| Mon 28 May 2001, 0:00 | | Absa Group - Profit And Dividend Announcement |
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ABSA GROUP LIMITED
SALIENT FEATURES OF THE GROUP RESULTS
Year ended 31 March
2001 2000 Change %
Headline earnings (Rm) 2,456 1,988 23.5
Headline earnings per share (cents) 378.7 310.3 22.1
Dividends per share (cents) 116.0 96.5 20.2
Dividend cover (times) 3.3 3.2
Total advances (Rm) 156,396 144,824 8.0
Net asset value per share (cents) 2,106 1,840 14.5
Selected ratios
Return on average shareholders' funds (%) 19.3 17.1
Return on average assets, excluding acceptances (%) 1.32 1.16
Net interest margin (%) 4.23 3.99
Charge for bad and doubtful advances (%) 1.09 1.21
Non-interest income as % of operating income 44.9 43.6
Cost-to-income ratio (%) 63.0 63.5
Capital to risk-weighted assets (%) 11.2 10.9
GROUP INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH
2001 2000 Change
Rm Rm %
Interest income 22,571 22,708 (0.6)
Interest expense (14,708)(15,843) 7.2
Net interest income 7,863 6,865 14.5
Charge for bad and doubtful advances (1,643) (1,707) 3.7
Income from lending activities 6,220 5,158 20.6
Non-interest income 6,408 5,317 20.5
Operating income 12,628 10,475 20.6
Operating expenditure (8,990) (7,739) (16.2)
Net income before exceptional items 3,638 2,736 33.0
Exceptional items:
Regulatory increase in general provision
for bad and doubtful advances - (564) -
Net income before taxation 3,638 2,172 67.5
Taxation (1,120) (615) (82.1)
Net income after taxation 2,518 1,557 61.7
Share of associated companies'
retained income 35 36 (2.8)
Attributable to outside shareholders (101) - -
Income attributable to shareholders 2,452 1,593 53.9
Headline earnings 2,456 1,988 23.5
Determination of headline earnings
Net income attributable to shareholders 2,452 1,593
Adjustments for:
Regulatory increase in general provision
for bad and doubtful advances (after tax) - 395
Goodwill written off 12 -
Net profit on disposal of subsidiary (8) -
Headline earnings 2,456 1,988
Number of shares in issue (000s) 648,547 643,029
Weighted average number of shares in issue (000s) 648,547 640,759
GROUP BALANCE SHEET AT 31 MARCH
2001 2000 Change
Rm Rm %
Assets
Cash and short-term assets 6,402 6,557 (2.4)
Short-term money market assets 10,462 4,395 >100
Liquid Assets and other securities 10,642 11,687 (8.9)
Advances 156,396 144,824 8.0
Other assets 4,441 2,848 55.9
Investments 2,671 2,835 (5.8)
Associated companies 332 281 18.1
Property and equipment 2,803 2,842 (1.4)
Intangible assets 164 74 >100
Deferred taxation 198 - >100
Client liabilities under acceptances 2,244 1,118 >100
Total assets 196,755 177,461 10.9
Liabilities
Deposits and current accounts 167,736 153,541 9.3
Deferred taxation 2,007 1,759 14.1
Taxation 451 84 >100
Provisions for liabilities and charges 6,044 5,563 8.7
Insurance funds 1,163 972 19.7
Subordinated debt 2,962 2,591 14.3
Liabilities to clients under acceptances 2,244 1,118 -
Total liabilities 182,607 165,628 10.3
Shareholders' funds
Share capital 1,297 1,286 0.9
Share premuim 1,532 1,532 -
Reserves 10,829 9,015 20.1
Shareholders' funds 13,658 11,833 15.4
Minority interest 490 - -
Total liabilities and shareholders' funds 196,755 177,461 10.9
Contingencies 14,198 11,471 23.8
GROUP STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS
Share
capital Non-
and distributable Distributable
premium reserves reserves Total
Rm Rm Rm Rm
Balance at 31 March 1999 3,476 435 7,534 11,445
Foreign currency translation
effects - (2) - (2)
Transfer to insurance
contingency reserve - 4 (4) -
Unrealised gains on
investments held by
short-term insurance company - 86 - 86
Share of associated companies'
retained earnings - 43 (36) 7
Net income attributable to
shareholders - - 1,593 1,593
Goodwill on acquisition of
subsidiaries (658) - - (658)
Dividends declared - - (638) (638)
Balance at 31 March 2000 2,818 566 8,449 11,833
Shares issued 11 - - 11
Foreign currency translation
effects - 157 (20) 137
Transfer to insurance
