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Still on track

07 August 2006 Angelo Coppola

Absa Group Limited today announced earnings growth for the six months ended 30 June 2006.

* Headline earnings increased by 22,4% to R3 460m
* Headline earnings per share increased 20,4% from 432,3 cents to 520,7 cents per share.
* Declared an interim dividend of 208 cents per share, which represents a dividend cover of 2,5 times a 30% increase
* Net interest income rose by 28,2% from R5 588m to R7 163m
* Mortgage loans were up by 35.1%
* Credit cards were up by 49.1%

Business unit performance in terms of attributable earnings:
Retail banking up 24.3%
Corporate and business banking services up 57.6%
Absa Capital up 21.9%
African operations up 61%
Bancassurance down 5.4%

Steve Booysen - CEO of Absa, which was voted the third coolest brand in South Africa, says that they are on track to deliver the results they promised. He did say that one of the challenges is to stay focussed while the integration process is underway.

In terms of issues facing his bank and the rest of the sector he said that October sees the start of the investigation into transaction fees a committee appointed by the Competition Commission today.

Turning to his business he says that while their customer profiles and employee profiles are similar - 55% of customers are black, 54% of employees are black, and they are working on this to bring it into line with the country's demographics.

As a matter of interest the bank has 8.1 million customers, of which 69% utilise only one product, which opens up the road for some cross selling.

In terms of cross selling, the bancassurance results were pleasing says Booysen, given the issues facing the insurance sector, such as the hardening of the short-term underwriting cycle, the issues raised by the PFA, and the statement of Intent between the LOA constituents and National Treasury. And while he says there was no exposure to the PFA rulings the business unit performance was down - in terms of attributable earnings by 5.4%

In terms of the corporate and business banking services sector, 35% of their customers are operating at a break even level - with 15% of this customer base cost the bank money. Understandably Booysen says that they are applying their minds to the 15%.

On the question of compliance Booysen says that compliance is resource intensive and cost of people and cash are substantial, and care must be taken about getting internally focussed.

Market share is steady or increased in some instances, and Booysen is happy. There is good progress in the card business, based, he says on the introduction of the Barclays skill set.

Looking ahead, Booysen says they need to get more innovative to attract more retail customers, and it's a fact that consumerism is on the increase, while the savings culture leaves a lot to be desired. On the other hand the regulatory and compliance cost pressures will continue.

There will be a drive into Africa although Booysen wouldn't be drawn on the details.

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