Absa Group grew full-year headline earnings by 10% as the group reported an improved performance in its SA operations.
Total income for the year ended December rose 5% to R109.9bn, while headline earnings were up 9.89% at R22.06bn, or headline earnings per share (HEPS) of 2,662.2c.
Absa said in SA, headline earnings were up 14% to R15.9bn as impairments within the Everyday Banking (EB) and the Product Solutions Cluster (PSC) moderated and noninterest revenue (NIR) reflected improvement.
Headline earnings growth in Africa Regions was up 8% to R6.2bn but the stronger rand, higher cash reserving requirements in larger markets and the continued adoption of hyperinflation accounting in Ghana resulting in muted reported currency growth.
The group declared a 7% higher dividend per share of 1,460c.
Gross loans and advances increased by 6.2% and deposits rose 12.2%. Pre-provision profit grew 5% to R51.4bn.
Net interest income rose to R71.1bn from R68.05bn a year ago, with growth supported by customer advances, which were up 7% and deposits, which increased by 12%, partly offset by slight margin compression to 463 bps in 2024 from 468 bps in 2023.
Absa said NII growth in the second half was lower than the first due to the drag from higher cash reserving requirements and slower lending in both the EB and PSC portfolios in order to contain risk.
Return on equity rose to 14.8% from 14.4% and though it was below the Absa’s medium-term return objective, the second half of the year RoE’s of 15.5% reflected a stronger performance compared with first half's returns of 14%, supported by headline earnings growth in the second half.
Excluding the effect of naira losses, Ghana hyperinflation and the rundown of separation costs, underlying headline earnings growth of 16% remains robust reflecting an improving credit loss ratio, better NIR growth and solid cost containment, Absa said.
Impairments were lower at R14.3bn compared with R15.5bn before. The lower charges reflect better early-cycle performance in PSC and EB as the SA retail cycle started to improve and from management actions related to risk reductions and collections initiatives.
This resulted in a credit loss ratio of 103 basis points, which is slightly above the upper-end of group’s through-the-cycle target range of 75-100 bps with the credit loss ratio in the second half of 85 bps, which is well within range.
In terms of divisional headline earnings, the Product Solutions Cluster increased 38%, Everyday Banking grew 18%, Relationship Banking rose 4%, Absa Regional Operations — Retail and Business Banking increased 12%, and Corporate and Investment Banking increased 6%. The loss in head office, treasury and other operations rose 24%.
Absa said the global economic environment was likely to remain uncertain, largely due to the sweeping and volatile changes being announced by the new Trump administration in the US.
It expects SA real GDP growth of about 2% in 2025 and 2026.
Absa cited positive reaction to the GNU, an improvement in Eskom’s operational performance and the early improvement in Transnet’s performance as positive factors.
Household incomes were expected to increase, with wage growth ahead of inflation and as some received a boost via withdrawals under the two-pot pension reform. Lower interest rates would result in a lower debt service burden, which should see a modest acceleration in household consumption, Absa said.
Absa currently forecasts that the GDP-weighted growth for the Africa region countries will rise to 5.3% in 2025. Disinflation, lower policy rates, improving weather conditions, strong infrastructure investment and ample multilateral support underpin the region’s growth outlook, it said.
“We expect mid-single digit revenue growth, with broadly similar growth in net interest income and non-interest income. We expect mid- to high single digit customer loan growth and low to mid-single digit customer deposit growth,” Absa said.
The group’s credit loss ratio is expected to improve to the top end of its through-the-cycle target range of 75 bps to 100 bps.
It expects an ROE of slightly above 15%, from 14.8% in 2024 and expects to maintain a dividend payout ratio of about 55% for 2025.
“We expect a stronger rand to be a slight drag on earnings in 2025, although Africa regions earnings growth should be stronger than SA. Finally, we reiterate our ROE target of 16% for 2026,” it said.
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