We have noted the Central Bank of Kenya’s press statement this morning in which it announced the suspension of Absa Bank Kenya’s foreign exchange dealer license from 9 April 2020 until 15 April 2020. Absa Bank Kenya has also received official notice of same.

Absa Group and all its subsidiaries embrace a culture that endeavours to comply with national and international regulations at all times. We have stringent and world benchmarked Anti-Money Laundering CFT policies which are applied rigorously in all our operations.

When the Central Bank of Kenya raised its concerns, pending resolution of the concerns raised, we decided to cancel the two foreign exchange forward transactions concerned. These were being executed on behalf of highly reputable global financial institutions, which are regulated in line with best international practice. The transactions were executed at prevailing market rates. This was done to demonstrate our willingness to address fully the concerns of the regulator.

We are in ongoing consultations and discussions with the Central Bank of Kenya to fully resolve all matters raised in the shortest possible time. We remain committed to being a constructive participant in Kenya’s financial markets and to contributing to its further developments in the interest of all customers and stakeholders.

During the first quarter of 2020, the seasonally adjusted Absa Purchasing Managers’ Index (PMI) experienced the weakest quarterly performance since 2009. The PMI averaged at 45.9 index points, compared to 47.6 in the fourth quarter of 2019. The weak quarterly outcome was despite the PMI improving to 48.1 index points in March from 44.3 index points in February. Nonetheless, the PMI still remained in contractionary terrain for a fourteenth straight month.

The PMI was, to some extent, lifted by the supplier deliveries subindex moving higher in March, reflecting slower delivery times. In normal circumstances, a slowdown in supplier deliveries is seen as positive for the sector as it suggests suppliers are busier. However, in this case, the slowdown in delivery times is caused by global supply-chain disruptions. This phenomenon is observed in PMIs worldwide, but amplified in the South African manufacturing PMI as this component has a bigger weighting (as the subindex brings much-needed stability to the headline PMI and results in a better correlation with official manufacturing output figures in normal times). Without the inadvertent boost from supplier deliveries, the headline PMI would have turned out lower in March.

With this in mind, it is better to look at some of the PMI subcomponents that may provide a further indication of the current underlying conditions in the factory sector. Indeed, the business activity and new sales orders indices lingered around 11-year low levels in March. The nationwide lockdown imposed towards the end of March meant that most factories lost three working days compared to a normal March, while the 21-day lockdown will result in 10 working days lost in April.

Supply-chain disruptions mean that production is also not expected to return to full capacity immediately after the lockdown lifts. This suggests that the April factory figures will likely show a deep contraction. An extension of the lockdown is likely to result in some factories having to close permanently. This will have a sustained negative impact on production and could also result in further job losses in the sector. Indeed, respondents turned very pessimistic about expected business conditions going forward.

The index tracking expected business conditions in six months’ time fell to 29.1 index points in March. This is below the lowest reading recorded during the 2008/09 recession and, in fact, the lowest level on record (series since 1999). This means that the worst is yet to come for the manufacturing sector.

We continued to transform our business while delivering the successful execution of the Separation from Barclays PLC.

Over the past year, the Absa Group and the Absa brand emerged stronger as we reached key milestones on our journey to be a leading African financial services group, inspired by the continent and the people we serve. Through our Integrated Report and supporting documents, we provide a balanced view of our performance and we believe it shows that we are creating sustainable value and prosperity for our stakeholders.

“Absa has made good progress against the strategic priorities set out for 2019. We have made headway towards regaining franchise health in our core businesses in South Africa and continue to deliver strong growth from our other markets. That we have been able to achieve this despite a challenging macroeconomic environment in our largest market, speaks to our strength and potential to do better,” says Daniel Mminele, Group Chief Executive.

We have a strong franchise and play a critical role in contributing to the economic prosperity of Africa. As a role player in a socioeconomic ecosystem, we continue to conduct our business in a way that promotes positive outcomes for society, consumers, and our business by using our core assets, capabilities and opportunities to address the challenges, and take advantage of the opportunities. We have a vested interest in creating inclusive growth in Africa and in delivering financial services in a socially and environmentally responsible manner. We provide insights into the value we have created both through the progress report against our strategy and within dedicated sections for our key stakeholders – investors, customers, employees, society, planet and regulators.

The Integrated Report reflects, in the main, our performance in 2019, but we are very aware that 2020 will be a far more challenging year than could have been thought possible. We have, given the knowledge that we have at this stage, indicated at appropriate points in the report that COVID-19 will be a significant consideration in our approach, planning, stress testing, and the like. We have not, however, reflected a revised outlook throughout the report as the effects will be dynamic and hence without certainty at the date of approval.

