Absa Group Ltd., the African unit of Barclays Plc, said profit last year missed targets and the firm’s performance, hit by real estate losses, prompted Chief Executive Officer Maria Ramos to forsake a cash bonus and curb boardroom payouts.
Net income dropped 13 percent to 8.39 billion rand ($935.6 million) in 2012, the Johannesburg-based bank said in a statement today. Earnings per share, excluding one-time items, were 12.27 rand, lower than the 12.57 rand median estimate of 17 analysts surveyed by Bloomberg.
To forgo the cash incentive “was a decision I made and the rest of the executive committee will receive reduced incentives commensurate with group performance,” Ramos, 53, said in an interview in Johannesburg today, without saying how much she was due to receive. Earnings were “disappointing” as they missed Absa’s own targets, she said.
In 2012 Absa’s head of debt collections left the company and the bank was forced to boost provisions after credit impairments rose. The bank also tightened lending as consumer indebtedness gained. Eight years after Barclays bought control of Absa, the South African bank is now preparing to buy the bulk of Barclays’s African operations for $2 billion.
Ramos was paid 20.7 million rand last year, including a deferred award worth 14 million rand. Ramos, who joined the bank in 2009, last got a cash bonus in 2010, when she was paid 2.28 million rand as part of her 19.6 million-rand compensation.
“While Absa is still a good business and the Barclays Africa transaction has been well received, both by ourselves and the market, performance from its core retail franchise has been disappointing,” Greg Saffy, an analyst at RMB Morgan Stanley in Johannesburg, said in a report to clients on Jan. 18.
Higher credit impairments, particularly in retail mortgages and commercial property finance, were the principal reason for the lower-than-expected earnings, Absa said.
Absa’s capital adequacy ratio, a measure of financial strength, rose to 17.4 percent last year, while its return on equity dropped to 13.6 percent from 16.4 percent. Absa said it would pay a final dividend of 6.84 rand per share.
The company rose 0.1 percent to 165.10 rand by the 5 p.m. close in Johannesburg. It dropped as much as 2.2 percent earlier.
The bank won’t be making any “huge” acquisitions and may still use its surplus capital to pay a special dividend, Chief Financial Officer David Hodnett said. Even after accounting for Basel III rules, which require banks to carry more capital, Absa would have a cash surplus of about 6 billion rand, he said in an interview.
Five out of eight analysts polled by Bloomberg expected Absa to announce a special dividend this month. Two of the eight expected a special dividend in the second half of the year and estimated it could be as high as 10 rand a share.
Absa investors including Coronation Fund Managers and the Public Investment Corp., have questioned why Absa isn’t using excess capital to help finance its purchase of Barclays’ African assets and limit dilution of minority shareholders.
“Barclays and Absa are not negotiating on using cash for the deal,” Hodnett said. “Barclays’s dilution is the biggest and the price would be higher if we did part of it in cash.”
Sanlam Investment Management will be speaking with Absa management during the next week about the bank’s high capital levels, Patrice Rassou, head of equities at the firm, said in an e-mailed response to questions today.
Absa expects loan growth of less than 10 percent again this year, while its credit-loss ratio is expected to improve “materially,” Ramos said.
“We are building momentum in our business and this should become evident in our top line growth this year, which should improve from last year’s modest levels, and should underpin a noticeable improvement in our return on equity,” she said.
Ramos was director-general of National Treasury when the government was led by former President Nelson Mandela. She ran the state-owned transport and logistics company, Transnet SOC Ltd., for five years before joining Absa.
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