25 551
Gross loans and advances 498 298 508 557 (2) 513 064
to customers
Impairment losses on loans (11 388) (12 824) 11 (12 014)
and advances (refer to
note 3)
486 910 495 733 (2) 501 050
Notes
(1) Comparatives have been reclassified. Refer to note 20.
(2) Other includes client liabilities under acceptances and working
capital solutions.
3. IMPAIRMENT LOSSES ON LOANS AND
ADVANCES
2011 2010
(Audited) (Audited) Change
Rm Rm %
Balance at the beginning of the year 12 824 12 014 7
Amounts written off during the year (5 787) (4 574) (27)
Foreign exchange differences 1 (2) >100
Interest on impaired assets refer to (1 176) (766) (54)
note 8.1)
5 862 6 672 (12)
Impairments raised during the year 5 526 6 152 (10)
Balance at the end of the year 11 388 12 824 (11)
Comprising:
Identified impairments 10 618 11 936 (11)
Unidentified impairments 770 888 (13)
11 388 12 824 (11)
3.1 Statement of comprehensive income
charge for the year ended 31 December
Impairments raised during the year 5 526 6 152 (10)
Identified impairments 5 642 6 303 (10)
Unidentified impairments (116) (151) 23
Recoveries of loans and advances (650) (574) (13)
previously written off
4 876 5 578 (13)
4. NON-PERFORMING LOANS
2011
(Unaudited)
Expected
recoverie
s and Total
Outstandi fair Net identified
ng value of exposur impairment
balance collatera e
l
Rm Rm Rm Rm
Cheque accounts 153 45 108 108
Credit cards 1 498 532 966 966
Instalment credit agreements 2 645 1 370 1 275 1 275
Microloans 348 76 272 272
Mortgages 23 479 19 466 4 013 4 013
Personal loans 1 116 486 630 630
Retail Banking 29 239 21 975 7 264 7 264
Cheque accounts 749 432 317 317
Commercial Asset Finance 932 395 537 537
Commercial Property Finance 1 894 1 354 540 540
Term loans 693 532 161 161
Absa Business Bank 4 268 2 713 1 555 1555
Absa Capital 844 405 439 439
Non-performing loans 34 351 25 093 9 258 9 258
Non-performing loans ratio (%) 6,9
2010(1)
(Unaudited)
Expected
recoverie
s and Total
Outstandi fair Net identified
ng value of exposur impairment
balance collatera e
l
Rm Rm Rm Rm
Cheque accounts 220 110 110 110
Credit cards 2 119 553 1 566 1 566
Instalment credit agreements 3 058 1 776 1 282 1 282
Microloans 445 84 361 361
Mortgages 25 569 20 678 4 891 4 891
Personal loans 928 321 607 607
Retail Banking 32 339 23 522 8 817 8 817
Cheque accounts 880 448 432 432
Commercial Asset Finance 1 082 429 653 653
Commercial Property Finance 2 483 2 032 451 451
Term loans 667 484 183 183
Absa Business Bank 5 112 3 393 1 719 1 719
Absa Capital 549 208 341 341
Non-performing loans 38 000 27 123 10 877 10 877
Non-performing loans ratio (%) 7,6
Note
(1) Comparatives have been reclassified. Refer to note 20.
5. DEPOSITS DUE TO CUSTOMERS
2011 2010(1) 2009(1)
(Audited) (Audited) Change (Audited)
Rm Rm % Rm
Call deposits 55 528 54 686 2 61 980
Cheque account deposits 130 953 116 371 13 100 475
Credit card deposits 1 884 1 830 3 1 868
Fixed deposits 124 341 113 217 10 105 928
Foreign currency deposits 6 898 7 942 (13) 7 211
Notice deposits 28 500 11 365 >100 10 293
Other(2) 2 695 3 664 (26) 8 069
Repurchase agreements with non- 8 734 7 035 24 1 712
banks
Savings and transmission 72 229 66 021 9 62 680
deposits
431 762 382 131 13 360 216
Notes
Comparatives have been reclassified. Refer to note 20.
Other includes partnership contributions received, deposits due on
structured deals, preference investments on behalf of customers and
unclaimed deposits.
6. DEBT SECURITIES IN ISSUE
2011 2010
(Audited) (Audited) Change
Rm Rm %
Abacas - Commercial paper issued and - 1 789 (100)
floating rate notes
Credit linked notes 8 976 6 360 41
Floating rate notes 69 854 75 748 (8)
Negotiable certificates of deposit 30 302 64 460 (53)
Promissory notes 3 168 3 759 (16)
Structured notes and bonds 1 451 1 220 19
Senior notes 14 300 9 190 56
128 051 162 526 (21)
7. BORROWED FUNDS
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
8,75% 1 September 1 500 1 500 -
2017
8,80% 7 March 2019 1 725 1 725 -
8,10% 27 March 2020 2 000 2 000 -
10,28% 3 May 2022 600 600 -
Three-month JIBAR + 2,10% 3 May 2022 400 400 -
CPI-linked notes, fixed at the following
coupon rates:
6,25% 31 March 2018 1 886 1 886 -
6,00% 20 September 3 000 3 000 -
2019
5,50% 7 December 2028 1 500 1 500 -
Accrued interest 1 157 826 40
Fair value adjustment 283 212 33
14 051 13 649 3
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December
NET INTEREST INCOME
8.1 Interest and similar income
2011 2010
(Audited) (Audited) Change
Rm Rm %
Interest and similar income is earned
from:
Cash, cash balances and balances with 2 2 0
central banks
Fair value adjustments on hedging 1 063 1 023 4
instruments
Investment securities 317 448 (29)
Loans and advances to banks 961 1 214 (21)
Other 806 934 (14)
Reverse repurchase agreements 155 280 (45)
Loans and advances to customers 41 543 46 067 (10)
Cheque accounts 2 572 2 760 (7)
Corporate overdrafts and specialised 664 1 255 (47)
finance loans
Credit cards 2 089 2 069 1
Foreign currency loans 110 167 (34)
Instalment credit agreements 5 559 6 024 (8)
Interest on impaired financial assets 1 176 766 54
(refer to note 3)
Loans to associates and joint ventures 417 486 (14)
Microloans 505 651 (22)
Mortgages 21 672 24 847 (13)
Other(1) 286 857 (67)
Overnight finance 584 571 2
Personal and term loans 3 260 2 900 12
Preference shares 619 693 (11)
Wholesale overdrafts 2 030 2 021 0
Other 1 042 527 98
Statutory liquid asset portfolio 4 282 2 983 44
49 210 52 264 (6)
Note
(1)Includes items such as interest on factored debtors` books.
