(Corrects spelling of name Meintjes, not Mientjes, paragraph 8)
* Absa’s half-year profits plunge by 93%
* Bad loans biggest drag
* Bank says full-year dividend unlikely
* Shares rise 2% as investors focus on future
JOHANNESBURG, Aug 24 (Reuters) - Shares in South African lender Absa rose more than 2% on Monday as investors looked past a plunge in profit to the prospect of a better second half.
The lender, already in the midst of a turnaround drive when the coronavirus pandemic struck, said it was unlikely to pay a full-year dividend after first half profit fell by 93%.
It had previously warned that bad loans would blow a hole in its performance and drag earnings down by up to 97%.
“Given our focus on preserving capital, we do not envisage declaring an ordinary dividend for 2020,” it said in its results statement, adding that capital levels were expected to remain resilient.
Headline earnings per share - the main profit measure in South Africa - stood at 67.7 cents ($0.0396) in the six months to June 30, compared with 920 cents a year earlier.
The biggest drag was an almost 300% rise in its credit impairment charge - among the steepest flagged by South Africa’s major lenders.
But a hefty portion of this was a provision for potential future losses, with Absa choosing to take more pain upfront.
Jan Meintjes, portfolio manager at Denker Capital, an Absa investor, said that meant the bank’s second-half profit decline could be closer to 30%, which he called a “good outcome”.
“The pre-provision profit was stronger than expected and a result of some good work done in the last 18 months,” he added.
Since splitting from former parent Barclays in 2017, Absa has been on a drive to win back lost market share, including by lending more aggressively than was possible under the British lender.
The South African Reserve Bank asked lenders not to pay dividends during the health crisis, but rival Standard Bank has said it could pay a final dividend pending discussions with the central bank. ($1 = 17.1172 rand) (Reporting by Emma Rumney; Editing by Kim Coghill and Anil D’Silva and Kirsten Donovan)
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