Banking group Absa has grown its full-year earnings by 12% after a strong performance from its Africa Regions unit.
The group said on Tuesday that headline earnings for the year to end-December rose 12% to R24.76bn, with diluted HEPS up 11% to 2,955.5c.
Revenue grew 5% to R115.7bn, as net interest income rose 4% and non-interest income increased 7%.
Net loans and advances grew 7%, while deposits and debt funding rose 8%.
Credit impairment charges declined 6% to R13.41bn, producing a 0.88% credit loss ratio from 1.03%.
The dividend per share rose 12% to 1,635c, with a payout ratio of 55%. The group’s return on equity (ROE) improved to 15.0% from 14.8%.
Personal and Private Banking’s headline earnings increased 7% to R7.5bn, but Business Banking declined 8% to R3.86bn. Africa Regions — Personal and Private Banking, and Business Banking — grew 51% to R2.5bn and Corporate and Investment Banking (CIB) rose 14% to R13.0bn.
The loss in head office, treasury and other operations reduced 5% to R2.16bn, it said.
On a geographic basis, South African headline earnings increased 7% to almost R17bn, while Africa Regions grew 25% to R7.77bn. Africa Regions contributed 31% of both group revenue and earnings.
Looking ahead, Absa said the global economic environment remains difficult to predict as US economic and diplomatic policy is expected to remain volatile. The armed conflicts in the Middle East and Ukraine pose significant economic and market challenges, it said.
Absa’s forecast for South Africa, made ahead of the military action against Iran, is for 1.9% GDP, with inflation averaging in the low 3%, and a further 50 basis points in interest rate reductions during 2026. However, a prolonged bout of military action in the Middle East could push energy prices higher and spoil global risk appetite, which would probably translate into a weaker path for the rand, somewhat higher inflation, a more cautious approach to interest rate cuts and weaker economic growth.
“We see the bar for the MPC [Reserve Bank’s monetary policy committee] to reverse course on rates as quite high and think it very unlikely that the global environment would trigger the onset of a rate hiking cycle,” it said.
“Botswana’s economy is expected to return to modest positive growth, Mozambique and Zambia’s economic recoveries are expected to gather pace, while Ghana’s fast pace of economic expansion cools slightly, and for other countries the growth trajectory is little changed from 2025,” it said.
Policy rates in 2026 are expected to be flat to lower for all, except Botswana.
“Given the current global risk of disrupted energy markets and higher oil prices, the risk to the Africa Regions’ view is for inflation to be higher, for more modest policy rate moves in impacted countries, and more pressure on fiscal sustainability should energy subsidies return.”
Based on these assumptions, and excluding further major unforeseen political, macroeconomic or regulatory developments, Absa’s guidance for 2026 is for mid-single-digit revenue growth, with non-interest income growth above net interest income.
It expects mid- to high-single-digit growth in both customer loans and customer deposits. The group’s credit loss ratio is expected to improve slightly into the bottom half of its 75-100 basis points through-the-cycle target range.
It expects an ROE of about 16%.
“We expect rand appreciation to be a headwind to group revenue and earnings in 2026,” it said.
The group reiterated its medium-term targets, including an ROE target range of 16%-19% for the period 2027-2030.
“We aim to improve our ROE to well within that range by 2028, with a key driver being reducing our cost-to-income ratio to approach 50% by 2028,” it said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.