| Tue 21 Feb 2006, 7:00 | | Absa Group Limited - Profit and Dividend Announcem |
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ASA
AMAGB
Absa Group Limited - Profit and Dividend Announcement
ABSA GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1986/003934/06)
("Absa" or "the Group")
JSE share code: ASA
Issuer code: AMAGB
ISIN: ZAE000067237
AUDITED FINANCIAL RESULTS FOR THE NINE MONTHS ENDED 31 DECEMBER 2005
GROUP SALIENT FEATURES
Nine months ended Twelve
months
ended
31 December 31 March
2005 2004 2005
(Audited) (Unaudited) Change (Audited)
Income statement (Rm) (Pro forma) % (Restated)
*
Headline earnings 4 902 4 014 22,1 5 394
Profit attributable to equity 4 776 3 942 21,2 5 419
holders
Balance sheet (Rm)
Total assets 407 422 n/a 347 161
Loans and advances to customers 322 097 n/a 268 240
Deposits due to customers 300 298 n/a 251 984
Financial performance (%)
Return on average equity** 26,5 25,2 25,3
Return on average assets,
excluding 1,73 1,63 1,65
acceptances**
Operating performance (%)
Net interest margin on average 3,36 3,28 3,25
assets**
Net interest margin on average
interest-bearing assets** 3,77 3,69 3,70
Impairment losses on loans and
advances as % of average loans 0,26 0,54 0,52
and
advances to customers**
Non-performing advances as % of 1,7 2,4 2,2
loans and advances to customers
Non-interest income as % of
operating income 51,1 52,6 53,8
Cost-to-income ratio 58,0 57,5 56,6
Share statistics (million)
Number of shares in issue 666,9 655,1 655,1
Weighted average number of 662,1 650,5 652,1
shares
Weighted average diluted number
of 690,8 669,3 677,3
shares
Share statistics (cents)
Headline earnings per share 740,4 617,0 20,0 827,2
Diluted headline earnings per 710,9 600,7 18,3 797,9
share
Earnings per share 721,4 605,9 19,1 831,0
Diluted earnings per share 692,7 589,9 17,4 801,6
Dividends per share relating to
income for the period 295,0 n/a 295,0
Dividend cover (times) 2,5 n/a 2,8
Net asset value per share 3 890 3 577 8,8 3 569
Capital adequacy (%)
Absa Bank 10,7 11,5 11,4
Absa Group 11,3 12,1 12,0
* The comparatives for March 2005 have been restated for International
Financial Reporting Standards (IFRS) throughout the document.
** These ratios have been annualised owing to the nine month period.
GROUP INCOME STATEMENT
Twelve
months
Nine months ended ended
31 December 31 March
2005 2004 2005
(Audited) (Unaudited) (Audited)
(Pro forma) Change (Restated)
Rm Rm % Rm
Net interest income 9 647 7 924 21,7 10 431
Interest and similar income 23 212 21 445 8,2 26 937
Interest expense and similar
charges (13 565) (13 521) (0,3) (16 506)
Impairment losses on loans and
advances (569) (978) 41,8 (1 284)
9 078 6 946 30,7 9 147
Net fee and commission income 7 067 6 395 10,5 8 920
Fee and commission income 7 750 6 995 10,8 9 703
Fee and commission expense (683) (600) 13,8 (783)
Net insurance premium income 1 948 1 562 24,7 2 051
Insurance premium revenue 2 146 1 815 18,2 2 341
Premiums ceded to reinsurers (198) (253) 21,7 (290)
Net claims and benefits paid (797) (673) (18,4) (929)
Gross claims and benefits paid
on insurance contracts (913) (713) (28,1) (1 023)
Reinsurance recoveries 116 40 >100,0 94
Changes in insurance and
investment liabilities (1,026) (677) (51,6) (668)
Gains and losses from banking
and trading activities 781 596 31,0 870
Gains and losses from investment
activities 1 336 973 37,3 1 228
Other operating income 759 619 22,6 696
Net operating income 19 146 15 741 21,6 21 315
Operating expenses (12 216) (10 302) (13 708)
(18,6)
Operating expenses (11 438) (9 619) (18,9) (12 785)
Impairments (54) (104) 48,1 (118)
Indirect taxation (724) (579) (25,0) (805)
Share of profit of associated
and joint venture companies 101 48 >100,0 59
Operating profit before income 7 031 5 487 28,1 7 666
