Unpacking Key Numbers From Absa Bank's Q3 Financial Results

Unpacking Key Numbers From Absa Bank’s Q3 Financial Results

By Soko Directory Team / Published November 30, 2022 | 9:32 am

KEY POINTS

Net interest income grew by 25.3 percent y-o-y to 23.3 billion shillings, on the back of a 24.7 percent y-o-y increase in interest income to 29.3 billion shillings.

Interest expense increased by 22.4 percent y-o-y to 6.0 billion shillings, slowing net interest income growth. The annualized net interest margin in turn edged up by 22 bps y-o-y to stand at 8.2 percent.

KEY TAKEAWAYS

Operating expenses (less loan loss provisions) edged up by 10.2 percent y-o-y to 13.3 billion shillings. Staff costs increased by 8.7 percent y-o-y to 7.4 billion shillings whereas other operating expenses increased by 14.3 percent y-o-y to 4.9 billion shillings. The cost-to-income ratio stood at 39.7 percent, down 442 bps y-o-y.

ABSA Group released its 3Q22 results recording a 30.1 percent y-o-y increase in profit after tax (PAT) to 10.7 billion shillings.

Performance was supported by a 22.5 percent y-o-y increase in total operating income to 33.4 billion shillings but trimmed by a 47.9 percent y-o-y increase in the loan loss provision expense to 5.0 billion shillings. EPS for the period stood at 1.97 shillings (+30.1 percent y-o-y).

Net interest income grew by 25.3 percent y-o-y to 23.3 billion shillings, on the back of a 24.7 percent y-o-y increase in interest income to 29.3 billion shillings.

Non-funded income increased by 16.4 percent y-o-y to 10.2 billion shillings, largely attributable to a 60.0 percent y-o-y increase in net income from forex dealings to 5.0 billion shillings.

Other operating income recorded a 36.8 percent y-o-y decline to 638.4 million shillings while fees and commission income declined by 1.2 percent y-o-y to 4.6 billion shillings. The funded income reliance in turn increased 157 bps y-o-y to 69.6 percent.

Pre-provision operating profit increased by 32.1 percent y-o-y to 20.2 billion shillings. Loan loss provision expense saw a 47.9 percent y-o-y increase to 5.0 billion shillings, placing the annualized cost of risk at 2.3 percent, 34 bps higher y-o-y. In turn, pre-tax profit was up 27.6 percent y-o-y to 15.1 percent.

Customer loans and advances grew by 26.4 percent y-o-y to 289.4 billion shillings. Government securities saw a 12.9 percent y-o-y increase to 92.2 billion shillings whereas held-for-dealing securities increased by 6.1 percent y-o-y to 47.6 billion shillings.

On the funding side, customer deposits saw a 4.6 percent y-o-y increase to 281.1 billion shillings. The loans-to-deposits ratio stood at 103.0 percent, up 1,777 bps y-o-y.

Gross NPL edged up by 2.0 percent y-o-y to stand at 20.0 billion shillings, with the NPL ratio declining by 142 bps y-o-y to stand at 6.5 percent. The NPL coverage ratio increased by 617 bps y-o-y to 77.0 percent.

On a trailing basis, ABSA is trading at a P/E ratio of 4.6x relative to an industry median of 3.7x, and a P/B ratio of 1.0x relative to an industry median of 0.7x. Its annualized ROE stands at 22.1 percent whereas its annualized ROA stands at 2.8 percent.

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