8.2 Interest expense and similar charges
2011 2010
(Audited) (Audited) Change
Rm Rm %
Interest expense and similar charges are
paid on:
Borrowed funds 1 350 1 586 (15)
Debt securities in issue 9 474 12 850 (26)
Deposits due to customers 15 475 16 979 (9)
Call deposits 3 072 3 231 (5)
Cheque account deposits 2 758 3 192 (14)
Credit card deposits 10 13 (23)
Fixed deposits 6 227 7 112 (12)
Foreign currency deposits 82 128 (36)
Notice deposits 777 456 70
Other 480 516 (7)
Savings and transmission deposits 2 069 2 331 (11)
Deposits from banks 1 101 534 >100
Call deposits 572 219 >100
Fixed deposits 504 281 79
Other 25 34 (26)
Fair value adjustments on hedging (482) (1 102) 56
instruments
Interest incurred on finance leases 85 109 (22)
Other 97 64 52
27 100 31 020 (13)
9. NON-INTEREST INCOME
9.1 Fee and commission income
Asset management and other related fees 78 102 (24)
Consulting and administration fees 110 154 (29)
Credit-related fees and commissions 12 443 11 471 8
Cheque accounts 3 292 3 156 4
Credit cards(1)(2) 1 070 866 24
Electronic banking 4 086 3 823 7
Other(3) 1 620 1 220 33
Savings accounts 2 375 2 406 (1)
Insurance commission received 436 386 13
Merchant income(2) 1 035 922 12
Other 97 100 (3)
Project finance fees 203 205 (1)
Trust and other fiduciary services 19 38 (50)
Portfolio and other management 14 26 (46)
fees(3)(4)
Trust and estate income 5 12 (58)
14 421 13 378 8
Fee and commission expense
Cheque processing fees (171) (173) 1
Other(2) (429) (329) (30)
Transaction-based legal fees (227) (189) (20)
Trust and other fiduciary services(2)(4) (64) (105) 39
Valuation fees (137) (166) 17
(1 028) (962) (7)
Net fee and commission income 13 393 12 416 8
Included above are net fees and commissions linked to financial
instruments not at fair value of R6 918 million (2010: R6 549 million).
Notes
(1) Includes acquiring and issuing fees.
(2) During the year under review, merchant income, trust and other
fiduciary service fees have been disclosed in order to achieve fair
presentation. This resulted in a reclassification of comparative
information.
(3) Includes service, credit-related fees and other commission on mortgage
loans and foreign exchange transactions.
(4) During the year under review, debt collection fees have been included
in trust and other fiduciary service fees. This resulted in a
reclassification of comparative information.
9.2 Gains and losses from banking and trading activities(1)
2011 2010
(Audited) (Audited) Change
Rm Rm %
Associates and joint ventures - 87 (100)
Dividends received - 45 (100)
Profit realised on disposal - 42 (100)
Net gains on investments 432 99 >100
Debt instruments 29 27 7
Equity instruments 423 164 >100
Available-for-sale unwind from (20) (92) 78
reserves
Net trading result 2 491 1 705 46
Net trading income excluding the 2 435 1 605 52
impact of hedge accounting
Ineffective portion of hedges 56 100 (44)
Cash flow hedges 33 44 (25)
Economic hedges 30 71 (58)
Fair value hedges (7) (15) 53
Other (419) (40) >(100)
2 504 1 851 35
Net gains on investments comprise debt and equity instruments designated
at fair value through profit or loss and available for sale unwind from
reserves.
Net trading result comprises gains and losses from instruments designated
at fair value through profit or loss as well as gains and losses from
instruments classified as held for trading.
The net trading income of R2 435 million (2010: R1 605 million), consist
of the following:
- Losses on financial instruments designated at fair value through profit
or loss of R844 million (2010: R1 061 million).
- Gains on financial instruments held for trading of R3 279 million (2010:
R2 666 million).
Financial instruments designated at fair value through profit or loss
consist of:
- Net gains of R595 million (2010: R705 million) on financial assets
designed at fair value through profit or loss.
- Net losses of R1 439 million (2010: R1 766 million) relating to
financial liabilities designated at fair value through profit or loss.
Other includes gains and losses from instruments designated at fair value
through profit or loss as well as gains and losses from instruments
classified as held for trading.
- Gains on financial instruments designated at fair value through profit
or loss of R105 million (2010: R176 million).
- Losses on financial instruments held for trading of R524 million (2010:
R216 million).
Note
(1) During the year under review, the presentation of "Gains and losses
from banking and trading activities" has been amended to align with market
practice and improve the quality of disclosure to the market. This
resulted in a reclassification of comparative information.
9.3 Gains and losses from investment activities(1)
2011 2010
(Audited) (Audited) Change
Rm Rm %
Available-for-sale unwind from reserves 1 0 >100
Net investment gains
Other(2) 53 24 >100
54 24 >100
Notes
(1) During the year under review, the presentation of "Gains and losses
from investment activities" has been amended to align with market practice
and improve the quality of disclosure to the market. This resulted in a
reclassification of comparative information.
(2) Other includes gains and losses from instruments designated at fair
value through profit or loss.
10. OPERATING EXPENDITURE
10.1 Operating expenses
2011 2010
(Audited) (Audited) Change
Rm Rm %
Amortisation of intangible assets 148 100 48
Auditors` remuneration 149 131 14
Cash transportation 643 625 3
Depreciation 1 155 1 062 9
Equipment costs 173 206 (16)
Information technology(1) 2 065 1 969 5
Investment property charges 43 4 >100
Change in fair value of investment 43 0 100
properties
Other 0 4 (100)
Marketing costs 928 974 (5)
Operating lease expenses on properties 880 877 0
Other(2)(3) 728 956 (16)
Printing and stationery 216 235 (8)
Professional fees(1) 934 970 (4)
Property costs(3) 1 042 814 28
Staff costs 11 722 10 836 8
Bonuses 1 098 951 15
Current service costs on post-retirement 648 525 23
benefits
Other(4) 428 466 (8)
Salaries 8 897 8 372 6
Share-based payments 434 280 55
Training costs 217 242 (10)
Telephone and postage 659 680 (3)
21 485 20 440 5
Notes
(1) Both lines include research and development costs totalling R101
million (2010: R133 million).
(2) Includes accommodation, travel and entertainment costs.
(3) During the year under review, property costs were moved from other and
disclosed separately due to the significance thereof. This resulted in a
reclassification of comparative information.
(4) Includes recruitment costs, membership fees to professional bodies,
staff parking, redundancy fees, study assistance, staff relocation and
refreshment costs.
