Absa has seen strong credit growth in the 10 months ended 31 October 2021, and now expects headline earnings in its biggest business - the Retail and Business Banking division - to more than double from the previous year.
Absa Corporate and Investment Bank's earnings have also increased "considerably", the bank said.
Its share price jumped by more than 5% to R147.07 in early trading on Friday, following the trading update.
Gross customer loans rose by mid-single digits year-on-year, with stronger growth coming from home loans and vehicle and asset finance. The bank is increasing its lending market share, particularly in asset-backed lending. It reported lower growth in personal loans.
Absa and Standard Bank stood out in 2020 by writing more loans, at a time when their peers were tightening their lending taps.
Absa has been on a path to regain the ground it lost in recent years, during the time when Barclays held a majority stake in the bank. Once a clear market leader in the home loan market, it slipped down the ranks.
Although it seemed like a risky move to grow lending market share in the middle of a pandemic when people were losing their jobs and could potentially default on their debt, Absa is reporting that the percentage of Stage 3 loans – those that have missed at least three payments – improved slightly from the first half.
Absa did say in March that the growth of its lending book was "very targeted" and that the bank didn't increase its risk profile to price these loans aggressively to gain the market share it did.
Absa said its credit impairments in the 10 months to end-October improved materially year-on-year from the R20.6 billion it reported in 2020, when its impairment charge shot up 163%.
Absa's credit loss ratio is now in the middle of its target range of 75 to 100 basis points.
Outside of the lending business, Absa said customer deposit growth remained robust, increasing by low double digits.
The bank's total revenue for the 10 months grew by mid-single digits year-on-year. Its net interest income rose by high single digits, and although its non-interest income was flat year-on-year, this has improved since the first half of the year.
Get the biggest business stories emailed to you every weekday.
Go to the Fin24 front page.