tax
Taxation expense (2 187) (1 486) (47,2) (2 172)
Profit for the period 4 844 4 001 21,1 5 494
Attributable to:
Equity holders of the Group 4 776 3 942 21,2 5 419
Minority interest 68 59 15,3 75
4 844 4 001 21,1 5 494
Headline earnings 4 902 4 014 22,1 5 394
GROUP INCOME STATEMENT - NINE AND TWELVE MONTHS INFORMATION
As a result of the Group"s change in year-end from March to December, management
has prepared, to facilitate the interpretation of the Group"s results for a
twelve month period ending 31 December, the following pro forma financial
information:
Nine months Three months Twelve
ended ended months
ended
31 December 31 March 31 December
2005 2005 2005
(Audited) (Unaudited) (Unaudited)
(Pro forma) (Pro forma)
(Restated) (Restated)
Rm Rm Rm
Net interest income 9 647 2 507 12 154
Interest and similar income 23 212 5 492 28 704
Interest expense and similar
charges (13 565) (2 985) (16 550)
Impairment losses on loans and
advances (569) (306) (875)
9 078 2 201 11 279
Net fee and commission income 7 067 2 525 9 592
Fee and commission income 7 750 2 708 10 458
Fee and commission expense (683) (183) (866)
Net insurance premium income 1 948 489 2 437
Insurance premium revenue 2 146 526 2 672
Premiums ceded to reinsurers (198) (37) (235)
Net claims and benefits paid (797) (256) (1 053)
Gross claims and benefits paid
on insurance contracts (913) (310) (1 223)
Reinsurance recoveries 116 54 170
Changes in insurance and
investment liabilities (1 026) 9 (1 017)
Gains and losses from banking 274 1 055
and trading activities 781
Gains and losses from investment
activities 1 336 255 1 591
Other operating income 759 77 836
Net operating income 19 146 5 574 24 720
Operating expenses (12 216) (3 406) (15 622)
Operating expenses (11 438) (3 166) (14 604)
Impairments (54) (14) (68)
Indirect taxation (724) (226) (950)
Share of profit of associated
and joint venture companies 101 11 112
Operating profit before income 7 031 2 179 9 210
tax
Taxation expense (2 187) (686) (2 873)
Profit for the period 4 844 1 493 6 337
Attributable to:
Equity holders of the Group 4 776 1 476 6 252
Minority interest 68 17 85
4 844 1 493 6 337
Headline earnings 4 902 1 380 6 282
DETERMINATION OF HEADLINE EARNINGS
Nine Twelve
Months months
ended ended
31 December 31 March
2005 2005
(Audited) (Audited)
(Restated)
Rm Rm
Headline earnings is determined
as follows:
Net income attributable to 4,776 5 419
shareholders
Adjustments for:
Net profit on disposal of (18) (12)
property and equipment
Net loss/(profit) on disposal of
available-for-sale assets and
strategic investments 130 (150)
Impairment costs
Available-for-sale and 14 30
strategic
investments
Goodwill impaired - 107
Headline earnings 4,902 5 394
GROUP BALANCE SHEET
31 December 31 March
2005 2005
(Audited) (Audited)
(Restated) Change
Rm Rm %
Assets
Cash, cash balances and balances 15 043 13 183 14,1
with central banks
Statutory liquid asset portfolio 16 289 14 384 13,2
Loans and advances to banks 4 602 3 528 30,4
Trading assets 22 830 21 351 6,9
Hedging derivative assets 1 016 600 69,3
Loans and advances to customers 322,097 268 240 20,1
Reinsurance assets 423 320 32,2
Other assets 6 762 7 563 (10,6)
Investments 12 759 13 599 (6,2)
Investments in associated
undertakings and joint ventures 895 607 47,4
Intangible assets 191 197 (3,0)
Property and equipment 3 451 3 209 7,5
Current tax assets 17 5 >100,0
Deferred tax assets 86 183 (53,0)
Clients" liabilities under
acceptances 961 192 >100,0
Total assets 407 422 347 161 17,4
Liabilities
Deposits from banks 28 431 24 370 16,7
Trading liabilities 19 397 20 028 (3,2)
Hedging derivative liabilities 2 004 1 610 24,5
Deposits due to customers 300 298 251 984 19,2
Current tax liabilities 438 493 (11,2)
Liabilities under investment
contracts 6 287 4 325 45,4