10.2 Other impairments
2011 2010
(Audited) (Audited) Change
Rm Rm %
Financial instruments 26 38 (32)
Amortised cost instruments 26 13 100
Available-for-sale instruments - 25 (100)
Other 47 71 (34)
Computer software development costs - 4 (100)
Equipment - 13 (100)
Goodwill 28 - 100
Investments in associates and joint (2) 29 >(100)
ventures
Repossessed properties 21 25 (16)
73 109 (33)
11. HEADLINE EARNINGS
2011 2010
(Audited) (Audited) Net
Gros Net Gros Net chang
s s e
Rm Rm Rm Rm %
Headline earnings(1) is determined as
follows:
Profit attributable to ordinary equity 7 901 6 432 23
holder of the Bank
Total headline earnings adjustment: 56 (20) >100
IFRS 3 - Goodwill impairment /(gain on 28 28 (72) (72) >100
bargain purchase)
IAS 16 - Profit on disposal of (27) (22) (26) (22) 0
property and equipment
IAS 28 and 31 - Headline earnings (0) (0) (1) (1) 97
component of share of post-tax results
of associates and joint ventures
IAS 28 and 31 - Profit on disposal of - - (42) (42) 100
investments associates and joint
ventures
IAS 28 and 31 - Impairment (2) (1) 29 21 >(100
(reversal)/charge of investments in )
associates and joint ventures
IAS 36 - Impairment of equipment - - 13 9 (100)
IAS 38 - Impairment of intangible - - 4 3 (100)
assets
IAS 39 - Release of available-for- 20 14 92 66 (79)
sale reserves
IAS 39 - Impairment of available-for- - - 25 18 (100)
sale assets
IAS 40 - Change in fair value of 43 37 (0) (0) >100
investment properties
Headline earnings/diluted headline 7 957 6 412 24
earnings
Headline earnings per share/diluted 2 1 23
headline earnings per share (cents) 127,0 733,4
Note
(1)The net amount is reflected after taxation and non-controlling
interest.
12. DIVIDENDS PER SHARE
2011 2010
(Audited) (Audited) Change
Rm Rm %
Dividends paid to ordinary equity
holder during the year
15 February 2011 final dividend 1 350 900 50
number 49 of 360,9 cents per ordinary
share (16 February 2010: 244,8 cents)
2 August 2011 interim dividend number 1 550 1 200 29
50 of 414,3 cents per ordinary share
(4 August 2010: 326,4 cents)
4 August 2010 special dividend to the - 1 000 (100)
ordinary and `A` ordinary equity
holder
2 900 3 100 (6)
Dividends paid to ordinary equity
holder relating to income for the
year
2 August 2011 interim dividend number 1 550 1 200 29
50 of 414,3 cents per ordinary share
(4 August 2010: 326,4 cents)
4 August 2010 special dividend to the - 1 000 (100)
ordinary and `A` ordinary equity
holder
10 February 2012 final dividend 2 320 1 350 72
number 51 of 620,1 cents per ordinary
share (15 February 2011: 390,9 cents)
3 870 3 550 9
Note
The STC payable by the Bank in respect of the final dividend approved
and declared subsequent to the reporting date amounts to R232 million
(2010: R 135 million). No provision has been made for this dividend
and the related STC in the financial statements at the reporting date,
accordance with IFRS.
2011 2010
(Audited) (Audited) Change
Rm Rm %
Dividends paid to preference equity
holders during the year
15 February 2011 final dividend number 143 162 (12)
10 of 2 887,6 cents per preference
share (16 February 2010: 3 280,3 cents)
2 August 2011 interim dividend number 141 158 (11)
11 of 2 858,3 cents per preference
share (4 August 2010: 3 197,5 cents)
284 320 (11)
Dividends paid to preference equity
holders relating to income for the year
2 August 2011 interim dividend number 141 158 (11)
11 of 2 858,3 cents per preference
share (4 August 2010: 3 197,5 cents)
10 February 2012 final dividend number 140 143 (2)
12 of 2 827,2 cents per preference
share (15 February 2011: 2 887,6 cents)
281 301 (7)
Notes
(1) The STC payable by the Bank in respect of the dividend approved and
declared subsequent to the reporting date amounts to R14 million (31
December 2010: R14 million). No provision has been made for the dividend
and the related STC at the reporting date, in accordance with IFRS.
(2) In 2007, the Minister of Finance announced a two-phase approach to
STC reform which included the reduction of the STC tax rate to 10% and
the replacement of STC with dividends tax on shareholders (dividends
tax). When the dividends tax comes into effect on 1 April 2012, the tax
will cease to be levied at a company level, and will instead be levied on
the shareholders who received the dividend.
Unutilised STC credits at the end of December 2011 will be utilised
against the STC payable on the final dividend subsequent to year-end.
Before the new withholding dividend tax comes into effect, any remaining
deferred tax asset relating to unutilised STC credits up to 31 March 2011
will be utilised.
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
as at 31 December
13. ACQUISITIONS AND DISPOSALS OF BUSINESSES
The following interests were acquired during the year under review:
13.1 Subsidiaries and business combinations
The Bank acquired 76% of the units in the Absa Property Equity Fund
(APEF) for R211 million during April 2011 and, as a result, has taken on
a majority share of the risks and rewards of the fund. The net assets
acquired amounted to R211 million. APEF operates as a special purpose
entity (SPE) specifically for the investment in community upliftment
projects and is consolidated in terms of SIC 12. The fund was previously
consolidated under SIC 12. The APEF was disposed of and reacquired in
2011. Since acquisition, the APEF contributed a net profit before tax of
R13 million and revenue of R10 million to the Bank for the period 1 April
2011 to 31 December 2011. If the acquisition occurred on 1 January 2011,
the Group`s revenue would have been R17 million higher and the net profit
before tax for the year would have been R18 million higher.
The Bank together with two other parties has a shareholding in Barrie
Island Investments Proprietary Limited (Barrie Island). During January
2011, the Bank entered into an agreement to purchase an additional 30% of
the shares in Barrie Island from another shareholder who wished to exit
the arrangement. Following this purchase, the Group will own 70% of the
shares of Barrie Island. At the acquisition date, the investment was
recognised at R nil million. A fair value loss was processed in the
statement of comprehensive income when additional shares in Barrie Island
were acquired. Barrie Island holds property in Alberton. The property is
zoned for commercial and residential property. Net liabilities incurred
in the further acquisition totalled R3 million with goodwill raised at R3
million. The goodwill in Barrie Island has been impaired because Barrie
Island has been consistently making losses and is not expected to be
profitable in the near future. Since the further acquisition, Barrie
Island had no revenue and profit before tax impact to the Bank for the
period to 31 December 2011. Goodwill raised on acquisition was
subsequently impaired.
The partnership in the IFU Property Fund was dissolved during the year
under review. Overlook at Sugarloaf Incorporated (a new legal entity
incorporated in the United States of America) was established to replace
the IFU Property Fund. This did not affect the Bank`s overall statement
of financial position.
