This article first appeared on GuruFocus .
-
Headline Earnings:Increased by 12% to almost 25 billion.
-
Revenue Growth:5% increase to 116 billion.
-
Return on Equity (ROE):Improved to 15%.
-
Dividend Per Share:Increased by 12%.
-
Net Asset Value Per Share:Increased by 8%.
-
Cost to Income Ratio:Experienced pressure due to investments.
-
Credit Impairments:Decreased by 6% to 13.4 billion.
-
Net Interest Margin:Narrowed by 10 basis points to 453 basis points.
-
Customer Loans Growth:Net customer loans grew by 6%.
-
Customer Deposits Growth:Grew by 6%.
-
Non-Interest Income:Increased by 7%, accounting for 36% of group revenue.
-
Operating Expenses:Increased by 6%.
-
Set One Ratio:Improved to 12.7%.
-
Global Markets Income:Rose by 31% to over 11 billion.
-
Personal and Private Banking Earnings:Grew by 7%.
-
Business Banking Earnings:Decreased by 8%.
-
Africa Regions PBB and Business Banking Earnings:Increased by 51%.
-
Loan Growth:Improved in the second half with 7% annualized growth.
-
Transactional Customers:Active transactional customers grew by 3% to 6.1 million.
Release Date: March 10, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
-
Absa Group Ltd ( AGRPY ) delivered a solid financial performance with a 12% increase in headline earnings and a 5% revenue growth.
-
The company's ROE improved to 15%, supported by a strong balance sheet and a set one ratio of 12.7%.
-
CIB delivered another strong year with earnings up 14%, accounting for almost half of the group's earnings and returns of 21.1%.
-
Africa region's business now contributes around 1/3 of the group's earnings, growing faster than South African operations.
-
The group achieved a 12% increase in dividend per share and an 8% increase in net asset value per share, delivering value to shareholders.
Negative Points
-
The cost to income ratio remains under pressure as the company invests to support delivery and strengthen its operating platform.
-
Business banking earnings decreased by 8%, highlighting the need for a more fundamental step change.
-
The net interest margin narrowed by 10 basis points due to lower deposit margins and competitive pricing pressure.
-
Operating expenses increased by 6%, resulting in slightly negative operating jaws and 4% higher pre-provision profit.
-
The company faces challenges in fully entrenching a customer-centric culture to drive stronger growth in customer numbers.
Q & A Highlights
Q: How is Absa prioritizing capital allocation across its South African divisions and Africa regions given its strong capital position? A: Deon Raju, Group Financial Director, explained that capital allocation is prioritized towards areas with growth potential, particularly in Africa regions and the CIB franchise. Retail and Business Bank South Africa are also considered for capital allocation due to their capital-generative nature.
Q: What is the outlook for net interest margins (NIMs) in 2026, considering rate expectations in South Africa and Africa regions? A: Deon Raju noted that mid-single-digit revenue growth is expected, with non-interest income slightly stronger than net interest income. NIM compression is anticipated, primarily due to rate cuts in Africa regions, except Botswana.
Q: Can you explain the 16% increase in merchant income despite competitive pricing pressures? A: Deon Raju attributed the increase to a reclassification of debit card turnover from Bankserve to Visa. Underlying growth aligns with industry trends, showing a couple of percent increase.
Q: What opportunities exist for cost savings in professional fees, which increased by 6% in 2025? A: Deon Raju highlighted that legal costs and credit bureau fees were the main drivers of the increase. Opportunities for cost reduction exist in consulting and marketing expenses, with a focus on discretionary cost management.
Q: Why was the credit loss ratio improvement better than expected? A: Deon Raju explained that strong recoveries in Africa regions, business banking, and CIB contributed to the better-than-expected credit loss ratio. These recoveries were lumpy and sizable, leading to a favorable close across all books.
Q: What are the strategies to improve ROE in the rest of Africa given its current low level? A: Charles Russell from SBG Securities emphasized opportunities for cost efficiency and capital allocation precision. Leveraging pan-African operations and customer growth in PPB business are expected to drive ROE improvements.
Q: How does Absa plan to achieve targeted non-interest revenue (NIR) growth? A: Kenny Fihla, CEO, outlined strategies for each business unit, focusing on client segments rich in non-interest revenues. Strengthening origination teams and enhancing client coverage are key initiatives to drive NIR growth.
Q: What is Absa's stance on the ongoing issue of online gambling in the country? A: Kenny Fihla acknowledged that online gambling is a growing problem, impacting lending decisions. Gambling trends are used as predictors of delinquency, and the issue diverts resources from productive economic use.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
