SA's fourth most valuable lender Absa says a recovery in its life insurance business and rising interest rates have helped with a double-digit revenue rise so far in its 2022 year, but it's seeing strain on consumers as a result of more difficult conditions, and impairments are rising too.
All its divisions saw "solid" loan growth in the 10 months to end October, Absa said in an update, with pre-provision profits growing by more than a fifth.
"Given higher policy rates and the uncertain macroeconomic outlook, we will maintain strong loan coverage. Our credit impairments are expected to increase year-on-year, resulting in a credit loss ratio in the upper half of our through-the-cycle range and above our first-half charge of 91 basis points," Absa said.
After a 325-basis-point increase in interest rates in the country so far this year. Absa expects vehicle finance and personal loans books' impairments to grow materially, although it expects impairments in its home loans book to "normalise".
Customer deposits rose by high single digits. Its revenue increased by "low teens", and its net interest margin benefited from the rising interest rates, while rate increases also pushed net interest income up by low teens. The group's non-interest income increased by low teens too.
Now the bank expects its revenue for the full 2022 financial year to increase by low teens year-on-year, driven by a low double-digit net interest income growth, and high single-digit growth in customer loans, among other factors. Because of this, the bank expects "substantial" pre-provision profit growth in the low 20s.