During the year under review, the Bank sold certain exposures to
Commissioner Street No. 4 (RF) Limited (Commissioner Street 4), a special
purpose entity established by the Bank. Commissioner Street 4 issued
various classes of notes to investors.
The following table summarises the acquisition date fair values of the
assets and liabilities acquired in the above transactions:
Class of asset/(liability) APEF Barrie Island
Cash, cash balances and balances with 0 0
central banks
Other assets 1 40
Other liabilities (0) (50)
Investment securities 277 -
Deferred tax asset - 1
Fair value of existing interest - 3
Non-controlling interest (67) 3
Net assets acquired/(liabilities 211 (3)
incurred)
Cash outflow on acquisition 211 0
Fair value of net (assets (211) 3
acquired)/liabilities incurred
Goodwill - 3
Total cash and cash equivalents acquired 0 0
A full list of subsidiaries as at 31 December 2011 is available, on
request, at the registered address of the Bank.
13.2 Associates and joint ventures
The following interests were disposed of during the year under review:
Sekunjalo Investments Limited was classified as an "equity-accounted"
associate held by Absa Capital and Absa Business Bank. Absa Capital`s
investment was disposed of and the remaining investment held by Absa
Business Bank was transferred to investment securities.
14. RELATED PARTIES
The Bank`s ultimate parent company is Barclays Bank PLC, which owns 55,5%
(2010: 55,5%) of the ordinary shares in Absa Group Limited. The remaining
44,5% (2010: 44,5%) of the shares are widely held on the JSE.
The following are defined as related parties of the Bank:
- key management personnel;
- the ultimate parent company;
- the parent company;
- fellow subsidiaries;
- subsidiaries;
- associates, joint ventures and retirement benefit funds;
- an entity controlled/jointly controlled or significantly influenced by
any individual referred to above;
- post-employment benefit plans for the benefit of employees or any
entity that is a related party of the Bank; and
- children and/or dependants and spouses or partners of the individuals
referred to above.
IAS 24 requires the identification of key management personnel, who are
individuals responsible for planning, directing and controlling the
activities of the entity, including directors. Key management personnel
are defined as executive and non-executive directors and members of the
Executive Committee (Exco).
14.1 Transactions with key management personnel and entities controlled
by key management
A number of banking and insurance transactions are entered into with key
management personnel in the normal course of business, under terms that
are no more favourable than those arranged with third parties. These
include loans, deposits and foreign currency transactions. The related
party transactions, outstanding balances at year-end, and related
expenses and income with related parties for the year are as follows:
2011 2010
(Audited) (Audited) Change
Rm Rm %
Balances
Loans 624 758 (18)
Deposits 33 25 32
Guarantees issued by the Bank 79 70 13
Other investments 81 68 19
Loans include mortgages, asset finance transactions, overdraft and other
credit facilities. Loans to key management personnel are provided on the
same terms and conditions as loans to employees of the Bank, including
interest rates and collateral requirements. There were no bad debts
expenses and provision for bad debts that related to balances with key
management personnel.
In addition to the specific guarantees, a number of key management
personnel and entities controlled by key management personnel have
unlimited surety with the Bank.
2011 2010
(Audited) (Audited) Change
Rm Rm %
Transactions
Interest income 56 2 >100
Interest expense 1 1 -
Key management personnel compensation
Executive directors
Post-employment benefit contributions 1 1 -
Salaries and other short-term benefits 20 27 (26)
Share-based payments 27 17 59
Termination benefits - 10 (100)
48 55 (14)
Other key management personnel
Post-employment benefit contributions 2 1 100
Salaries and other short-term benefits 42 43 (2)
Share-based payments 36 33 9
Termination benefits 3 - 100
83 77 8
14.2 Balances and transactions with
ultimate parent company(1)(2)
The following are balances with, and
transactions entered into with the
ultimate parent company:
Balances
Loans and advances 41 065 15 174 >100
Derivative assets 10 524 9 079 16
Nominal value of derivative assets 637 611 489 895 30
Other assets 338 952 (64)
Investment securities 499 434 15
Deposits from banks (5 784) (5 820) 1
Derivative liabilities (10 488) (8 999) (17)
Nominal value of derivative liabilities (462 870) (375 175) (23)
Other liabilities (1 167) (533) >(100)
Transactions
Interest and similar income (111) (80) (39)
Interest expense and similar charges 67 36 86
Net fee and commission income (17) (15) (13)
Gains and losses from banking and trading (136) 1 646 >(100)
activities
Other operating income (152) (42) >(100)
Operating expenditure (115) (252) 54
Trade balances must be settled in accordance with market conventions
applicable to the transaction. Non-trade balances must be settled by the
close of the month immediately following the month in which the
transaction occurred. Further, settlement must be made in the currency
required by the parent. In exceptional cases it may be impractical or
inefficient to settle balances monthly. In such circumstances the
unsettled balances must be explicitly agreed monthly in writing and full
settlement must be made at least quarterly.
There were no bad debt expenses and provisions for bad debts that related
to balances and transactions with the parent company.
14.3 Balances and transactions with fellow subsidiaries, associates and
joint ventures of the ultimate parent company (1)(2)
Fellow subsidiaries, associates and joint ventures are those entities of
Barclays Bank PLC.
Balances and transactions between the Bank and its subsidiaries have been
eliminated on consolidation and are not disclosed in this note.
Notes
(1) The Bank`s ultimate parent company is Barclays Bank PLC, which has a
majority equity interest in Absa Group Limited.
(2) Debit amounts are shown as positives; credit amounts are shown as
negatives
2011 2010
(Audited) (Audited) Change
Rm Rm %
Balances
Loans and advances to banks 188 412 (54)
Derivative assets - 65 (100)
Nominal value of derivative liabilities - 3 507 (100)
Other assets 1 (400) >100
Deposits from banks (559) (262) >(100)
Derivative liabilities (72) (7) >(100)
Nominal value of derivative liabilities (1 441) (292) >(100)
Other liabilities (52) 266 >(100)
Transactions
Interest and similar income (2) - (100)
Net fee and commission income (12) - (100)
Operating expenditure 152 279 (46)
Trade balances must be settled in accordance with market conventions
applicable to the transaction. Non-trade balances must be settled by the
close of the month immediately following the month in which the
transaction occurred. Further, settlement must be made in the currency
required by the parent. In exceptional cases it may be impractical or
inefficient to settle balances monthly. In such circumstances the
unsettled balances must be explicitly agreed monthly in writing and full
settlement must be made at least quarterly.
There were no bad debt expenses and provisions for bad debts that related
to balances and transactions with the parent company.