Policyholder liabilities under
insurance contracts 2,736 2 390 14,5
Borrowed funds 6 483 5 679 14,2
Other liabilities and sundry 11 824 10 726 10,2
provisions
Deferred tax liabilities 2 562 1 859 37,8
Liabilities to clients under
acceptances 961 192 >100,0
Total liabilities 381 421 323 656 17,8
Equity
Capital and reserves attributable
to equity holders:
Share capital 1 327 1 310 1,3
Share premium 1 875 1 611 16,4
Other reserves 622 383 62,4
Distributable reserves 21 931 19 969 9,8
25 755 23 273 10,7
Minority interest 246 232 6,0
Total equity 26 001 23 505 10,6
Total equity and liabilities 407 422 347 161 17,4
Contingent liabilities - banking 16 331 16 630 (1,8)
related
GROUP STATEMENT OF CHANGES IN EQUITY
31 December 31 March
2005 2005
(Audited) (Audited)
(Restated)
Rm Rm
Share capital 1 327 1 310
Opening balance 1 310 1 291
Prospective IFRS adjustment - treasury
shares Absa Life Limited (2) -
Shares issued 24 8
Consolidation of treasury shares held
by 1 -
Absa Life Limited
Consolidation of Absa Group Limited
Share (6) 11
Incentive Trust
Share premium 1 875 1 611
Opening balance 1 611 1 309
Prospective IFRS adjustment - treasury
shares Absa Life Limited (40) -
Shares issued 382 111
Elimination of treasury shares held by
Absa Life Limited 13 -
Consolidation of Absa Group Limited
Share (91) 191
Incentive Trust
Other reserves 622 383
Opening balance as previously reported 383 755
IFRS adjustments applied - 10
retrospectively
Movement in foreign currency
translation (130) 31
reserve
Movement in regulatory general credit
risk - (332)
reserve
Movement in available-for-sale
reserve 90 (75)
Movement in cash flow hedges reserve 97 (56)
Movement in insurance statutory reserve 11 30
Movement in associated undertakings and
joint ventures" retained earnings 101 (20)
reserve
Movement in share based payments 70 40
reserve
Distributable reserves 21 931 19 969
Opening balance as previously reported 19 969 15 995
IFRS adjustments applied - (423)
retrospectively
IFRS adjustments applied prospectively (301) -
Consolidation of Absa Group Limited
Share - (4)
Incentive Trust and other
Transfer to insurance statutory reserve (11) (30)
Transfer (to)/from associated
undertakings
and joint ventures" retained earnings (101) 18
reserve
Transfer from regulatory general
credit risk reserve - 332
Profit attributable to shareholders 4 776 5 419
Dividends paid during the period (2 401) (1 338)
25 755 23 273
Minority interest 246 232
Opening balance as previously reported 232 171
IFRS adjustments applied - 4
retrospectively
Other reserve movements (54) (18)
Minority share of profit 68 75
Total equity 26 001 23 505
GROUP CASH FLOW STATEMENT
Nine months Twelve months
ended ended
31 December 31 March
2005 2005
(Audited) (Audited)
(Restated)
Rm Rm
Net cash flow from operating activities 1 487 8 812
Net cash flow from/(utilised) in 1 429 (6 562)
investing activities
Net cash utilised in financing
activities (1 370) (2 526)
Net increase/(decrease) in cash and cash
equivalents 1 546 (276)
Cash and cash equivalents at the
beginning of the period 6 796 7 077
Effects of exchange rate changes on cash
on cash equivalents 1 (5)
Cash and cash equivalents at the end of
the period 8 343 6 796
PROFIT CONTRIBUTION BY BUSINESS AREA
Twelve
months
Nine months ended ended
31 December 31 March
2005 2004 2005
(Audited) (Unaudited) (Audited)
(Pro forma) Change (Restated)
Rm Rm % Rm
Banking operations
Retail banking 2 136 1 759 21,4 2 397
Absa Private Bank 153 152 0,7 221
Retail Banking Services 355 275 29,1 404
Flexi Banking Services 200 165 21,2 203
Absa Home Loans and 793 627 26,5 838
Repossessed
Properties
Absa Card 385 320 20,3 441
Small Business 250 220 13,6 290
Commercial banking 1 294 999 29,5 1 403
Business Banking Services 764 621 23,0 844
