Financial services firm Absa noted that its workforce fell by 1,200 in the first nine months of the year, as it continued to grapple with the economic fallout from the Covid-19 pandemic.
The lender said in a business update on Thursday (November 19) that it is unlikely to pay an ordinary dividend this year in an effort to conserve cash, Bloomberg reported. It is withholding payments despite solid buffers and forecasts of “improving second half capital generation”.
Absa said she expects net earnings per share to decline by more than 40% for the year ending December 2020.
“The number refers to permanent and temporary employees of Absa,” the group said in an emailed statement.
“Much of the reduction came from natural attrition, as Absa instituted a hiring freeze in light of Covid-19. The continued global and local progression towards digital banking has contributed to the reduction.
“The reduction concerns Absa operations in the African countries in which we are present,” he said.
The lender has seen its workforce drop in recent years, to 38,472 in 14 countries. The group’s workforce in South Africa is 28,296 people.
The data published by PwC showed the number of employees gained and lost by the country’s major banks in recent years, including Absa.
Lenders are cutting jobs as they look for ways to cut costs and face slow economic growth and new industry competition from branchless digital entrants such as TymeBank and insurer Discovery, a declared PwC.
Standard Bank chief executive Sim Tshabalala said in April that customer needs and competitive pressures had forced the group to rapidly digitize its business, leading to job losses and branch closures.
“The Standard Bank Group has no choice but to become a digital company. An overwhelming majority of our customers prefer to do almost all of their transactions online, ”he said.
“Our competition is increasingly digital and often cannot bear the costs of a large, long-established incumbent. If we fail to digitize urgently, efficiently and successfully, our clients will leave us and our shareholders will redirect their investments towards more competitive alternatives. Customers and shareholders would be absolutely right to do so. “
Looking ahead, Absa Group expects South Africa’s real GDP to decline by 8.7% in 2020, with moderate 2.6% growth forecast for next year against a backdrop of declining growth. significant uncertainty caused by the Covid-19 pandemic.
On Thursday, the Monetary Policy Committee (MPC) decided to leave the repo rate unchanged at 3.5%. Three committee members preferred to leave the rates unchanged, while two members preferred a 25 basis point cut in the pension rate.
“This serves as a guide to the expectation that rates are more likely to fall than rise under current economic conditions,” said Luigi Marinus, portfolio manager at PPS Investments.
The South African Reserve Bank (SARB) has moderated its GDP growth forecast for 2020 from -8.2% to -8.0%, and GDP growth is now expected to increase by 3.5% in 2021 and by 2.4% in 2022.
“This is significantly lower than the growth expectations of world GDP of a decline of 4.4% in 2020 and an increase of 5.2% in 2021 according to the latest forecasts of the International Monetary Fund (IMF),” a Marinus said.
He said the MPC had acted confidently since the lockdown began by reducing the pension rate to the current level of 3.5%. However, with the economic statistics currently available, it is difficult to understand why this has stopped.
“South Africa’s GDP growth is expected to disappoint relative to global levels and inflation is expected to remain below the midpoint of the target range for the next two years. While monetary policy alone cannot reverse the hardships many South Africans face, any further short-term rate cuts will have a stimulating effect on the economy.
Read: Absa sees muted recovery for South Africa in 2021