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JSE ABSP
ABSP
ABSP - Absa Bank Limited - Audited Annual Financial Results For Twelve Months
Ended 31 December 2006 and dividend declaration
ABSA BANK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1986/004794/06)
ISIN: ZAE000079810
JSE share code: ABSP
(Absa Bank)
ABSA BANK: PROFIT AND DIVIDEND ANNOUNCEMENT
AUDITED ANNUAL FINANCIAL RESULTS FOR TWELVE MONTHS ENDED 31 DECEMBER 2006
BANK SALIENT FEATURES
Twelve months Nine months
ended ended
31 December 31 December
2006 2005*
(Audited) (Audited)
Income statement (Rm)
Headline earnings** 5 861 3 443
Profit attributable to ordinary equity 6 051 3 431
holders of the Bank
Balance sheet (Rm)
Total assets 453 726 376 687
Loans and advances to customers 368 320 292 955
Deposits due to customers 348 934 289 113
Financial performance (%)
Return on average equity 25,1 22,8
Return on average assets 1,42 1,31
Loans-to-deposits ratio 105,6 101,3
Operating performance (%)
Net interest margin on average 3,42 3,29
assets
Net interest margin on average 3,71 3,64
interest-bearing assets
Impairment losses on loans and 0,44 0,27
advances as % of average loans and
advances to customers
Non-interest income as % of total 45,4 46,3
operating income
Cost-to-income ratio 58,1 62,5
Effective tax rate, excluding 28,4 30,1
indirect taxation
Share statistics (million)
(including "A" ordinary shares)
Number of shares in issue 337,3 332,9
Weighted average number of shares 336,3 321,0
Weighted average diluted number of 336,3
shares 321,0
Share statistics (cents)
Headline earnings per share 1 742,5 1 072,6
Diluted headline earnings per share 1 742,5 1 072,6
Earnings per share 1 799,0 1 068,8
Diluted earnings per share 1 799,0 1 068,8
Dividends per ordinary share relating 591,1
to income for the year/period 1 309,7
Dividend cover (times) 2,9 0,8
Net asset value per share 7 630 6 545
Tangible net asset value per share 7 586 6 508
Capital adequacy (%)
Absa Bank 12,3 10,7
*The comparatives for the nine months ended 31 December 2005 have been restated
for the reclassification of certain assets and liabilities as well as the
reclassification of interest and dividends on fair value through profit and loss
assets. The comparatives have been restated throughout. See section on
"Reclassifications" below.
**Excludes R73 profit attributable to preference equity holders of the Bank.
BANK INCOME STATEMENT
Twelve months Nine months
ended ended
31 December 31 December
2006 2005
(Audited) (Audited)
Rm Rm
Net interest income 14 184 8 765
Interest and similar income 36 551 22 000
Interest expense and similar charges (22 367) (13 235)
Impairment losses on loans and advances (1 515) (561)
12 669 8 204
Net fee and commission income 9 434 6 348
Fee and commission income 9 468 6 364
Fee and commission expense (34) (16)
Gains and losses from banking and
trading activities 1 274 759
Gains and losses from investment 169 44
activities
Other operating income 897 406
Net operating income 24 443 15 761
Operating expenditure (15 943) (10 919)
Operating expenses (15 070) (10 196)
Impairments (71) (54)
Indirect taxation (802) (669)
Share of retained earnings of 48 69
associated undertakings and joint
ventures
Operating profit before income tax 8 548 4 911
Taxation expense (2 424) (1 480)
Profit for the year/period 6 124 3 431
Attributable to:
Ordinary equity holders of the Bank 6 051 3 431
Preference equity holders of the Bank 73 -
Minority interest 0 -
6 124 3,431
Headline earnings 5 861 3 443
DETERMINATION OF HEADLINE EARNINGS
Twelve months Nine months
ended ended
31 December 31 December
2006 2005
(Audited) (Audited)
Rm Rm
Headline earnings is determined as
follows:
Profit attributable to ordinary equity 6 051 3 431
holders of the Bank
Adjustments for:
Net profit on disposal of property and (11) (17)
equipment
Net (profit)/loss on disposal of (184) 15
available-for-sale assets and strategic
investments
Impairment costs 5 14
Associated undertakings and joint 10 -
ventures
Available-for-sale assets and strategic (5) 14
investments
Headline earnings 5 861 3 443
BANK BALANCE SHEET
31 December 31 December
2006 2005
(Audited) (Audited) Change
Rm Rm %
Assets
Cash, cash balances and balances 12 022 11 334 6,1
with central banks
Statutory liquid asset portfolio 20 829 16 219 28,4