14.4 Balances and transactions with parent company(1)(2)
The following are balances with and transactions entered into with the
parent company:
2011 2010
(Audited) (Audited) Change
Rm Rm %
Balances
Loans and advances 215 (174) >100
Other liabilities (138) 139 >(100)
Transactions
Dividends paid 3 184 3420 (7)
Interest expense and other charges 8 10 (20)
Trade balances must be settled in accordance with market conventions
applicable to the transaction. Non-trade balances must be settled by the
close of the month immediately following the month in which the
transaction occurred. Further, settlement must be made in the currency
required by the parent. In exceptional cases it may be impractical or
inefficient to settle balances monthly. In such circumstances the
unsettled balances must be explicitly agreed monthly in writing and full
settlement must be made at least quarterly.
There were no bad debt expenses and provisions for bad debts that related
to balances and transactions with the parent company.
13.5 Balances and transactions with fellow subsidiaries
Balances and transactions between the Bank and its subsidiaries have been
eliminated on consolidation and are not disclosed in this note.
The following transactions were entered into with fellow subsidiaries:
2011 2010 Change
Rm Rm %
Balances
Loans and advances to Group companies (25) - (100)
Transactions
Interest and similar income - (18) 100
Net fee and commission income - 2 (100)
Various terms and conditions were agreed upon, taking into account
transfer pricing and relevant tax requirements.
Notes
(1) Debit amounts are shown as positive; credit amounts are shown as
negative.
(2) Absa Bank is a wholly owned subsidiary of Absa Group Limited.
15. ASSETS UNDER MANAGEMENT AND ADMINISTRATION(1)
2011 2010 Change
Rm Rm %
Alternative asset management and exchange- 16 615 16 231 2
traded funds
Portfolio management 5 136 4 779 7
Private equity 728 732 (1)
Unit trusts 262 119 >100
22 741 21 861 4
16. FINANCIAL GUARANTEE CONTRACTS
Financial guarantee contracts(2) 356 599 (41)
17. COMMITMENTS
Authorised capital expenditure
Contracted but not provided for(3) 119 882 (87)
Operating lease payments due(4)
No later than one year 1 073 1 029 4
Later than one year and no later than 2 062 1 965 5
five years
Later than five years 488 386 26
3 623 3 380 7
Sponsorship payments due(5)(6)
Not later than one year 209 305 (32)
Later than one year and no later than 299 508 (41)
five years
508 813 (38)
18. CONTINGENCIES
Guarantees(7) 12 509 11 052 13
Irrevocable debt facilities(8) 45 637 46 348 (2)
Irrevocable equity facilities(8) 494 750 (34)
Letters of credit 4 560 4 653 (2)
Other 10 43 (77)
63 209 62 846 1
Notes
(1) Comparatives have been reclassified for the inclusion of assets
managed by Absa Capital on behalf of clients, exchange-traded funds and
alternative asset management funds in order to align assets under
management and administration to current market practice.
(2) Represents the maximum exposure, which is not necessarily the
measurement recognised on the statement of financial position in
accordance with IFRS.
(3) The Bank has capital commitments in respect of computer equipment and
property development. Management is confident that future net revenue and
funding will be sufficient to cover these commitments.
(4) The 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.
(5) During the year under review, additional information has been
included for sponsorships. This resulted in a reclassification of
comparative information.
(6) The Group has sponsorship commitments in respect of sports and arts
and culture sponsorships. Certain sponsorship agreements in place, expire
in 2012 and are under review by management for renewal in the foreseeable
future.
(7) Guarantees include performance and payment guarantee contracts.
(8) Irrevocable 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.
19. SEGMENT PERFORMANCE
19.1 Condensed consolidated profit contribution by segment
for the year ended 31 December
2011 2010(1)
(Audited) (Audited) Change
Rm Rm %
Banking operations
Retail Banking 4 031 3 104 30
Home Loans 448 166 >100
Vehicle and Asset Finance 403 226 78
Card 1 646 1 380 19
Personal Loans 720 515 40
Retail Bank 814 817 (0)
Absa Business Bank 2 878 2 815 2
Absa Capital 1 280 1 439 (11)
Corporate centre (319) (414) 23
Capital and funding centres 315 (192) >100
Preference equity holders of the Bank (284) (320) 11
Profit attributable to ordinary equity 7 901 6 432 23
holder of the Bank
Headline earnings adjustments 56 (20) >100
Headline earnings 7 957 6 412 24
Note
(1) Comparatives have been reclassified. Refer to note 20.
19.2 Condensed consolidated total revenue(1) contribution by segment
for the year ended 31 December
2011 2010(1)
(Audited) (Audited) Change
Rm Rm %
Banking operations
Retail Banking 22 348 21 022 6
Home Loans 3 951 3 480 14
Vehicle and Asset Finance 2 219 2 015 10
Card 3 757 3 470 8
Personal Loans 2 108 1 960 9
Retail Bank 10 313 10 097 2
Absa Business Bank 11 390 11 107 3
Absa Capital 5 101 5 098 0
Corporate centre (894) (1 090) (18)
Capital and funding centres 679 (106) >100
Total revenue 38 624 36 031 7
Notes
Revenue includes net interest income and non-interest income.
Comparatives have been reclassified. Refer to note 20.
19.3 Condensed consolidated internal total revenue(1) contribution by segment
for the year ended 31 December
2011 2010(2)
(Audited) (Audited) Change
Rm Rm %
Banking operations
Retail Banking (10 401) (12 992) 20
Home Loans (12 898) (15 157) 15
Vehicle and Asset Finance (2 442) (2 764) 12
Card (303) (384) 21
Personal Loans (569) (611) 7
Retail Bank 5 811 5 924 (2)
Absa Business Bank 2 800 1 614 73
Absa Capital 7 741 12 566 (38)
Corporate centre (337) (435) (23)
Capital and funding centres (1 170) (820) (43)
Internal revenue (1 367) (67) >(100)
Notes
(1) Revenue includes net interest income and non-interest income.
(2) Comparatives have been reclassified. Refer to note 20.
19.4 Condensed consolidated total assets by segment
as at 31 December
2011 2010(1)
(Audited) (Audited) Change
Rm Rm %
Banking operations
Retail Banking 452 455 454 452 (0)
Home Loans 234 114 242 722 (4)
Vehicle and Asset Finance 46 382 50 242 (8)
Card 23 352 21 098 11
Personal Loans 13 489 12 887 5
Retail Bank 135 118 127 503 6
Absa Business Bank 200 359 180 163 11
Absa Capital 359 211 344 954 4
Corporate centre (353 555) (362 014) (2)
Capital and funding centres 83 966 72 855 15
Total assets 742 436 690 410 8
Note
(1) Comparatives have been reclassified. Refer to note 20.