contingency reserve - 9 (9) -
Unrealised losses on investments
held by short-term insurance
company - (18) - (18)
Share of associated companies'
retained earnings - 35 (35) -
Net income attributable to
shareholders - - 2,452 2,452
Dividends declared - - (757) (757)
Balance at 31 March 2001 2,829 749 10,080 13,658
GROUP CASH FLOW STATEMENT
Year ended Year ended
31 March 31 March
2001 2000
Rm Rm
Net cash movement from operating activities (2,088) 1,945
Net cash inflow from operating activities 5,268 4,007
Net decrease in operating funds (6,650) (1,714)
Taxation paid (706) (348)
Cash movement in investment activities 1,285 (1,799)
Cash flows from financing activities 511 750
Other movements 137 (2)
Increase/ (decrease) in cash and cash
equivalents (155) 894
Cash and short-term assets at beginning
of year 6,557 5,663
Cash and short-term assets at end of year 6,402 6,557
PROFIT CONTRIBUTION BY BUSINESS AREA
2001 2000 Change
Rm Rm %
Retail banking 1,362 947 43.8
Commercial bank 1,020 683 49.3
Bankfin 210 214 (1.9)
MLS Bank 56 50 12.0
Unifer 49 - -
Africa 27 - -
Wholesale banking 604 538 12.3
Domestic operations 482 438 10.1
International operations 122 100 22.0
Total banking 1,966 1,485 32.4
Insurance and financial services 445 515 (13.6)
Other 45 (12) >100
Total headline earnings 2,456 1,988 23.5
COMMENTARY
Earnings and dividend announcement
We are pleased to report excellent results for the year ended 31 March 2001.
Headline earnings increased by 23,5% to R2 456 million (378,7 cents per
share) compared to R1 988 million (310,3 cents per share) of the previous
financial year.
This increase has been derived from all the major business units within the
Group, with the retail banking business unit performing exceptionally well.
The return on average shareholder funds improved from 17,1% to 19,3%.
A final dividend of 72 cents per share (2000: 59 cents) has been declared,
bringing the total dividend to shareholders for the year to 116 cents per
share (2000: 96,5 cents). This is an increase of 20,2% on the previous year.
Operating environment
The operating and economic environment was marked by a moderate increase in
the demand for credit. This was particularly evident from demand for
mortgage, credit card and instalment finance products. Lending to the
corporate sector, however, remained low. Private sector credit extension
increased by 9,4% year-on-year, compared to 8,2% of the previous year.
The stable interest rate environment, reflecting the lowest interest rates
in twelve years, impacted favourably on the ability of consumers to meet
their financial obligations. Personal indebtedness has also continued to
decline as a result of tax concessions, a declining inflation rate and
relatively low interest rates.
Bank lending margins remained under pressure in the face of sustained
intense competition, while banks also absorbed the 25 basis point increase
in the repo rate that came into effect during October 2000.
Strategic Acquisitions
The Group made a successful entry into microlending through its acquisition
of a 51% interest in UniFer. This stake was marginally increased to 53%
during the year. A more than adequate return was achieved on this
investment, in spite of the negative impact of Government's announcement to
terminate salary deductions via the Persal system from July 2001.
Absa acquired a 70% stake in the National Bank of Commerce Limited (NBC) in
Tanzania on 1 April 2000 and thereafter disposed of 15% of the shares to the
International Finance Corporation to end with a 55% shareholding. The
contribution from this acquisition in its first year demonstrates the
potential that can be unlocked in selected African countries.
Because of the inclusion of the results of UniFer and NBC for the first
time, year-on-year comparisons are somewhat distorted. The joint
contribution of these subsidiaries, after deducting appropriate funding
costs relating to these investments, was R 67,1 million for the year under
review.
