Banking group Absa has delivered on its promise to cut costs, reporting a cost-to-income ratio of 61.2% for the six months to 30 September 2001, compared with 65% for the same period a year earlier.
Critics of Absa`s provision of free Internet services had said that entering the free Internet service provider (ISP) market would be to the detriment of the banking group`s drive to slash costs.
<B>Figures at a glance</B>
Absa Group results for the six months to 30 September 2001
Figures for the six months to 30 September 2000 in parentheses:
Interest income: R11.94b (R10.83b)
Operating income: R6.82b (R6.06b)
Net income after tax: R1.37b (R1.13b)
Attributable income: R1.3b (R1.07b)
Headline earnings: R1.31b (R1.07b)
HEPS: 201.8c (164.4c)
Dividends per share: 53c (44c)
Cost-to-income ratio: 61.2% (65%)
NAV per share: 2 268c (1 942c)
The group maintains that the free Internet offering was a success in that it increased the number of Internet banking clients by 67% from January to 250 000 users.
The service cost Absa about R45 million a year. It announced this week that it would restrict the free offering to active banking clients only.
The change came about as a result of recommendations by the group`s e-commerce task team, set up to investigate the acceleration of the bank`s e-business strategy.
The bank had not expected the rapid growth in Internet users. It says it reached its two-year target in six months.
Absa CE Nallie Bosman says the group is well on track to achieve its stated target of a cost-to-income ratio of 61% by the year-end. The ratio was 65% at the September 2000 year-end.
He says the domestic economy is in the initial phase of an economic downswing in reaction to the global economic slowdown.
"The lower and more stable interest rate environment during the period stimulated demand for home loans and instalment finance, but overall consumer credit demand failed to live up to the expectations of double-digit growth."
He expects the global slowdown to continue until the middle of next year, "but at this stage it is not anticipated that this will have a major effect on the current trading conditions in SA in the short-term".
Given the subdued economic growth and downward pressure on global interest rates, a "slight" decline in local rates early in the new year should not be ruled out, he adds.
Bosman expects the performance of the six months to be sustained for the full year.
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