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* Drop in bad debt charges drives Absa’s rebound
* Strategy changes also paying off
* Bank sets 17% ROE target by 2024 (Adds details, shares, CEO quote)
JOHANNESBURG, March 14 (Reuters) - South African lender Absa reported an almost threefold rise in its annual profit to above even 2019 levels on Monday, and said it was targeting a return on equity of 17% by 2024.
Like most South African lenders, a massive decline in bad debt charges prompted by the COVID-19 health crisis has driven a rebound in Absa’s performance.
Credit impairments slumped 59% at Absa to just under 8.5 billion rand ($564.64 million), and the bank even released 1.24 billion rand in provisions it had built to cover potential bad debts as its economic assumptions improved.
Interim CEO Jason Quinn said Absa had navigated a difficult environment, and the sudden departure of former chief executive Daniel Mminele in April last year, to produce “record results” that were the strongest in several years on a number of metrics.
After lagging rivals and losing market share in key divisions, a strategy reset at Absa has begun to pay off and claw back some of that lost ground.
The bank’s headline earnings per share (HEPS) - the main profit measure in South Africa - stood at 2,147.1 cents for the year ended Dec. 31, compared with 730.9 cents a year earlier and 1,750 cents in 2019.
On a normalised basis, accounting for the impact of its separation from former parent Britain’s Barclays, HEPS stood at 2,197 cents.
Absa’s ROE - a key measure of bank profitability stood at 14.6% after collapsing to 5.2% last year due to the pandemic.
Its 2024 target, which comes alongside a goal of reaching a cost-to-income ratio in the low 50s, was dependant on a global backdrop threatened by new risks such as Russia’s invasion of Ukraine, it said.
It declared a dividend of 785 cents for the year. There was no update on the bank’s process to appoint a permanent chief executive following Mminele’s departure.
Its shares were up 1.3% at 0702 GMT.
($1 = 15.0538 rand)