20. RECLASSIFICATIONS
20.1 Some items within the statement of financial position for the years
ended 31 December 2010 and 31 December 2009 were reclassified in the
current year:
2010
(Audited)
As previously Reclassific Reclassifie
reported a-tion d
Rm Rm Rm
Loans and advances to banks(1) 23 633 2 618 26 251
Other assets(1) 12 954 (3 276) 9 678
Loans and advances to customers 485 588 10 145 495 733
Collateralised loans(1) 658
Offsetting (2) 9 487
Total assets (2) 680 923 9 487 690 410
Deposits due to customers (2) 372 644 9 487 382 131
Total liabilities (2) 628 293 9 487 637 780
Total liabilities and equity (2) 680 923 9 487 690 410
2009
(Audited)
As previously Reclassific Reclassifie
reported a-tion d
Rm Rm Rm
Loans and advances to banks 35 036 - 35 036
Other assets 7 219 - 7 219
Loans and advances to 490 205 10 845 501 050
customers(2)
Total assets(2) 673 774 10 845 684 619
Deposits due to customers(2) 349 371 10 845 360 216
Total liabilities(2) 626 356 10 845 637 201
Total liabilities and equity(2) 673 774 10 845 684 619
Notes
(1) Collateralised loans
During the year under review, the Bank has reclassified certain
collateralised loans previously disclosed as `Other assets` to `Loans and
advances to banks` and `Loans and advances to customers` in 2010 and to
`Loans and advances to banks` in 2009 to reflect the true nature of these
trades as collateralised loans. This has resulted in comparatives being
reclassified for 31 December 2010 as reflected in the table above.
(2) Offsetting
Certain customers within the Bank have agreements in place whereby
interest receivable or payable is calculated on the net balances of the
cheque deposits and cheque advances. During the year under review, the
Bank identified that the related cheque account balances owed or
receivable were also being reported on a net basis. All balances within
this portfolio were reassessed for appropriate presentation in terms of
IAS 32 and the Bank`s stated accounting policies, taking into account
contractual arrangements and current business practise applied to these
accounts.
As a result, certain assets and liabilities relating to these cheque
accounts were reclassified so that these are presented on a gross basis.
This has resulted in the comparatives being reclassified for 31 December
2010 and 31 December 2009 as reflected in the table above.
20.2 Comparatives have been reclassified for the following structure
changes made during the year:
- Absa Technology Finance Solutions Proprietary Limited was moved from
Vehicle and Asset Finance within Retail Banking to Absa Business Bank.
- Debit Card was moved within Retail Banking from Retail Bank to Card.
- Personal loan centres were moved within Retail Banking from Personal
Loans to Retail Bank.
- Absa Development Company division was moved from Absa Business Bank to
Retail Bank within Retail Banking.
- The Group`s corporate client base was transferred from Absa Business
Bank to Absa Capital following an initiative to optimise product delivery
to its corporate clients.
Profit and dividend announcement
Overview
The Bank`s headline earnings increased 24% to R7 957 million (2010: R6 412
million). Diluted headline earnings per share rose 23% to 2 127,0 cents (2010: 1
733,4 cents). Absa`s return on average equity (RoE) improved to 15,8%,
reflecting a higher return on average assets (RoA) of 1,13% (2010: 0,93%),
offset by reduced leverage.
Absa delivered on its key commitments to for 2011, including growing revenue
faster than operating expenses. The Bank`s pre-provision profit increased 10% to
R17 139 million. Improved non-interest revenue growth, lower credit losses,
better cost containment and a wider net interest margin were the primary reasons
for Absa`s headline earnings growth. These drivers outweighed the impact of
lower loans and advances, and a higher effective tax rate.
Retail Banking`s 35% headline earnings growth was the principal driver of the
Bank`s 24% increase. Absa Business Bank (ABB) increased earnings 4%. Absa
Capital`s headline earnings decreased 14% after a difficult second half.
Operating environment
South Africa`s economic growth slowed considerably in recent quarters to an
annualised 1,4% in the third quarter of 2011. Household expenditure growth has
remained a bright point, rising 3,7% on an annualised basis in the third
quarter. This is underpinned by evidence that the worst of the labour market
weakness has passed and consumers are benefiting from low interest rates and
increased real household income growth. Despite the prime rate being at the
lowest level since the 1970s, private sector credit extension remains moderate.
Household credit rose at an average of 5,7% from June through November 2011 and
corporate credit 3,6%. This modest new borrowing and income growth has reduced
household debt to disposable income from a 2008 peak of 82,7% to 75,0%, although
consumers remain vulnerable to any monetary policy tightening.
Inflation pressures mounted through 2011, as headline CPI (Consumer Price Index)
increased from the cyclical low of 3,2% in September 2010 to 6,1% in November
2011, which is above the SARB target range. Growth in core inflation has been
more moderate, increasing to 3,9% despite rising food and fuel costs. Given
concerns about economic growth, the Reserve Bank has kept its policy rate at
5,5%.
Bank performance
Statement of financial position
The Bank`s total assets rose 8% to R742 billion at 31 December 2011, reflecting
strong second half growth in its trading portfolio assets and loans and advances
to banks. Absa`s statutory liquid asset portfolio increased 19% to R57 billion.
Loans and advances to customers
Absa`s loans and advances to customers declined by 2% to R487 billion (2010:
R496 billion). Retail Banking`s loans and advances declined 2%, reflecting
sustained focus on risk appetite and pricing. Retail mortgages (including
Commercial Property Finance), which constitute 48% of total Bank gross loans and
advances to customers, decreased 4%. Given Retail Banking`s strategy to grow its
proportion of unsecured loans, credit cards grew 5% and personal loans 6%. Muted
client demand also dampened ABB`s loans and advances, which declined 5% to lower
Commercial Property Finance, instalment credit agreements and wholesale
overdrafts. Absa Capital`s loans and advances increased 6%, reflecting strong
growth in foreign currency loans and overnight finance.
Deposits due to customers
The Bank continued to improve its liquidity, growing customer deposits 13% to
R432 billion and increasing its proportion of long-term funding to 24,5%. With
solid growth in most key categories, Retail Banking`s deposits increased 9%, to
maintain its leading market share. Its proportion of high margin deposits
improved further. ABB`s deposits increased 12%, given strong growth in cheque
account and call deposits. Absa Capital`s deposits rose 18%, after solid growth
in fixed deposits and notice deposits. Deposits due to customers accounted for
71% of funding compared to 64% in 2009, while the proportion from debt
securities in issue dropped to 21% from 29%. The Bank`s loans-to-deposits ratio
decreased to 87,0% from 91,0%.
