S.Africa's Absa H1 profit down 6 pct on bad debts

JOHANNESBURG (Reuters) - Absa Group, South Africa's third-largest banking group, on Friday reported an expected 6 percent drop in first-half earnings, hit by a spike in bad debts in its home loans business.

The South African lender majority held by Britain's Barclays said headline earnings per share fell to 602.3 cents in the six months to end-June, down from a total 638.5 cents a year earlier.

Headline EPS, which exclude certain one-time items, are the main gauge of profit in South Africa.

Absa, the first of South Africa's big banks to report earnings this season, flagged last month profit would likely fall as much as 10 percent due to sour mortgages.

The warning sent its shares into a tailspin and ignited fears that its recent recovery was losing steam. Absa has in the past few years grown earnings by cutting back bad debts rather than expanding earnings from lending.

Other large South African lenders such as Standard Bank, FirstRand and Nedbank are unlikely to post profit declines as they have set aside adequate provisions, analysts say.

Absa said net interest income, a measure of earnings from lending, totaled 11.9 billion rand, compared with 11.6 billion rand last year.

Credit impairment charges, or bad debts costs, totaled 4 billion rand, an increase of 40 percent from a year earlier.

Lenders in Africa's largest economy have been ramping up unsecured lending to counter slow growth in home and vehicle financing.

Absa has been losing market share to competitors such as FirstRand, and investors are also worried about the exit of several top ranking executives including the deputy CEO Louis von Zeuner.

Absa is the worst performing share among South Africa's big banks this year. Its shares are down nearly 4 percent while bigger rival FirstRand is up 29 percent. Industry leader Standard Bank has gained 13 percent, while Nedbank, South Africa's No.4 bank, has added 19 percent.

Source: http://news.yahoo.com/africas-absa-h1-profit-down-6-pct-bad-055630741--finance.html

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