|
Absa - Rating affirmation: Absa`s long- and short-term ratings affirmed and the
outlook changed from stable to positive
18 October 2002
Current credit ratings: Long-term: zaAA minus; Outlook: Positive; Short-term:
zaA1 plus.
CA-Ratings announces that it has affirmed the counterparty credit ratings of
Absa. The long-term rating of Absa is zaAA minus and the short-term rating is
zaA1 plus. The outlook was changed to positive supported by the improved
structure of the balance sheet, continued improvement in the performance of the
core operations of the bank and adequate asset quality. The continued difficult
global economy and weakening credit strength of international corporates and the
likely impact thereof on South African banks may lengthen the time for an
improvement in Absa`s credit ratings.
The ratings of Absa reflect its strong domestic market position and full range
of banking products.
Absa is one of the largest commercial banks in Africa, with assets at March 2002
in excess of R247 billion and leading retail and business banking platforms
while the corporate banking activities are experiencing above average growth.
These strengths have enabled the bank to consistently grow the earnings of its
core businesses over the past years.
The geographic diversity of the group remained almost static over the past year
and the strong focus on the southern African market is expected to remain part
of its strategy. Absa is expected to selectively expand into Africa with the
focus on generating hard currency earnings through trade and commodity finance.
At March 2002 the bank`s capitalisation was acceptable in regulatory terms at
10,2%. The Tier 1 capital ratio stood at 5,7% and the Tier 2 ratio at 4,5%. The
ratio improved subsequently through the build-up of reserves. The internal
capital generation coupled with the conversion of subordinated loans of R1,6
billion should strengthen the ordinary equity base of the bank over the medium
term.
The flight to quality following the crises in the small bank market since the
beginning of the year has diversified Absa`s funding base and improved the key
liquidity ratios. However the continuous shortening of the deposit market in SA
might further increase the asset and liability maturity mismatch of the bank.
The asset quality of the bank has been underpinned by its geographic and
industry diversification in South Africa and its large proportion of residential
mortgage loans. Absa Bank`s non-performing loans are lower than previously and
provision coverage has improved over the last year. The quality of domestic
loans is expected to be influenced by the increases in interest rates but the
likely impact is not yet clear. Client concentrations, common to SA banks, might
increase with the reduction in number of local and foreign banks in the country.
Although Absa has reduced its international exposures, international corporate
failures might impact on its asset quality. In any event, asset growth is
expected to be moderate.
The restructuring of the bank into business units continues to have a
significant beneficial impact on the core performance of the group. Revenue
growth has been consistent and of sound quality with net interest income
contributing more than 50% while commissions and fees are mainly of an annuity
transactional nature.
Improvement in efficiencies should reduce the cost-income ratio to below 60%
over the near term.
Inquiries: Elizma Brooks, CA-Ratings (2711 442-4233.
Issued by: Willie Roux, Absa Group Investor Relations (2711 350-4061);
willier@absa.co.za.
Date: 18/10/2002 12:30:00 PM Produced by the JSE SENS Department
| Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information. | |||||||||||||
| Other Profile Group sites: FundsData Online (unit trust data) | Profile Group corporate site | |||||||||||||
| [ Terms of Use | Privacy Policy | PAIA manual | FAQs/Help | Site Map | © Copyright Reserved 2026 ] | |||||||||||||
|
|||||||||||||