Loans and advances to banks 20 833 19 912 4,6
Trading assets 17 711 23 484 (24,6)
Hedging assets 672 379 77,3
Loans and advances to customers 368 320 292 955 25,7
Loans to Group companies 1 728 2 058 (16,0)
Loans to holding company 1 301 1 402 (7,2)
Other assets 3 151 3 441 (8,4)
Investments 2 839 1 548 83,4
Investments in associated 601 533 12,8
undertakings and joint ventures
Intangible assets 147 120 22,5
Property and equipment 3 509 3 247 8,1
Deferred tax assets 63 55 14,5
Total assets 453 726 376 687 20,5
Liabilities
Deposits from banks 39 236 28 400 38,2
Trading liabilities 15 499 20 915 (25,9)
Hedging liabilities 1 898 461 >100,0
Deposits due to customers 348 934 289 113 20,7
Current tax liabilities 941 235 >100,0
Policyholder liabilities under 76 82 (7.3)
insurance contracts
Borrowed funds 8 268 6 326 30,7
Other liabilities and sundry 8 015 7 822 2,5
provisions
Deferred tax liabilities 2 133 2 284 (6,6)
Total liabilities 425 000 355 638 19.5
Equity
Capital and reserves attributable to
equity holders:
Share capital 303 303 -
Share premium 5 415 4 665 16,1
Preference share capital 1 - >100,0
Preference share premium 2 991 - >100,0
Other reserves 1 682 1 817 (7,4)
Distributable reserves 18 334 14 224 28,9
28 726 21 009 36,7
Minority interest 0 40 >(100,0)
Total equity 28 726 21 049 36,5
Total equity and liabilities 453 726 376 687 20,5
Contingent liabilities - banking 12 441 16 020 (22,3)
related
BANK STATEMENT OF CHANGES IN EQUITY
31 December 31 December
2006 2005
(Audited) (Audited) Change
Rm Rm %
Share capital 303 303 0.0
Opening balance 303 292 3.8
Shares issued 0 - >100,0
Conversion of subordinated debt to - 11 (100,0)
capital
Share premium 5 415 4 665 16,1
Opening balance 4 665 1 606 >100,0
Shares issued 750 2 447 (69,4)
Costs incurred - (5) 100,0
Conversion of subordinated debt to - 617 (100,0)
capital
Preference share capital
Shares issued 1 - >100,0
Preference share premium 2 991 - >100,0
Shares issued 2 999 - >100,0
Costs incurred (8) - >(100,0)
Borrowed funds - subordinated - - -
convertible loan
Opening balance - 628 (100,0)
Conversion of subordinated debt to - (628) 100,0
capital
Other reserves 1 682 1 817 (7,4)
Opening balance 1 817 1 717 5,8
Movement in foreign currency 178 (116) >100,0
translation reserve
Movement in regulatory general credit 50 - >100,0
risk reserve
Movement in available-for-sale reserve 67 (16) >100,0
Movement in cash flow hedges reserve (485) 97 >(100,0)
Movement in associated undertakings 48 69 (30,4)
and joint ventures` retained earnings
reserve
Disposal of associated undertakings (48) - >(100,0)
and joint ventures - release of
reserves
Transfer from share-based payments (23) - >(100,0)
reserve
Share-based payments for the 78 66 18,2
year/period
Distributable reserves 18 334 14 224 28,9
Opening balance 14 224 14 865 (4,3)
IFRS adjustments applied prospectively - (278) 100,0
Transfer to regulatory general credit (50) - >(100,0)
risk reserve
Transfer to associated undertakings (48) (69) 30,4
and joint ventures` retained earnings
reserve
Disposal of associated undertakings 48 - >100,0
and joint ventures - release of
reserves
Transfer from share-based payments 23 - >100,0
reserve
Profit attributable to ordinary equity 6 051 3 431 n/a
holders
Profit attributable to preference 73 - >100,0
equity holders
Dividends paid during the year/period (1 987) (3 725) 46,7
28 726 21 009 36,7
Minority interest 0 40 >(100,0)
Opening balance 40 41 (2,4)
Disposals (40) - >(100,0)
Other reserve movements (0) (1) 100,0
Minority share of profit 0 - n/a
Total equity 28 726 21 049 36,5
BANK CASH FLOW STATEMENT
Twelve months Nine Months
ended ended
31 December 31 December
2006 2005
(Audited) (Audited) Change
Rm Rm %
Net cash flow utilised in operating (6 054) (18)
activities >(100,0)
Net cash flow (utilised in)/from
investing activities (1 660) 2 560 >(100,0)
Net cash from/(utilised in) financing
activities 3 755 (533) >100,0
Net (decrease)/increase in cash and
cash equivalents (3 959) 2 009 >(100,0)
Cash and cash equivalents at the
beginning of the year/period 7 462 5 453 36,8
Effects of exchange rate changes on
cash on cash equivalents (5) - >(100,0)
Cash and cash equivalents at the end of
the year/period 3 498 7 462 (53,1)
PROFIT CONTRIBUTION BY BUSINESS AREA
Twelve months Nine months
