Reviewing some local earnings results, we look at South-African-based financial services group ABSA Group Limited (JSE: ABG) and touch on the latest results for Old Mutual (JSE: OMU) while also highlighting the most prominent findings from February’s U.S. CPI report.
ABSA Group Limited (JSE: ABG)
The financial services group reported its highest-ever normalised headline earnings figure of R21 billion for the 2022 financial year, representing a stellar 13% year-over-year growth from the R18.6 billion reported in the prior-year period. Moreover, ABSA’s 16.6% return on equity figure for 2022 represents a material improvement from the 15.8% figure reported for the 2021 financial year. The banking group enjoyed robust financial performance amidst a rising interest-rate environment which saw central banks raise rates persistently throughout much of 2022 in a heated battle against inflation.
Old Mutual Limited (JSE: OMU)
Pan-African investment, savings, insurance, and banking group Old Mutual Limited (JSE: OMU) saw its headline earnings increase by 10% year-over-year, from R7.2 billion in 2021 to R7.9 billion in 2022. The group’s solvency ratio strengthened from 184% in 2021 to 190% in 2022. Its dividend coverage ratio improved significantly by 15%, from 1.51x in 2021 to 1.73x in 2022, as the group reported no change in interim and final dividends per share (DPS). The insurance and investment group has also announced plans to enter the digital banking space as early as 2024, a project that will buzz market participants, investors, and shareholders alike.
February’s U.S. CPI Report
February’s annual U.S. CPI figure met expectations at 6%, down from January’s 6.4%. Seasonally adjusted, the U.S. Consumer Price Index (CPI-U) for All Urban Consumers rose 0.4% in February after increasing 0.5% in January. Market participants will be somewhat relieved to see February’s annual CPI figure come in lower than January’s. Still, the FED will be hesitant to ease rate hikes until substantial evidence prevails that inflation is on a “sustained downward path”.
Despite the collapse of Silicon Valley Bank strengthening the case for rate caution and January’s CPI figure arriving in line with expectations, market participants will know very well that “the process of getting inflation back down to 2% has a long way to go and is likely to be bumpy.” All eyes will turn to the FED’s following interest rate announcement to gauge how Jerome Powell plans to bring U.S. inflation down to the much-desired 2% target rate.
Sources: ABSA Group Limited, Bloomberg, CNBC, Forbes, FX Street, NBC News, Old Mutual Limited, U.S. Bureau of Labour Statistics, Reuters
Disclaimer: Trive South Africa (Pty) Ltd, Registration number 2005/011130/07, and an Authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 2002 (FSP No. 27231). Any analysis/data/opinion contained herein are for informational purposes only and should not be considered advice or a recommendation to invest in any security. The content herein was created using proprietary strategies based on parameters that may include price, time, economic events, liquidity, risk, and macro and cyclical analysis. Securities involve a degree of risk and are volatile instruments. Market and economic conditions are subject to sudden change, which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. When trading or investing in securities or alternative products, the value of the product can increase or decrease meaning your investment can increase or decrease in value. Past performance is not an indication of future performance. Trive South Africa (Pty) Ltd, and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered from using or relying on the information contained herein. Please consider the risks involved before you trade or invest.