REVIEW OF OPERATIONS
The Group successfully maintained net interest margins at the same level as
the previous year for its traditional business despite the margin pressure
caused by the intense competition for most products. This was achieved by
successful asset and liability management initiatives and improved service
levels that mitigated the impact of the competitive business environment.
Most importantly, the Group was able to uphold the quality of its advances
book because of the success of the credit re-engineering initiative that was
conducted over the past two years. The net interest rate margin improved
marginally from 3,99% to 4,02%, while the higher margins obtained from micro
lending further improved this ratio to 4,23%.
The healthy growth of 14,1% in retail advances was partially offset by a
decline in wholesale advances of 7,7%. Total net advances increased by 8,0%
during the year. Net interest income increased by 14,5% from R6 865 million
to R7 863 million.
Non-performing advances to total advances improved from 4,9% in March 2000
to 4.4% in March 2001. This improvement is also reflected in the 3,7%
decrease in the charge for bad and doubtful advances during the year. The
bad debt ratio of the Group improved from 1,21% to 0,89% if one excludes the
effect of the new acquisitions. The higher bad debt provisions relating to
microlending increased this ratio to 1,09% for the Group.
Non-interest income increased by 20,5% and represents 44,9% of total income
- up from 43,6% the previous year. Of total non-interest income
approximately 70,0% is annuity-based and these fee and commission earnings
grew by 37,5% for the year under review. A greater appetite for risk,
following the upgrading of technology and investment in people, resulted in
trading earnings growth of 64,0%. The risk/reward profile of the Group in
respect of trading activities is still well within the approved risk
profile.
The cost-to-income ratio improved from 63,5% to 63,0% for the year under
review. Operating expenditure increased by 16,2% (or 9,5% if UniFer and
NBC are excluded) in support of the Group's focus on income growth and
service quality improvements.
The Group's ratio of capital to risk-weighted assets was 11,2% at 31 March
2001, while that of Absa Bank Limited was 10,9%. This is well above the
current statutory minimum requirement of 8,0% and in excess of the 10,0%
proposed by the South African Reserve Bank.
Accounting policies
Except for new accounting policies, including goodwill, intangible assets,
related party transactions and provisions which are stated to comply with
new statements of Generally Accepted Accounting Practice, the accounting
policies are consistent, in all material respects, with those of the
previous year.
STRATE
In accordance with the initiative of the JSE Securities Exchange South
Africa to transfer all listed companies to an electronic share transaction
settlement environment, Absa will be moving onto the STRATE system on 16
July 2001. A letter has been mailed to shareholders in this regard.
Shareholders are invited to make use of the Absa branch network to hand in
their share certificates for dematerialisation onto the STRATE system.
Prospects
Absa anticipates a stable economic environment for the duration of the 2002
financial year. Underlying inflationary pressures are expected to decline
and this is expected to lead to a decline in interest rates towards the end
of the year. This, in turn will facilitate an increase in the demand for
credit and impact positively on customer default ratios.
Domestic credit extension is forecast to grow by 11,1% compared to 9,4% of
the 2001 financial year. The stimulus for growth is expected to be consumer
spending across the board that will be most visible in the areas of
mortgages, leasing finance and credit cards. Overdraft and loan credit,
which is related more to investment and trade finance, is forecast to remain
subdued.
The establishment of the new customer- and product-focused strategic
business units will improve customer service and retention. The focus on
specific customer needs and the delivery of customised product offerings
should allow the Group to maintain its position in the market.
The Group is confident that the growth momentum of the past year will be
sustained in the next year.
On behalf of the board
D C Cronj E R Bosman
Chairman Group Chief Executive
28 May 2001
Declaration of ordinary dividend no 29
Notice is hereby given that a final dividend of 72,0 cents per ordinary
share has been declared and is payable to shareholders registered in the
books of the company at the close of business on Friday, 15 June 2001.
The share transfer register will not be closed for purposes of this
dividend.
On 29 June 2001, the dividend will be electronically transferred to the bank
accounts of shareholders that utilise this facility. In respect of those
who do not, cheques dated 29 June 2001 will be posted on or about that date.
On behalf of the board
W R Somerville
Group Secretary
28 May 2001
