- Headline earnings grew 7% to R7.25bn supported by strong pre-provision profit growth of 19%.
- Diluted headline earnings per share increased 7% to 856.7c.
- Interim dividend per share of 460c.
- Headline earnings in South Africa rose 3% to R5.9bn and rest of Africa rose 33% to R1.3bn.
- Pre-provision profit increased 19.1% to R17bn.
- Revenue grew 13% to R36.5bn as net interest income increased 14% and non-interest income rose 10%, while operating expenses grew 7% to R19.5bn.
- Credit impairments increased 46% to R5.2bn resulting in a 1.29% credit loss ratio up from 0.97%.
- Return on Equity declined marginally to 16.1% from 16.4%.
- Tier 1 Capital (CET1) ratio of 12.1% remains above regulatory requirements and our Board target range.
Barclays Africa Group Limited (“Barclays Africa” or “Group”) today announced strong half-year results for the period ending 30 June 2016, in line with market expectations. These results demonstrate that our strategy continues to deliver and is resilient to the challenging economic environment. We continue to make progress on our commitments.
“Our strategy continues to deliver strong results and is proving resilient in a challenging economic environment. Ours is a proudly African bank deeply committed to Shared Growth across our continent.”
Chief Executive, Barclays Africa Group Limited
Summary of results:
Headline earnings increased 7% to R7.25bn supported by strong pre-provision profit growth of 19%. It is important to focus on the core underlying results as Rand weakness added 3% to the Group’s revenue and cost growth.
Revenue grew 13% while a focus on cost management saw operating costs increase only 7% despite ongoing investment in new technologies, people and infrastructure.
The Rest of Africa business continued to grow faster than the South Africa business.
As expected, credit impairments increased due to provisions for single name impairments in the Corporate and Investment Bank, and additional coverage built in the South Africa Home Loans portfolio.
The Group continues to make progress on its commitments.
- Revenue from the Rest of Africa business increased to 23% of total revenue, well within the target range of 20-25%.
- Maintained Top 3 status by revenue in 4 of the 5 largest markets: South Africa, Ghana, Zambia, and Botswana.
- Cost-to-Income ratio improved to 53.4% from 55.9%, showing good progression towards the medium-term target of the low 50s.
- Return on Equity (ROE) of 16.1% which is marginally down over the prior year in line with our guidance, and remains short of the medium-term target of 18-20%.
Although these are strong results there are a number of factors that pose significant downside risks.
In South Africa, business confidence remains weak, and the combination of weak job growth, higher inflation and rising interest rates have placed a strain on consumer finances. GDP growth in South Africa is expected to continue to weaken in 2016 and recover slowly in 2017.
Similarly, average GDP growth in the Rest of Africa presence countries is expected to be the lowest since 2002.
Business Unit Performance Highlights
- The Retail and Business Bank (RBB) franchise continues to deliver strong results. Headline earnings are up 10% on prior year to R4.9bn as pre-provision profit increased by 13%.
RBB delivered healthy growth in a number of areas. Non-interest income increased 7% as strong Card growth offset moderate transactional revenue growth, and the business saw an increase of 16% in loans in the Rest of Africa.
As previously noted, impairments are rising across a number of portfolios, notably in South Africa Home Loans.
The core South Africa Retail franchise added 410k new-to-bank customers in the first half and now serves 8.9 million customers.
- The Corporate and Investment Bank (CIB) made good progress on expanding the Corporate Bank in the Rest of Africa. Headline earnings are up 7% on prior year to R2.0bn supported by strong revenue growth and a 45% increase in pre-provision profit, offset by a material increase in single name impairments and higher portfolio provisions.
The Rest of Africa now contributes roughly half of total CIB headline earnings in line with the strategy.
The Rest of Africa Corporate business increased income by 36% supported by strong advances growth, improved margins, and increased transactional volumes.
- The Wealth, Investment Management & Insurance (WIMI) business continued to grow. However, headline earnings are down 8% on prior year to R690mn despite a 13% growth in Life Insurance in South Africa. The decline in earnings is driven primarily by a change in reserving requirements in some markets outside South Africa, and lower market returns.
WIMI made good progress in growing revenue with net premium income up 19% and fee income up 9%.
The investment management business continued to win institutional mandates which resulted in R11bn of net inflows during the half.
In a challenging half year WIMI achieved an ROE of 23% and remains an attractive cash-generative business.
This strong performance in the first half demonstrates the value of a well-diversified Group and positions the business well for sustainable growth going forward.
In March, Barclays Africa announced its commitment to Shared Growth which is central to the business strategy. Clear and ambitious goals have been set across three pillars:
- Invest R1.4 billion in education and skills development over the next three years.
- Raise R1.3 billion for Small and Medium Enterprise funding this year.
- Offer financial inclusion to half a million people this year.
A number of Shared Growth initiatives have been launched which will accelerate during the rest of the year.
Barclays PLC Divestment
Following their announcement on 1 March, Barclays PLC continues to explore strategic and capital market opportunities to reduce its shareholding in Barclays Africa to achieve regulatory deconsolidation.
The first sale tranche of 12.2% was successfully concluded on 5 May and reduced Barclays PLC’s shareholding to 50.1%.
Barclays Africa continues to work closely with Barclays PLC, including planning for the operational separation of the two businesses in order to preserve value for all stakeholders. Barclay Africa and Barclays PLC continue to engage with regulators as the divestment process is subject to all relevant regulatory approvals.