Absa Vehicle and Asset 530 378 40,2 559
Finance
Wholesale banking 669 554 20,8 843
African operations 90 62 45,2 71
Corporate centre (213) (97) >(100,0) (288)
Capital and funding centre (29) (75) 61,3 (159)
Total banking 3 947 3 202 23,3 4 267
Insurance, fiduciary and
investment operations 1 075 812 32,4 1 127
Costs relating to the Barclays
transaction (120) - >(100,0) -
Total headline earnings 4 902 4 014 22,1 5 394
PROFIT COMMENTARY
Sustained earnings growth
Absa Group Limited produced another good performance for the nine months under
review, with solid contributions from all the Group"s major business units.
Significant features of this performance included the Group"s ability to grow
lending and its customer base in a consumer-friendly domestic economic
environment with low levels of bad debts and buoyant equity markets.
As a result of the alignment of Absa"s year-end with that of Barclays PLC, the
reported results cover a period of only nine months. To facilitate evaluation
and interpretation, these results are compared with unaudited pro forma results
for the nine months ended 31 December 2004.
Headline earnings increased by 22,1% to R4 902 million in comparison with
headline earnings of R4 014 million for the corresponding period of the previous
financial year. Headline earnings per share increased by 20,0%, from 617,0 to
740,4 cents per share.
The Group delivered a return, on an annualised basis, of 26,5% on average
shareholders" equity (December 2004: 25,2%). A final dividend of 135 cents per
share has been declared, bringing the total dividend for the nine months to 295
cents per share. This compares favourably with the 295 cents per share declared
in respect of the twelve months ended 31 March 2005 and represents a dividend
cover of 2,5 times.
The Group has made good progress with the initiatives to deliver sustainable
future benefits envisaged as part of the transaction whereby Barclays PLC
acquired a controlling shareholding in Absa. As part of the second phase of this
transaction, Absa acquired the Barclays South Africa operations effective 1
January 2006.
Diluted headline earnings per share
The options issued to the Absa Group Limited Share Incentive Trust, the Absa
Share Ownership Trust (the trust established to facilitate Absa"s employee share
ownership programme), and Batho Bonke Capital (Proprietary) Limited (Absa"s
black economic empowerment partner) diluted headline earnings per share by 29,5
cents to 710,9 cents per share. Accordingly, the growth in fully diluted
headline earnings per share was 18,3% compared with the same period in the
previous financial year.
Accounting policies
Absa implemented the International Financial Reporting Standards (IFRS) with
effect 1 April 2005. The opening balance sheets at 1 April 2004 and 1 April 2005
have been restated accordingly. The income statement for the twelve months to
March 2005 has been restated, as has the pro forma unaudited results for the
nine months to December 2004.
However, it is important to note that selected areas of IFRS are only applied
prospectively in terms of the standards, resulting in figures still not being
100% comparable on a line-by-line basis. The standards that were prospectively
applied were detailed in Absa"s SENS announcement issued on 25 October 2005.
The Group"s results for the nine months ended 31 December 2005 have been audited
by the Group"s auditors, Ernst & Young and PricewaterhouseCoopers Inc. Their
audit report is available for inspection at the Group"s registered address, 3rd
Floor, Absa Towers East, 170 Main Street, Johannesburg, 2001.
Operating environment
Domestic demand conditions remained buoyant during the nine months ended
December 2005. Motor vehicles and other durable goods sales showed rapid growth.