“We have undergone a significant transformation, which is reflected in the attitudes and successes of our Group and our employees. In 2019, our employees proved that Absa is adaptable, agile and resilient. We continue to operate in very challenging and dynamic global, regional and local environments, but I am confident that we will respond appropriately to the current global crisis,” says Wendy Lucas-Bull, Group Chairman.

The Integrated Report is our primary report to our shareholders but does contain information that is relevant to other stakeholders. It focuses on matters that our Board and management consider to be material, that is, those that have, or could have, the ability to influence our financial performance, reputation or license to operate.

View our 2019 integrated reporting suite:

• Integrated Report
• Notice of Annual General Meeting
• Form of Proxy
• Summary Annual Consolidated Financial Statements
• Annual Consolidated and Separate Financial Statements
• Pillar 3 Risk Management Report
• Remuneration Report
• Broad-Based Black Economic Empowerment Report
• Environmental Social and Governance Report

• Initial R15m contribution towards COVID-19 fight.
• Funds will extend access to testing and hygiene materials in marginalised communities.
• Public health and reporting awareness campaign in partnership with government and GovChat.
• R700 000 worth of food redirected from cancelled Absa Cape Epic to vulnerable communities.

Absa has donated an initial R15m towards various initiatives aimed at dealing with the impact of COVID-19 in South Africa. R10m will go to the Solidarity Fund, and a further R4m to civil society organisations involved in the fight against the pandemic, and R1m for a range of preventative, protective and vaccine research initiatives.

“Absa recognises that COVID-19 is a serious public health issue that will have profound economic and social consequences. The rate of escalation in infections confirms that the steps taken by government to deal with this pandemic are both necessary and urgent. Considering the impact that COVID-19 will have on ordinary South Africans and the economy, decisive action from all of us is essential to protect human life and socioeconomic sustainability,” said Daniel Mminele, Group Chief Executive of Absa Group.

The Solidarity Fund was established by government to support the most vulnerable to deal with the impact of COVID-19. The Fund will complement government resources allocated to the national public health response to prevent and slow down the spread of the virus.

In addition to the financial contribution, Absa has partnered with the department of social development and GovChat in a public awareness and hygiene education campaign using the bank’s sports broadcast advertising spots and prominent football personalities. Absa is the title sponsor of South Africa’s Absa Premiership league competition that is broadcast on DStv SuperSport and SABC.

GovChat is a digital platform that connects ordinary citizens to government services. To help with the effort against the pandemic, GovChat’s service delivery notification service is being used to help citizens use their mobile phones to notify health authorities, and be directed to appropriate health facilities. The data will also assist authorities to identify COVID-19 hotspots at any given time in order to manage resource allocation.

In addition, Absa is redirecting R700 000 worth of food and supplies initially intended for the Absa Cape Epic in the Western Cape, which was cancelled, towards vulnerable communities that will be hard-hit during the lockdown.

“COVID-19 is an unprecedented challenge against which we have to stand together and collaborate to protect human health and life, and to ensure continued socioeconomic sustainability. We will continue to monitor developments and work with relevant authorities and stakeholders to find solutions,” said Mminele.

Absa launches extensive COVID-19 payment relief programme

• Relief for consumer, business banking and wealth customers
• Bespoke solutions for corporate and business banking clients
• Additional administration fees waived
• To allow benefits to reach more customers, those who can pay are encouraged to continue payments
• Programme applies to all Absa markets, subject to legislation, regulations and conditions applicable in each country

As South Africa and the world confront the public health, financial and economic implications of the COVID-19 pandemic, Absa Group is rolling out an extensive relief programme for eligible customers impacted by COVID-19.

“We realise that this is a difficult time for our customers and businesses whose financial means are being negatively affected. After careful consideration and engagements with regulators, we are pleased to introduce a comprehensive customer, business and corporate relief programme. This programme, effective on Monday, 30 March 2020, is in line with the principles of an industry agreed approach www.banking.org.za. We urge those of our customers who are able to continue making their payments, to do so. This will enable us to extend these measures to many more who are not in a similar position,” said Daniel Mminele, Group Chief Executive of Absa.

Eligible customers in need of short-term liquidity relief will qualify for the relief programme that applies to Absa’s credit products. These relief measures apply to Absa’s corporate, wealth, business bank, private bank and retail customers. Crucially, this programme will not attract additional administration fees for customers.

Support to corporate and business banking clients will entail solutions based on their unique requirements and operations. Businesses and corporates are encouraged to contact their relationship managers for further details.