Net asset value (NAV)
The Bank`s NAV increased 10% to R53 billion, as it generated retained earnings
of R5,0 billion during the year. Absa`s NAV per share grew 9% to 14 058 cents
(2010: 12 955 cents).
Capital to risk-weighted assets
The Bank`s risk-weighted assets decreased by 2% to R385 billion (2010: R392
billion). Absa maintained its strong capital levels, which remain above board
targets and regulatory requirements. At 31 December 2011, Absa Bank`s Core Tier
1 and Tier 1 capital adequacy ratios were 12,1% (2010: 10,7%) and 13,3% (2010:
11,9%) respectively. The Bank`s total capital ratio improved to 16,2% (2010:
14,8%).
Statement of comprehensive income
Net interest income
Net interest income increased 4% to R22 110 million (2010: R21 244 million),
despite loans declining slightly and a 0,87% lower average prime rate during the
year. The growth stems from the Bank`s improved net interest margin (3,80% from
3,62%) due to its hedging strategy, better new business pricing and lower
reliance on wholesale funding. These outweighed the negative endowment effect on
capital and deposits, competitive pricing pressure on deposits and the cost of
lengthening funding and increasing surplus liquid assets.
Credit losses
Absa`s credit impairments improved 13% to R4 876 million (2010: R5 578 million).
Retail Banking, where credit losses decreased 14% to R3 792 million, was
responsible for most of the reduction. Early cycle delinquencies improved as
lower interest rates helped consumers to recover, and the benefits of effective
collections and sound credit policy became evident. ABB`s credit losses dropped
23% year on year to R843 million.
The Bank`s credit loss ratio improved to 1,00% from 1,12%. This is noticeably
below 2009`s high charge of 1,65%. Retail Banking`s credit loss ratio declined
to 1,22% (2010: 1,41%), as every category improved, particularly Absa Card and
Personal Loans. ABB`s credit loss ratio fell to 0,72% from 0,91%. Absa`s non-
performing loan coverage declined to 27,0% (2010: 27,7%), in part due to 27%
higher write-offs.
Non-performing loans as a percentage of loans and advances improved to 6,9%
(2010: 7,5%), due to reduced new NPLs (non-performing loans), greater write-offs
and rehabilitating more accounts. Absa`s loans subject to debt counselling
reduced to R3,4 billion from R7,0 billion the previous year, reflecting strong
collection efforts.
Non-interest income
Despite muted trading and retail client activity levels, Absa`s non-interest
income grew 12% to R16 514 million (2010: R14 787 million), owing to growth in
targeted areas. Net fee and commission income, which constituted 81% of non-
interest income grew 8% to R13 393 million (2010: R12 416 million), due to
volume growth and price increases. Retail Banking`s net fee and commission
income rose 6%, while ABB`s demonstrated improving momentum growing 8%. Absa
Capital`s net trading increased 1% to R2 036 million, despite difficult second
half conditions in fixed income. The Bank sold its stake in Visa Incorporated in
2011, recording a R30 million gain compared to a R128 million loss in the prior
year. Private equity and commercial property finance revaluations accounted for
less than 1% of total non-interest revenue.
Operating expenses
The Bank`s operating expenses increased 5% to R21 485 million (2010: R20 440
million), reflecting cost containment while continuing to invest in target
growth areas.
Staff costs constituted 55% of total, increased 8% to R11 722 million. This
reflected salary increases, higher bonuses and share-based payments due to
significant incentive deferrals from previous years and improved operating
performance. Non-staff costs grew just 2%, as containing discretionary spend was
a priority. Total IT-related spend grew 5% to R2,1 billion, which represents 10%
of the Bank`s costs. Absa`s cost-to-income ratio improved to 55,6% from 56,7%.
Taxation
The Bank`s taxation charge grew 25% to R3 140 million, as its effective tax rate
rose to 27,7% from 27,1%. The higher rate was mainly due to a lower proportion
of exempt income and secondary tax on companies. Absa continued to contribute
significantly to the fiscus, making cash payments of R4,8 billion.
Prospects
Global economic conditions remain challenging. Key structural weaknesses in the
Eurozone still need to be addressed, the US economy faces the uncertainty of an
election year and emerging markets look to navigate the downside risks in
developed countries. However, Sub-Saharan Africa`s GDP is expected to grow 5,5%
this year.
For South Africa, the external environment is unlikely to support stronger
growth and we expect the economy to grow just 2,8%. Slightly higher inflation
will place some pressure on real household income and the labour market is
expected to remain weak, which suggests consumers will remain vulnerable and
corporates cautious in their business decisions. We expect the Reserve Bank
increase interest rates in the fourth quarter, albeit at a slow pace.
Against this fragile macro backdrop, sector asset and revenue growth is likely
to remain muted. However, Absa should continue to benefit from its hedging
strategy. Containing costs remains a priority and management is committed to
keeping cost growth below revenue growth again this year. Together with an
expected credit loss ratio of below 1%, the Bank`s returns should improve
further. Absa will continue to work closely with Barclays to capture the
opportunities the combined franchises offer in the rest of Africa. Absa remains
well positioned for expected regulatory changes with a strong capital position
and continued improvement in its liquidity.
Basis of presentation and changes in accounting policies
The Bank`s condensed results have been prepared in accordance with the
recognition and measurement requirements of International Financial Reporting
Standards (IFRS). The disclosures comply with International Accounting Standard
(IAS) 34.
The preparation of financial information requires the use of estimates and
assumptions about future conditions. The accounting policies that are deemed
critical to the Bank`s results and financial position, in terms of the
materiality of the items to which the policy is applied, and which involve a
high degree of judgement including the use of assumptions and estimation, are
impairment of loans and advances, goodwill impairment, valuation of financial
instruments, impairment of available-for-sale financial assets, impairment of
investments in associates and joint ventures, deferred tax assets, consolidation
of special purpose entities (SPEs), post-retirement benefits, provisions, share-
based payments, liabilities arising from claims made under short-term insurance
contracts, liabilities arising from claims made under life-term insurance
contracts, income taxes and offsetting of financial assets and liabilities.
Changes in accounting policies
The accounting policies applied in preparing the financial results for the year
under review are the same as the accounting policies in place for the year ended
31 December 2010 except for the following:
- The Bank adopted the predecessor accounting method as its accounting
policy for common control transactions. The Bank previously accounted
for common control transactions in terms of IFRS 3 Business
Combinations where these transactions had economic substance. This
change in accounting policy will align the Bank`s accounting policy
with its ultimate parent company, Barclays PLC. The change in
accounting policy does not impact the Bank`s consolidated results and
will have no impact on basic and diluted earnings per share as
previously reported.
- Adoption of amendments and changes to IFRS mandatory for the 31
December 2011 financial year. These amendments, specified in
consolidated annual financial statements, resulted in some additional
disclosures being presented but otherwise had a minimal impact on the
financial results for the year under review.