Much of this was financed by credit and stimulated by a further 50 basis point
reduction in interest rates in April 2005. Consumers continued to take on
additional debt, pushing the debt-to-disposable income ratio up to 63,4% in
September 2005 - the highest level since 1990. This level is still considered
affordable in view of recent strong gains in real household income and the low
interest rate environment.
Real economic growth in 2005 is estimated to have averaged just less than 5%.
Household consumption expenditure grew at an estimated 6,7% (real growth), once
again providing a major boost to economic growth. Although gross fixed capital
formation growth remained strong, the growth rate of the production side of the
economy again failed to match the increase in expenditure, as was evidenced by
the current account deficit, which widened to around 5% in the latter part of
2005.
Although high and rising commodity prices should support the mining sector, some
weakness could again impact agriculture and manufacturing production if the
global economy slows and rand strength persists. The stronger rand and oil
prices coming off their earlier peaks also benefited the inflation outlook.
However, the economy has been running at very high levels of capacity
utilisation despite a strong increase in fixed capital formation. This increases
the possibility of a pickup in inflation later in 2006. In addition, the rising
current account deficit and still very brisk pace of spending and credit uptake
suggest that interest rates may stay on hold for a more prolonged period than
initially expected.
Group performance
Net interest income increased by 21,7%, from R7 924 million for the nine months
to 31 December 2004 to R9 647 million for the nine months ended 31 December
2005.
Credit demand remained strong, particularly in the retail environment. Mortgage
loan and credit card growth were the main contributors to the overall retail
loan growth of 24,7% for the nine months. Commercial and wholesale loans grew by
15,9% and 13,8% respectively. Total advances growth for the nine months was
20,1%, or 26,7% on an annualised basis. In spite of the continued pressure on
lending margins in selected markets and an increased reliance on wholesale
funding, the Group"s margin in respect of average assets improved from 3,25% in
March 2005 to 3,36% for the nine months to December 2005. The improved margin
can be attributed primarily to the implementation of IFRS, which requires
certain fee income directly related to the acquisition of loans to be treated as
part of the net interest margin.
The bad debt charge of R569 million for the period was significantly lower than
the R978 million charge for the same period of 2004. The ratio of non-performing
advances to total advances declined to 1,7%, the lowest in the history of the
Group. On an annualised basis, the Group"s impairment ratio (income statement
charge as a percentage of average advances) for the period was only 0,26%
compared with the 0,35% and 0,52% reported in September 2005 and March 2005
respectively. This low charge is underpinned by the further improvement in the
number and value of non-performing loans and increased success in the recovery
of previously written-off amounts.
The Group"s credit management policies, procedures and techniques are sound and
will be further enhanced by continuing to apply best practice. The levels of
provisions held in the Group are prudent and adequately cover the risk of
uncollectable amounts.
Approximately 77% of non-interest income was derived from transaction-based fees
and commissions. Other major sources included life and short-term insurance
activities (7,7%) and treasury trading (7,4%). Fee and commission income, before
and after IFRS reclassifications, grew by 16,8% and 10,8% respectively.
Transaction volume growth and the continued increase in retail customer numbers
were the main growth drivers. Revenue from treasury trading activities was 25,3%
higher than in the same period of 2004. The Group"s insurance activities
continued to perform well, assisted by the growth in new business, favourable
underwriting conditions, operational efficiencies and strong growth in the
equity portfolio.
Operating expenditure increased by 18,9% compared with the corresponding nine
months of 2004. Areas contributing to the relatively high cost growth included
the expansion of the Group"s branch and automated teller machine (ATM) network,
increased business volumes, expenditure relating to the Barclays transaction,
regulatory and compliance-related activities, as well as staff costs. The
increased staff costs emanate from the Group"s emphasis on customer service in
an environment where banking transactions and activities increased dramatically.
Barclays alignment and synergies costs, the winding-up of the Group"s
international operations as well as performance-related incentives also resulted
in increased costs.