ended ended
31 December 31 December
2006 2005
(Audited) (Audited)
Rm Rm
Banking operations
Retail banking 4 095 2 564
Absa Private Bank 260 153
Retail Banking Services 1 318 806
Absa Home Loans and Repossessed 1 086 762
Properties
Absa Card 700 385
Absa Vehicle and Asset Finance(AVAF) 731 458
Absa Corporate and Business Bank 1 282 845
Absa Capital 928 351
African operations (44) (8)
Corporate centre 186 8
Capital and funding centre 131 (59)
Total banking 6 578 3 701
Costs relating to the Barclays - (120)
transaction
Total earnings from business areas 6 578 3 581
Synergy costs (after tax) (454) (150)
Profit attributable to preference
equity holders (73) -
Profit attributable to ordinary equity
holders 6 051 3 431
Headline earnings adjustments (190) 12
Total headline earnings 5 861 3 443
RECLASSIFICATIONS
BANK BALANCE SHEET
31 December 31 December
2005 2005
(As
Commentary previously Reclassifi-
Rm Reported) cations (Restated)
Assets
Cash, cash balances and 11 334 11 334
balances
with central banks -
Statutory liquid asset 16 219 - 16 219
portfolio
Loans and advances to 1 3 710 16 202 19 912
banks
Trading assets 2 22 864 620 23 484
Hedging assets 2 999 (620) 379
Loans and advances to 1 & 3 308 196 (15 241) 292 955
customers
Loans to Group companies 3 460 - 3 460
Other assets 3 441 - 3 441
Investments 1 548 - 1 548
Investments in associated
undertakings and joint 533 - 533
ventures
Intangible assets 120 - 120
Property and equipment 3 247 - 3 247
Deferred tax assets 55 - 55
Client liabilities under 3 961 (961) -
acceptances
Total assets 376 687 - 376 687
Liabilities
Deposits from banks 1 28 432 (32) 28 400
Trading liabilities 2 19 397 1 518 20 915
Hedging liabilities 2 1 979 (1 518) 461
Deposits due to 1 & 3 288 120 993 289 113
customers
Current tax liabilities 235 - 235
Policyholder liabilities
under insurance contracts 82 - 82
Borrowed funds 6 326 - 6 326
Other liabilities and
sundry provisions 7 822 - 7 822
Deferred tax liabilities 2 284 - 2 284
Client liabilities under 3 961 (961) -
acceptances
Total liabilities 355 638 - 355 638
Equity
Capital and reserves
attributable to equity
holders:
Share capital 303 - 303
Share premium 4 665 - 4 665
Preference share capital - - -
Preference share premium - - -
Other reserves 1 817 - 1 817
Distributable reserves 14 224 - 14 224
21 009 - 21 009
Minority interest 40 - 40
Total equity 21 049 - 21 049
Total equity and 376 687 - 376 687
liabilities
Contingent liabilities - 16 020 - 16 020
banking related
BANK INCOME STATEMENT
Nine months Nine months
ended ended
31 December 31 Decembeer
2005 2005
(As
Commentary previously Reclassifi-
Rm Reported) cations (Restated)
Net interest income 8 820 (55) 8 765
Interest and similar 4 21 892 108 22 000
income
Interest expense and (13 072) (163) (13 235)
similar charges
Impairment losses on (561) - (561)
loans and advances
8 259 (55) 8 204
Net fee and commission 6 348 - 6 348
income
Fee and commission income 6 364 - 6 364
Fee and commission (16) - (16)
expense
Gains and losses from
banking and trading 4 & 5 688 71 759
activities
Gains and losses from 5
investment activities - 44 44
Other operating income 5 466 (60) 406
Net operating income 15 761 - 15 761
Operating expenditure (10 919) - (10 919)
Operating expenses (10 196) - (10 196)
Impairments (54) - (54)
Indirect taxation (669) - (669)
Share of retained
earnings of associated
undertakings and joint
ventures 69 - 69
Operating profit before 4 911 - 4 911
income tax
Taxation expense (1 480) - (1 480)
Profit for the 3 431 - 3 431
year/period
Attributable to:
Ordinary equity holders 3 431 - 3 431
of the Bank
Preference equity - - -
holders of the Bank
Minority interest - - -
3,431 - 3,431
Headline earnings 3 443 - 3 443
COMMENTARY ON THE RECLASSIFICATIONS
1. Change in banks/non-banks advances and deposits split
The financial statements for the period ended 31 December 2005 classified
wholesale funding with banks as part of balances with customers. The Group has
reclassified this funding as part of balances with banks.
2. Reclassification of non qualifying hedges
The financial statements for the period ended 31 December 2005 classified non
qualifying assets and liability hedges as hedging assets or liabilities. The
Group has reclassified these as trading assets or liabilities.
