Absa said in a surprise announcement on Tuesday that headline earnings for the six months to June could be up to 10% lower than the R4,6-billion reported in the comparative period last year.
South Africa’s largest bank by retail customer numbers blamed soaring credit impairments due to higher cover required on its mortgage book as property prices and distressed customers remained under pressure.
Revenue in the period under review was also subdued, the Barclays-owned group said.
› Absa warns of fall in earnings
› Asset bosses alarmed over ANC pension plan
Analysts had expected Absa would continue to show modest revenue growth following a similar performance in the year to December, and Tuesday’s update shows the tough challenges banks are facing to grow advances in the face of high consumer debt.
Absa said advances were expected to start improving only in the second half of the year.
Maria Ramos, Absa group CE, said: "Given that economic conditions continue to be difficult and distressed customers remain under pressure, we believe we are taking appropriate measures. Although we have had to write off more than expected in terms of distressed mortgages in the legal process, we continue to focus on trying to keep customers in their homes."
Absa management indicated on releasing 2011 full-year results that domestic economic conditions were expected to be fragile in 2012, so asset and revenue growth were likely to remain muted.
"In the current environment, sustainable productivity improvements remain a group priority and we continue to manage our costs effectively," Ms Ramos said.