Reclassifications
- The Bank has reclassified certain collateral previously disclosed as
`Other assets` to `Loans and advances to banks` and `Loans and
advances to customers` in 2010to reflect the true nature of these
trades as collateralised loans. This has resulted in comparatives
being reclassified for 31 December 2010 (loans and advances to banks
R2 618 million, other assets (R3 276 million) and loans and advances
to customers R658 million).
- Certain customers within the Bank have agreements in place whereby
interest receivable or payable is calculated on the net balances of
the cheque deposits and cheque advances. During the year under review,
the Bank identified that the related cheque account balances owed or
receivable were also being reported on a net basis. All balances
within this portfolio were reassessed for appropriate presentation in
terms of IAS 32 and the Bank`s stated accounting policies, taking into
account contractual arrangements and current business practice applied
to these accounts. As a result, certain assets and liabilities
relating to these cheque accounts were reclassified so that these are
presented on a gross basis. This has resulted in the comparatives
being reclassified for 31 December 2010 (loans and advances to
customers R9 487 million, deposits due to customers (R9 487 million))
and 31 December 2009 (loans and advances to customers R10 845 million,
deposits due to customers (R10 845 million)).
Going concern
The directors assess the Group`s future performance and financial position on an
ongoing basis and have no reason to believe that the Group will not be a going
concern in the year ahead. For this reason these condensed annual consolidated
financial statements are prepared on a going concern basis.
Events after the reporting period
The directors are not aware of any events after the reporting period of 31
December 2011 and the date of authorisation of these summarised annual
consolidated financial statements as defined in IAS 10.
Auditors` report
Ernst & Young Inc. and PricewaterhouseCoopers Inc., Absa Bank Limited`s
independent auditors, have audited the consolidated annual financial statements
of Absa Bank Limited from which the condensed consolidated financial results
have been derived. The auditors have expressed an unqualified audit opinion on
the consolidated annual financial statements. The condensed consolidated
financial results comprise the condensed consolidated statement of financial
position at 31 December 2011, condensed consolidated statement of comprehensive
income, condensed consolidated statement of changes in equity and condensed
consolidated statement of cash flows for the year then ended, and selected
explanatory notes, excluding items indicated as unaudited. The audit report of
the consolidated annual financial statements is available for inspection at Absa
Bank Limited`s registered office.
On behalf of the board
G Griffin M Ramos
Chairman Chief Executive
Johannesburg
10 February 2012
Declaration of dividend number 12: 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 9,0%.
Notice is hereby given that preference dividend number 12, equal to 63% of the
average prime rate for 1 September 2011 to 29 February 2012, per Absa Bank
preference share has been declared for the period 1 September 2011 to 29
February 2012. The dividend is payable on Monday, 2 April 2012, to shareholders
of the Absa Bank preference shares recorded in the register of members of the
Company at the close of business on Friday, 30 March 2012.
The directors of Absa Bank confirm that the Bank will satisfy the solvency and
liquidity test immediately after completion of the dividend distribution.
Based on the current prime rate, the preference dividend payable for the period
1 September 2011 to 29 February 2012 would indicatively be 2 827,2 cents per
Absa Bank preference share.
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 preference dividend are applicable:
Last day to trade cum dividend Friday, 23 March 2012
Shares commence trading ex dividend Monday, 26 March 2012
Record date Friday, 30 March 2012
Payment date Monday, 2 April 2012
Share certificates may not be dematerialised or rematerialised between Monday,
26 March 2012, and Friday, 30 March 2012, both dates inclusive.
On Monday, 2 April 2012, the dividend will be electronically transferred to the
bank accounts of certificated shareholders who use this facility. In respect of
those who do not, cheques dated 2 April 2012 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, 2
April 2012.
On behalf of the board
DWP Hodnett
Acting Company Secretary
Johannesburg
10 February 2012
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.
Administrative information
These condensed annual consolidated financial statements are a summary of the
audited annual consolidated financial statements of the Bank, which were
prepared by Absa Group Financial Reporting under the direction and supervision
of the Financial Director, DWP Hodnett CA(SA). A copy of the audited annual
financial statements will be available from 30 March 2012, either on
www.absa.co.za or, on request, at the registered address of the Bank.
Absa Bank Limited
Registration number: 1986/004794/06
Authorised financial services and
registered credit provider (NCRCP7)
Incorporated in the Republic of South Africa
ISIN: ZAE000079810
JSE share code: ABSP
Registered office
7th Floor, Absa Towers West
15 Troye Street
Johannesburg, 2001
Postal address: PO Box 7735
Johannesburg, 2000
Telephone: (+27 11) 350 4000
Telefax: (+27 11) 350 4009
Email: groupsec@absa.co.za
Board of directors
Independent non-executive directors
C Beggs, BP Connellan, YZ Cuba,
SA Fakie, G Griffin (Chairman),
MJ Husain, PB Matlare,
TS Munday, SG Pretorius,
BJ Willemse
Non-executive directors
AP Jenkins(1), R Le Blanc(1),
EC Mondlane Jr(2), IR Ritossa(3)
Executive directors
DWP Hodnett (Financial Director), M Ramos (Chief Executive),
LL von Zeuner (Deputy Chief Executive)
(1)British (2)Mozambican (3)Australian
Transfer secretary
South Africa
Computershare Investor Services
Proprietary Limited
70 Marshall Street
Johannesburg, 2001
Postal address: PO Box 61051
Marshalltown, 2107
Telephone: (+27 11) 370 5000
Telefax: (+27 11) 370 5271/2
Sponsor
J.P. Morgan Equities Limited
No 1 Fricker Road, Cnr. Hurlingham Road,
Illovo, Johannesburg, 2196
Postal address: Private Bag X9936
Sandton, 2146
Telephone: (+27 11) 507 0300
Telefax: (+27 11) 507 0503
Auditors
PricewaterhouseCoopers Inc.
Ernst & Young Inc.
Shareholder contact information
Shareholder and investment queries about the
Absa Bank should be directed to the following areas:
Investor Relations
AM Hartdegen (Head of Investor Relations)
Telephone: (+27 11) 350 5926
Telefax: (+27 11) 350 5924
E-mail: Investorrelations@absa.co.za
Acting Company Secretary
DWP Hodnett
Email: david.hodnett@absa.co.za
Other Contacts
Group Media Relations
J Dludlu (Head of Group Communication)
Telephone: (+27 11) 350 3221
Group Finance
JP Quinn (Group Financial Controller)
Telephone: (+27 11) 350 7565
For more information on our results refer to our website:
Website address: www.absa.co.za
Date: 10/02/2012 07:30:02 Produced by the JSE SENS Department.
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