Absa Group banks on economic rebound

Absa Group, one of the many listed companies heavily impacted by the COVID-19 pandemic, has seen its headline earnings more than double to $18 billion in the year ending December 1st, 2021. Punki Modise, Absa's Interim Group Financial Director, joined CNBC Africa to discuss the factors behind the bank's impressive performance. Modise highlighted a variety of drivers contributing to the improvement in Absa's overall performance. The bank experienced a more accommodative macro environment, leading to lower impairment numbers, while customer resilience helped mitigate anticipated credit losses during the crisis. Furthermore, growth in non-interest revenue, particularly in secured portfolios such as vehicle and asset finance businesses, supported the bank's margins. Absa's global markets business also managed risks effectively, leading to significant growth in non-interest revenue. Additionally, the bank's focus on cost management and efficiency, including digitization and technology deployments, played a crucial role in maintaining cost growth at just 1%. Absa's strategy of driving its costs below inflation levels has proven effective in sustaining profitability. Looking ahead, Absa expects high single-digit revenue growth from customer loans and advances in the next reporting period. Modise emphasized the resilience of Absa's balance sheet and the potential profitability boost from anticipated interest rate increases. Despite the current uncertainties in the global economy, particularly with the war in Europe and South Africa's economic challenges, Absa remains optimistic about its future performance. The bank sees opportunities in the commodity sector, with the South African government's focus on the commodity boom translating into positive financial outcomes for Absa. In terms of the African continent, Absa continues to deploy capital selectively, investing in countries with promising growth prospects. While tourism-based economies struggle to recover from the impact of COVID-19, other economies show resilience and growth potential. Absa acknowledges the challenges faced by South Africa, particularly in the energy sector, and calls for focused efforts to address these issues to unlock the country's economic potential. Modise expressed confidence in the country's ability to overcome these challenges and achieve higher economic growth rates. With a strong focus on efficiency, strategic investments, and prudent risk management, Absa Group is poised to navigate the uncertainties ahead and capitalize on emerging opportunities in the financial landscape.