The Group"s cost-to-income ratio is in line with the ratio reported for March
2005 if the costs relating to the Barclays transaction and synergy initiatives
are excluded. However, if the Barclays related costs are included, the cost-to-
income ratio deteriorated from 56,6% in March 2005 to 58,0% in December 2005
owing to top-line income growth, at 17,9%, lagging expenditure growth over the
period.
The earnings uplift resulting from exploiting synergies inherent to the Barclays
transaction will become increasingly evident, although the net earnings impact
will remain negative during 2006. Benefits are expected to exceed expenditure
during 2007. Management believes it remains well placed to deliver R1,4 billion
pre tax per annum in sustainable benefits four years (mid 2009) after the
completion of the transaction.
Segmental reporting
Retail banking - Headline earnings up 21,4%
Retail banking increased its headline earnings contribution to R2 136 million
(December 2004: R1 759 million), with strong performances from all customer
segment and product business units. Retail Banking Services and Absa Home Loans
(net of repossessed properties) performed strongly, growing headline earnings
for the nine months by 29,1% and 26,5% respectively. Although the earnings of
the private bank did not increase from those of the comparable period, this
entity met expectations after taking account of the restructuring exercise. The
restructuring enables the delivery of an enhanced service offering to a larger
number of customers.
The strong performance of retail banking as a whole resulted from a buoyant
consumer and property market and a low interest rate environment. Net advances
were 24,7% higher than those recorded for the year ended 31 March 2005. The main
driver was mortgage loan growth, up 28,4% from March 2005, which was well-
supported by credit card and personal loan growth of 28,5% and 26,0%
respectively.
Increased transaction volumes continued to drive non-interest income growth.
Price increases contributed moderately as they were kept well below the
inflation rate. The growth in transaction volumes emanated from the increased
activities of existing customers and growth in the retail customer base from 6,9
million in March 2005 to 7,6 million in December 2005.
The credit impairment charge in the retail market declined to a historical low
of 0,11%. This charge reflects the quality of the advances portfolio and the
improved net worth of customers, partly owing to the strong growth in
residential property values.
During the nine months under review, 43 new staffed outlets were opened, mainly
in previously disadvantaged areas, and a further 48 extensively upgraded. An
additional 757 ATMs were added to the delivery footprint. This expansion of the
Group"s delivery reach enhances the sustainability of future revenue growth and
provides access to financial services to a far greater proportion of the South
African population.
Commercial banking - Headline earnings up 29,5%
Commercial banking increased its headline earnings contribution to R1 294
million. Profit drivers included advances growth of 15,9% (mainly in the large
and medium business segments and asset and vehicle financing), improved credit
quality and returns generated from property related investments.
Business Banking Services experienced some margin pressure on selected advance
and deposit products, but was able to grow its customer base and market share.
Despite the solid advances growth of 17,9%, the 0,53% credit impairment charge
was lower than the March 2005 ratio of 0,92%. Investments in a number of listed
property vehicles contributed handsomely to non-interest income.
During recent years, Absa Vehicle and Asset Finance (AVAF) has extended its
reach beyond its traditional vehicle finance markets into financing other
classes of commercial moveable assets. Resulting from this strategy, office
automation finance, in particular, experienced solid growth in the period under
review.
AVAF benefited from strong growth in new vehicle sales owing to low interest
rates and a lack of vehicle price increases. This assisted AVAF in increasing
its market share in the new vehicle segment. In addition to this AVAF retained
its leadership position in the pre-owned vehicle market.
Wholesale banking - Headline earnings up 20,8%
The demand for credit in the large corporate market continues to be sluggish,
although there are indications that capacity utilisation is reaching high
levels. The Group"s domestic operations nevertheless achieved advances growth of
13,8% by focusing on specialised and project finance. Transaction income
benefited from increased deal flows in merchant banking, particularly in the
areas of empowerment and project finance. Revenue from treasury trading
activities was strong, particularly during the last quarter, as a result of
increased customer flows. Investment banking posted R101 million in respect of
gains on private equity investments.