The programme incorporates a three-month payment relief and allows customers in need of short-term financial relief to reduce their monthly instalments. Customers in good standing (with up-to-date accounts), and who have been financially impacted by the pandemic will have the opportunity to opt-in for payment relief, aimed at assisting with cash flow needs. This means the programme will give customers the opportunity to either continue paying if they are in a position to, to pay reduced instalments by agreement with the bank or to defer payments for a period of three months.

Relevant agreements will be adjusted, by revising the loan period and capitalising interest during the relief period.

“The programme is testament to our commitment to finding real, customer-focused solutions, in a time of great uncertainty for everyone,” said Arrie Rautenbach, Chief Executive of Absa Retail and Business Banking (RBB) South Africa.

The principles applicable to this relief programme in South Africa are extended to Absa’s other markets in Africa but will be implemented subject to the various conditions, laws and regulations applicable in each country.

“Absa campuses also have small and medium sized enterprises such as hairdressers, pharmacies, florists and coffee shops, among others as commercial tenants. In recognition of the role SME’s play in creating jobs and sustaining livelihoods, these businesses have been granted a rental holiday for the next three months,” concluded Mminele.

We will continue to monitor the situation closely and adjust our relief programme where necessary.

Absa Payment Relief Programme: FAQs

• What does Absa’s Payment Relief Programme entail? What is Absa’s Payment Relief Programme?
• When will the solution be available?
• Will there be different criteria for various products and businesses/individuals?
• Will the relief programme also be available to Absa colleagues?
• Why did Absa launch the programme?
• Banks have been criticised for lack of support to date. Why did it take so long to launch this programme?
• What about customers under debt review?
• What steps should customers take who would like to opt in?
• What are the benefits of the Payment Relief Programme?
• Will interest still be capitalised?
• Moody’s has downgraded SA’s credit rating to junk. Are you not concerned about credit risk?
• How will the payment relief impact your Absa homeowners insurance?
• Are there any administration costs for effecting the payment relief?

Customer Questions & Answers (core issues)
 

• 1. Is it safe for customers to use Absa branches?
• 2. If an Absa branch is temporarily closed, how can I take care of my banking needs?
• 3. Will Coronavirus affect customer service or other services that Absa provides to me or my business?
• 4. Is it safe to handle cash?
  
• 5. Is it safe to use point of sale (POS) machines?
• 6. Does Absa have a plan to disinfect surfaces in busy areas often?
• 7. Is it safe to use ATMs?
• 8. Are clients screened or required to declare their recent travel as they enter our branches and campuses?

Contractor Cleared of COVID-19
 
Further to the notification we provided yesterday, Absa wishes to convey to the public that we have been informed that the results for individual who was tested for COVID-19 have come back negative. This outcome has been reported to the National Institute for Communicable Diseases (NICD) in line with stipulated guidelines.
 
All Absa colleagues who had been in contact with the individual, and who were also requested to self-isolate as a precautionary measure, will also be cleared to return to work.
 
Absa has in place protocols to educate and protect its employees in the wake of the global COVID19 pandemic, and will continue to work closely with health officials and experts to monitor the situation and prepare to respond in accordance with best practice.

*Salient points: 

• Headline earnings increased 1% to R16.3 billion
• Revenue increased 6% to R80 billion 
• Operating expenses growth contained to inflationary levels, increasing 6% to R46.4 billion
• Pre-provision profit increased 5% to R33.6 billion
• Return on equity declined to 15.8% from 16.8%
• Dividends increased 1% to R11.25 per share.

*Note: normalised values (stripping out the effect of the separation from Barclays PLC)

Johannesburg, 11 March 2020 –– Absa Group Ltd. today reported improving revenue growth for the 2019 financial year, with headline earnings growing slightly. 

“We delivered a resilient performance against a challenging macroeconomic backdrop. We maintained balance sheet momentum and growth was broad-based across most businesses,” said Daniel Mminele, Absa Group Chief Executive.

Absa Group revenue increased 6% while headline earnings, the measure most analysts use to gauge profit, rose 1% as impairments increased. 

“Our revenue growth is showing an improving trend, with strong deposit growth of 12% and customer loan growth of 9% for the Group,” said Absa Group Financial Director, Jason Quinn. 

Overall, Absa’s balance sheet, revenue and earnings growth were in line with peers after lagging for a number of years.

Absa launched its growth strategy in March 2018 after Barclays PLC ceased to be the controlling shareholder in the Pan African banking group. Absa is on track to complete its separation programme, one of the largest in the banking sector in terms of size and complexity, on time and within budget by the middle of 2020.