3. Clients liabilities under acceptances
The financial statements for the period ended 31 December 2005 disclosed client
liabilities under acceptances separately on the face of the balance sheet. The
Group has now included them as part of loans and advances to/deposits from
customers as they are of a similar nature.
4. Reclassification of interest
The financial statements for the period ended 31 December 2005 classified
interest on investments held at fair value through profit and loss in net
interest income. The Group has reclassified this interest and now discloses it
under gains and losses from banking and trading/investment activities.
5. Reclassification of dividend income
The financial statements for the period ended 31 December 2005 classified
dividends on non trading activities as part of other income. The Group has
reclassified these to gains and losses from banking and trading/investment
activities.
PROFIT AND DIVIDEND ANNOUNCEMENT
Introduction
Absa Bank is a wholly-owned subsidiary of Absa Group Limited (Absa Group), which
is listed on the JSE Limited.
Absa Bank and its subsidiaries` annual financial results for the twelve months
ended 31 December 2006 and its preference dividend declaration for the period 1
September 2006 to 28 February 2007 are contained in this announcement. As a
result of the change in the year-end from March to December, the previous
audited financial results were for the nine months ended 31 December 2005.
Commentary pertaining to Absa Bank`s core subsidiaries can be found in the Absa
Group`s annual financial results announcement. The Absa Group announcement has
been published on the JSE Limited Securities Exchange News Services (SENS) and
the Absa Group`s website (www.absa.co.za) on 20 February 2007, and in the press
on 21 February 2007.
Basis of presentation and changes in accounting policies
Absa Bank`s annual financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS).
The Bank has changed its accounting policy to recognise actuarial gains and
losses in accordance with the "corridor method" allowed under IAS 19 - Employee
Benefits. This change was prompted by the fact that the pension funds of the
various African subsidiaries are consolidated. Management is of the view that
this change results in more reliable and relevant information in relation to the
underlying operations of those entities. The result of this change is immaterial
for Absa Bank.
The Bank`s results for the twelve months ended 31 December 2006 have been
audited by the Group`s auditors, Ernst & Young Registered Auditors Inc. and
PricewaterhouseCoopers Inc. Their audit report is available for inspection at
the Bank`s registered address, 3rd floor, Absa Towers East, 170 Main Street,
Johannesburg, 2001.
Declaration of dividend number 2: Non-cumulative, non-redeemable preference
shares
Notice is hereby given that preference dividend number 2 of 3 784 cents per
share has been declared for the period from 1 September 2006 to 28 February
2007.
The Absa Bank preference shares have a coupon rate of 63% of the prime overdraft
lending rate. The dividend is payable on Monday, 19 March 2007, to shareholders
of the non-cumulative, non-redeemable preference shares (preference
shareholders) recorded in the books of the Company at the close of business on
Friday, 16 March 2007.
In accordance with the provisions of Strate, the electronic settlement and
custody system used by the JSE Limited, the relevant dates for the payment of
the preference dividend are as follows:
Last day to trade cum dividend Friday, 9 March 2007
Shares trade ex dividend Monday, 12 March 2007
Record date Friday, 16 March 2007
Payment date Monday, 19 March 2007
Share certificates may not be dematerialised or rematerialised between Monday,
12 March 2007, and Friday, 16 March 2007, both days inclusive. Where applicable,
dividends in respect of certificated shares will be transferred electronically
to shareholders` bank accounts on payment date.
In the absence of specific mandates, dividend cheques will be posted to
shareholders. Shareholders who have dematerialised their share certificates will
have their accounts at their central securities depository participant or broker
credited on Monday, 19 March 2007
On behalf of the board
W R Somerville
Group secretary
20 February 2007
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.
Enquiries
Jacques Schindehutte
Group executive director
Absa Group Limited
5th floor, Absa Towers East, 170 Main Street, Johannesburg
Tel: (+2711) 350-4850 Fax: (+2711) 350-8433
e-Mail: jacquessc@absa.co.za
Eric Wasserman
Group executive: Group Finance
Absa Group Limited
4th floor, Absa Towers East, 170 Main Street, Johannesburg
Tel: (+2711) 350-5887 Fax: (+2711) 350-6487
e-Mail: ericwas@absa.co.za
Issued by:
Jacques Badenhorst
Head: Investor Relations
Absa Group Limited
4th floor, Absa Towers East, 170 Main Street, Johannesburg
Tel: (+2711) 350-4061 Fax: (+2711) 350-6487
e-Mail: jacques.badenhorst@absa.co.za
Lead sponsor:
Merrill Lynch South Africa (Proprietary) Limited
Co-sponsor:
Absa Capital, a division of Absa Bank Limited
Johannesburg
20 February 2007
Date: 20/02/2007 07:04:01 Produced by the JSE SENS Department.
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