Absa Group Profits Rise in 2010

February 18 - Absa, one of South Africa's largest lending banks, released its financial statistics for 2010, showing a rise in profit of 19%.

The reason for this, said the bank, is that the number of bad loans have declined considerably since the Central Bank dropped key interest rates to the lowest they have been in 30 years.

In a statement issued by Absa this week, the group showed that its net income had risen from R6.84 billion in 2009 to R8.12 billion a year later.

Absa services over 11 million South Africans and is considered the country's largest retail lender.

The company has benefitted from the Central Bank's trend to keep narrowing the benchmark interest rate (three times in 2010), as well as the generally positive direction that South Africa's economy has taken since the recession in 2009.

Nonetheless, Absa said that it expected 'low single-digit' growth in loans this year because credit demand was still muted.

The group's Chief Executive, Maria Ramos said that it would be premature to return capital to investors.

Absa expects to keep the cost growth of its lending arm below 10% in 2011. Absa also expects to spend R5 billion on IT systems this year.

Ramos also said that Absa may need to streamline the business, resulting in "some reduction of headcount", although there were no plans for "mass retrenchment".

Analysts expect the rest of South Africa's banks to report lackluster results this season.

2/18/2011 10:32:06 AM