Performance highlights from Absa’s three core businesses:

Retail and Business Banking South Africa

RBB South Africa continues to show signs of turnaround as the unit gained ground in key areas, recording increases in customer loans and deposits. Revenue momentum increased and costs were well contained. However, an increase in impairments eroded earnings. 

Highlights include:

• Gross loans and advances grew by 7% to R530 billion
• Deposits grew by 10% to R373 billion
• Non-interest income grew by 6%
• Cost-to-income ratio improved to 57.7% from 58.4% in 2018
• Customer growth of 1% to 9.7 million
• Market share growth in retail deposits and retail loans and advances, including personal loans, new home loans and vehicle finance.

Corporate and Investment Banking (CIB)

CIB’s earnings growth was driven by strong performance in countries outside South Africa, which partially offset a decline in earnings in South Africa. 

Highlights include: 

• Continued growth momentum in ARO with total income growing 15% (12% in constant currency) to R7.4 billion
• Solid income growth from Corporate Bank franchise up 9% (8% in constant currency) to R10.6 billion
• Strong growth momentum in the trade finance business in SA, with a CAGR of 19% in the last four years.

Absa Regional Operations (ARO)

ARO, comprising Absa Group’s African operations excluding South Africa, delivered strong financial performance in 2019 with earnings growth of 16% (12% in constant currency), enhancing the overall Group’s position.

Highlights include:

• Revenue grew by 14% (11% in constant currency)
•  Pre-provision profits increased by 17% (14% in constant currency)
• Cost-to-income ratio improved to 57.8%
• While separating, ARO has grown its retail primary customer base in 2019 to 1.5 million customers.

Outlook

South Africa’s macro environment has consistently disappointed for the past five years, and the outlook remains muted, compounded by the recent outbreak of coronavirus which will have an impact on the global macro outlook, and which will also have implications for the economic prospects in our other operating regions. 

“We will continue to drive the execution of our strategic objectives with agility, and take advantage of emerging opportunities, while managing risks more effectively in response to changes in the operating environment,” said Mminele.

Absa Corporate and Investment Banking (CIB) claimed top honours in the 12th EMEA Finance African Banking Awards for 2019 when it was awarded Best Investment Bank in Africa; it also won Best Investment Bank in Botswana, South Africa, Tanzania, and Zambia as well the Best Equity House in Mozambique and the Best Loan House in South Africa.

“We are honored to be chosen as the best investment bank in Africa at these highly respected industry awards, and it is testament to the hard work the team have put in to make our business more and more client focused while ensuring we deliver to the level expected of a leading investment bank. We have seen a growing appetite by our clients to invest and expand across the continent, both in the markets that Absa operates in and in non-presence countries. We are here to provide the solutions that help our clients realise their ambitions across this continent”, says Absa CIB CEO Charles Russon.

The awards recognise the achievements of retail and investment banks as well as their asset management and brokerage operations across the combined emerging Europe, Middle East and Africa (EMEA) regions.

David Renwick, Head: Investment Banking Division says, “Absa owes these achievements to incredible partnerships it has built with its clients and the talented teams within the business that continuously demonstrate world-class expertise and capabilities across a range of solutions and markets for clients in Africa. These included various Advisory, Capital Raising and Financing mandates, in addition being the joint-lead arranger in the first social bond ever raised by a corporate in Africa.”

The other notable achievement for the bank was its selection as joint book-runner on the Airtel Africa Plc dual IPO on the London and Nigerian Stock Exchanges, where Absa was also Joint Issuing House in Nigeria as well. Renwick says this was the largest African IPO since 2018 and the largest ever IPO on the Nigerian Stock Exchange.

Barclays Tanzania Managing Director Abdi Mohamed says, “We are honoured to be receiving this award. We thank our customers and all our stakeholders for the ongoing support. As we transition our brand to Absa over the coming months we will continue to focus on innovation, service delivery, and bringing possibility to life for our customers.”

These awards speak to how Absa is pushing the financial boundaries by developing new propositions that remove obstacles and reduce our client’s pain points, in addition to being a socially responsible bank in all the markets where we operate.

MD of Barclays Bank Zambia Mizinga Melu says, “We are honoured to be the recipient of the 12th EMEA award. Being recognised for this prestigious award is testimony of our Corporate and Investment Banking capabilities that are anchored on supporting the growth of key sectors of our economy, building strong partnerships with our clients as well as connecting clients to larger markets through our regional and global footprint. As we embark on our journey to Absa, we will continue to provide our customers with innovative banking solutions that not only meet their needs, but help to shape the banking sector in Zambia,” she said.