The Group"s international operations in Singapore and Asia will be closed by the
end of the first quarter of 2006 and the London office significantly scaled
down. This contributed to a loss of R39 million being posted by these entities
for the period under review. Bankhaus Wolbern performed well and posted earnings
of R99 million for the period. Subsequent to 31 December 2005, the Group has
agreed to sell Bankhaus Wolbern conditional on, inter alia, German and South
African regulatory approval.
Other African operations - Headline earnings up 45,2%
The Group"s African operations outside of South Africa performed satisfactorily,
with the Tanzanian and Namibian operations leading the way. Although the
contribution from the Group"s African operations remains modest, the returns in
this environment are potentially attractive and support the Group"s rationale
for further expansion in Africa.
Financial services - Headline earnings up 32,4%
The Group"s bancassurance activities performed exceptionally well, with very
strong operational and underwriting performances by both the life assurance and
short-term insurance operations. Strong equity markets also contributed
handsomely.
Absa Life"s earnings were mainly driven by significant sales success,
particularly in respect of retail credit risk business. Favourable weather
conditions and claims management efficiencies contributed to good profitability
on short-term property insurance.
Absa Brokers made strong inroads into the short-term market, especially personal
lines business and e-delivery. Absa Trust achieved record levels of trust asset
values under management and also experienced significant growth in terms of the
inflow of wills.
Current focus areas include further product delivery integration with Absa
branches, expansion of the product range to satisfy customer needs, customer
retention and increased cross-selling.
Net asset value and capital adequacy
The net asset value of the Absa Group increased by 8,8% from 3 577 cents per
share to 3 890 cents per share during the period under review. This modest
increase follows higher dividend payouts during the period to reduce the surplus
capital in the Group to a more acceptable level.
On the basis of the prescribed consolidated capital requirements of the SARB,
the Group"s capital stood at 11,3% of risk-weighted assets at 31 December 2005
(March 2005: 12,0%). The Group"s primary capital ratio was 8,6% (March 2005:
9,1%) and its secondary capital ratio was 2,7% (March 2005: 2,9%).
Prospects
Consumer credit demand, particularly in the retail environment, is expected to
remain strong during 2006, albeit not as buoyant as in the past two years.
Inflation is expected to remain within the government"s target range of 3-6% and
interest rates are likely to remain stable over the next year.
Interest margins will probably contract further over the next year, mostly as a
result of the competitive landscape and increased reliance on wholesale funding.
Credit quality should remain good, but the charge to the income statement is
expected to edge upwards to more sustainable levels.
It is in this positive economic environment, which is particularly favourable to
retail banking, that the Group is expected to continue to prosper.
On behalf of the board
D C Cronje S F Booysen
Chairman Group chief executive
21 February 2006
Declaration of ordinary dividend no 39
Shareholders are advised that a final dividend of 135 cents per ordinary share
was declared on Tuesday 21 February 2006, and is payable to shareholders
recorded in the register of members of the company at the close of business on
Friday, 17 March 2006.
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, 10 March 2006
Shares commence trading ex dividend Monday, 13 March 2006
Record date Friday, 17 March 2006
Payment of dividend Monday, 20 March 2006
Share certificates may not be dematerialised or rematerialised between Monday,
13 March 2006, and Friday, 17 March 2006, both dates inclusive.
On Monday, 20 March 2006, 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 20 March 2006 will be posted on or about that
date. The accounts of shareholders who have dematerialised their shares (which
are held at their central securities depository participant or broker) will be
credited on Monday, 20 March 2006.
On behalf of the board
W R Somerville
Group secretary
21 February 2006
Enquiries:
Jacques Schindehutte +27 (11) 350-4850
Eric Wasserman +27 (11) 350-5887
Issued by:
Sue Steyn
Investor Relations
Absa Group Limited
4th floor, Absa Towers East, 170 Main Street, Johannesburg.
Tel: +27 (11) 350-4394. Fax: +27 (11) 350-6487
E-mail: sues@absa.co.za
Date: 21 February 2006
Lead sponsor to Absa
Merrill Lynch South Africa (Proprietary) Limited
Co-sponsor
Absa Corporate and Merchant Bank - Corporate Finance, a division of Absa Bank
Limited
Date: 21/02/2006 07:00:19 AM Produced by the JSE SENS Department
