Barclays’ South African arm Absa issues a profit warning

SOUTH African bank Absa, which is majority owned by Barclays, yesterday issued a profit warning that blamed an increase in mortgage-related bad debts, sending its shares tumbling.

The bank warned its first-half earnings could fall as much as 10 per cent below last year’s 4.6bn rand (£347m), causing its stock to fall by seven per cent.

“Credit impairments have increased due to higher cover required on our mortgage legal book, as property prices and distressed customers remain under pressure,” the firm said.

Absa also said that revenue growth was sluggish, raising fears that the South African banking recovery may be faltering.

“They are saying it is just on the impairments on their mortgage book,” said Charles Russell, an analyst at Macquarie First South Securities.

“I cannot imagine that is the only thing that has gone wrong. The fact that they are not growing any revenue, that is more of a pervasive thing than just relating to their mortgage portfolio.”

Shares in Absa closed yesterday down 8.3 per cent at 14,350 rand on the Johannesburg Stock Exchange.