14 March 2022

For immediate release

Absa Group 2021 Earnings Increase on Lower Impairments, Higher Pre-prevision Profit

*Salient points

Revenue increased 6% to R85.9billion

Operating costs rose 4% to R47.4 billion
Cost-to-income ratio decreased to 55.2% from 56%
Pre-provision profit increased 7% to R38.5 billion
Impairments fell 59% to R8.5 billion
Headline earnings per share increased to 2197 cents from 946.5 cents
Return on equity improved to 15.8% from 7.2%
Group CET 1 ratio improved to 12.8% from 11.2%
✓ Dividend per share declared: 785 cents (no dividend in 2020)

*Note: Normalised values are reflected (stripping out the effect of the separation from Barclays PLC)

Absa Group headline earnings more than doubled to R18.6 billion in 2021 (R8 billion in 2020), well in
excess of 2019 earnings, as pre-provision profit increased and as the impairments charge reduced
substantially.

The improvement in part reflects a stronger than expected economic recovery in South Africa, where
Absa generates most of its income. South Africa’s gross domestic product improved from a low base
in 2020 and showed improving momentum for most of the year. All of the countries in which Absa has
a presence look to have returned to positive economic growth during 2021.
“This is a strong set of results which reflect the benefit of, not only the improved operating environment
in 2021, but also the deliberate actions that we have taken to ensure that Absa remains resilient and
poised to resume our growth plans in a favourable environment,” said Jason Quinn, Absa Interim
Group Chief Executive. “Our purpose-led approach to supporting our clients and communities defined
our success in a tough environment while also creating value for shareholders,” he said.

Revenue growth remained resilient at 6%, or 8% in constant currency, supported by strong growth in
net interest income (up 9%). Non-interest income was in line with 2020 levels, as the negative impact
of Covid-19-related claims in the insurance business eroded the benefit of strong income increases in
areas including Global Markets.

Solid revenue growth and cost management helped to deliver positive pre-provision profit growth over
the past two years.

Absa continues to make material investments in information technology (IT), where costs increased
by 19% to R4.9 billion as Absa sought to build on the gains made during the past three years in
improving system reliability and stability for customers, and to strengthen security and controls.
Impairment charges were significantly lower than in the prior year as fewer customers defaulted on
loans and the outlook for defaults improved on the back of improved macro-economic conditions.

Customer deposits grew 12%, supported by strong performance in the retail and business banking
and corporate deposit portfolios and the closure of the Absa Money Market Fund, with a significant
portion of those customers electing to migrate to Absa deposit products. Growth in gross customer
advances at 7% was supported by strong growth in secured assets in South Africa, where home loans
increased 9% and vehicle asset finance rose 10% as Absa continued to gain market share in these
areas.

“We have come through the crisis in a strong position, having focused on managing operating
leverage, building balance sheet resilience and preserving capital,” said Punki Modise, Absa Interim
Group Financial Director. “These actions and our financial performance resulted in a return on equity
that exceeds our cost of equity, years ahead of expectation,” she said.

Return on equity improved to 15.8% in 2021, while Absa Group’s Common Equity Tier 1 (CET1) ratio
was strong at 12.8%. At this level, Absa’s capital reserves are above the Board target level and above
the minimum regulatory capital requirement level.

Retail and Business Banking (RBB)

RBB earnings more than doubled as significantly lower impairment charges were partially offset by a
3% contraction in pre-provision profit, reflecting the impact of higher excess mortality claims in the life
insurance business, customer fee cuts of R600 million to alleviate strain on customers, and increased
performance costs. RBB operations outside of South Africa contributed to the improved performance
and returned to profitability in 2021.

Since the start of the Covid-19 pandemic, RBB has focused on being close to customers and
responding proactively and empathetically with initiatives to support them. This approach continued in
2021 as customers were supported through lockdowns and civil unrest with bespoke relief measures
including debt restructuring, debt consolidation and assisted asset realisation.

In 2021, the focus shifted from mitigating the financial consequences of the Covid-19 pandemic to
growing the business in a sustainable and selective manner through dynamic execution of the strategic
transformation journey launched in 2018. The customer franchise strengthened as reflected in key
performance indicators in South Africa, including:

• a 49% increase in home loan registrations

• vehicle asset finance production increasing 24%
• new personal loans increasing 40% in South Africa
• cheque account sales increasing by 73%, which is 24% higher than 2019 levels

RBB SA is in the second phase of its 2018 strategy, focusing on smart growth. Its main priorities
include improving customer primacy, making progress with digitisation and growing capital-light
revenues, including in our integrated bancassurance operations.

