| Thu 5 Jun 2003, 12:10 | | Gensec deal is on Absa's radar |
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June 5, 2003
By Edward West
Cape Town - Absa Group was interested in a deal involving all or part of Sanlam subsidiary Gensec Bank, Rupert Pardoe, deputy chief executive of Absa, said yesterday.
Speaking at an analysts presentation, Pardoe said last year's talks about a "merger of equals" had not worked from Absa's point of view because the group's existing bancassurance model was working well and a case could not be made that such a merger would add value.
However, he expected discussions would still take place about a distribution agreement with Sanlam. A decision on Absa's interest in Gensec was likely in a few weeks, he said.
Sanlam has previously indicated that the future of its treasury, risk management, arbitrage and investment banking subsidiary would depend on the outcome of talks with Absa.
Gensec's operating income contribution to Sanlam fell 41 percent to R112 million last year after it was hit by the weakness in the equity markets.
Speaking on shareholder issues, Pardoe said the sale of shares by the Mineworkers Pension Fund had depressed Absa's share price last year, but the overhang now appeared to have closed.
Last year the fund opted out of its stake in Universa, a holding company which owns 23 percent of Absa. The fund held 60 million Absa shares and was likely to retain about 30 million shares.
The biggest contributor to headline earnings in the year to March was commercial banking, which made up 30
.4 percent.
Personal banking contributed 28.5 percent, wholesale banking 26.2 percent and financial services 17.2 percent.
In the year ahead, most of Absa Group's growth would come from personal advances, as the corporate market was still depressed. The bank was confident it could sustain the current level of advances.
The possibility of interest rate cuts of up to 300 basis points this year could depress margins slightly.
In the personal advances book, core competitive advantages that would be leveraged were increasing the group's share of the black market, providing more accessible financial services and enhancing cross-selling, the electronic origination of home loans, a focus on wealth management, further efficiency and distribution improvements and returns.
Financial targets the bank hoped to achieve by financial 2005 were sustainable earnings growth, a bad debt ratio of below 1 percent, and a return on equity of 23 percent - it was 21.4 percent in the past year barring the PSG and Banco Austral acquisitions.
Absa also wants to sustain the contribution of non-interest income at more than 50 percent of total income, and drive the cost-to-income ratio down to the mid-50s from its current level of just under 60 percent.
Absa shares gained R1.25 to close at R36 yesterday
