Absa Group Ltd. (ASA), the South African bank controlled by Barclays Plc (BARC), dropped the most in almost four years after the lender said first-half earnings before one-time items declined as much as 10 percent as bad loans increased.
The stock declined as much as 7 percent, the most since October 2008, and was trading 6.3 percent lower at 146.65 rand as of 10:48 a.m. in Johannesburg. Absa was the worst performer on the FTSE/JSE Africa Banks Index (JBNKS) today, which retreated as much as 2.7 percent.
Other lenders in South Africa, including Standard Bank Group Ltd. (SBK), the country’s largest, have reported lower impairments on bad loans this year. Absa’s credit impairments had been declining since June 2009 as the economy recovered from the global financial crisis and a recession. While interest rates are at 30-year lows Africa’s largest economy is slowing again, with economic growth narrowing to an annualized 2.7 percent in the first quarter from 3.2 percent in the previous three months.
“There’s been a big increase in unsecured lending so the last thing clients want to see is higher debt,” Jacques Potgieter, head of trading at Tradition Financial Services, said in a phone interview in Johannesburg today. “People are getting scared and taking profit. The market has also been overbought.”
Revenue growth in the first five months was “also subdued” Absa said in a statement today. “While our new lending volume is improving, this is only expected to become evident during the second half of 2012,” the company said.
“I was a bit surprised at the poor result but there has been a pull-back in fixed asset, durable and semi-durable spending and only non-durable, food and clothing spending is up,” David Shapiro, a director at Johannesburg-based Sasfin Securities, said. “In my mind it points to sinking confidence, more worries, and also tougher conditions,” according to Bloomberg.