In 2021, RBB revamped key capabilities within the customer relationship matrix, including the launch
of a behavioural rewards programme – Absa Advantage – which, as a data-driven customer
communication approach, has improved the understanding of customer preferences and therefore
enhanced the ability to engage empathetically in all interactions.

Social media engagement with customers has been elevated across the business as evidenced by
the improvements made in the 2021 BrandsEye Net Sentiment Banking Index where Absa came out
on top after being the bottom ranked bank for a number of years.

Absa also remained at the forefront of digital payment innovation with the launch of Apple Pay in South
Africa, as well as contactless payments with Garmin and FitBit wearables as well as the introduction
of the universal QR scan to pay functionality in the Absa app in 2021.

Corporate and Investment Banking (CIB)

CIB headline earnings increased to levels higher than prior to the pandemic, with strong growth
recorded across corporate banking and investment banking and across regions. Earnings
performance was supported by income growth of 10% as the client franchise grew and primary-banked
client numbers increased. Improved credit performance and a 78% drop in impairment charges further
supported earnings.
All core business units delivered double digit revenue growth in constant currency, with strong
performance from Markets despite the high base. A 14% increase in Global Markets income was
supported by solid franchise growth across both Corporate and Institutional client base.

Having completed the balance sheet led phase of its strategy and separation from Barclays, CIB is
also successfully prioritising customer primacy, as well as deposit and non-interest revenue growth,
carefully balancing growth and returns.

Absa made significant progress in building on existing environmental, social and governance (ESG)
capabilities and in its aspiration to become an African leader in this space. Absa was the first South
African bank to announce sustainable finance targets with the aim to finance or arrange over R100
billion for ESG-related projects by 2025. We also announced Africa’s first certified green loan from the
International Finance Corporation, with a value of $150 million.

An active force for good

Absa actively contributed to creating inclusive sustainable economic growth in Africa, investing close
to R195 million in support of communities through various education and youth employability,
advocacy and thought leadership, as well as COVID-19 and Civil Unrest response initiatives. These
included, among others:

• The launch of the Absa Fellowship Programme, which aims to support the development of
authentic, accountable, and ethical future leaders with the potential to play a shaping role in their
respective communities in Africa.
• The Absa Cross Skilling programme, a collaboration with our CIB clients to cross-skill 238 young
people after Covid-19-related job losses.
• 17,873 unemployed youth supported through technical, vocational and digital skills among others.

Absa invested in initiatives that promote fairness, equality and transparency across all our African
markets. These included, among others, financial contributions and leadership support towards the
Gender-Based Violence and Femicide Response Fund in South Africa.

Absa also contributed to initiatives in support of business relief for informal traders and micro-
enterprises affected by Covid-19 and Civil Unrest in South Africa.

Looking ahead

The outlook for the global economy in 2022 is particularly uncertain. Events in Ukraine are acute, and
sharp moves in commodity prices and potential interruptions to supply are likely to trigger significant
re-assessments. Absa currently expects South Africa’s economy to grow by 2.1% in 2022, returning
to pre-Covid absolute GDP levels by the end of the year. In countries outside of South Africa, where
Absa has a presence, GDP-weighted economic growth of 5.3% is expected.
Based on these assumptions, and excluding further major unforeseen political, macroeconomic or
regulatory developments, Absa expects high single-digit revenue growth in 2022 and return on equity
at similar levels to 2021.

“While the outlook for the global economy in 2022 is particularly uncertain, we feel positive about the
strong base that we have built in the past few years and how this has positioned us to deliver on our
strategic objectives,” said Quinn. “We will pursue growth opportunities appropriate to the environment
and shore up buffers as needed to ensure that the bank remains resilient.”

End

For more information please contact:

Carli Cooke
Absa Group Media Relations
083 652 7371
carli.cooke@absa.africa

About Absa Group Limited

Absa Group Limited (‘Absa Group’) is listed on the Johannesburg Stock Exchange and is one of Africa’s largest
diversified financial services groups.

Absa Group offers an integrated set of products and services across personal and business banking, corporate
and investment banking, wealth and investment management and insurance.

The Group owns majority stakes in banks in Botswana, Ghana, Kenya, Mauritius, Mozambique, Seychelles,
South Africa, Tanzania (Absa Bank Tanzania and National Bank of Commerce), Uganda and Zambia and has
insurance operations in Botswana, Kenya, Mozambique, South Africa and Zambia. Absa also has representative
offices in Namibia and Nigeria, and securities entities in the United Kingdom and the United States.

For further information about Absa Group Limited, please visit www.absa.africa