Absa's hope for an improved 2025

Absa, one of South Africa's big four banks, has flagged a better metrics in 2025 as it bets on improved economic prospects for the year ahead.

Absa, which released its financial results for 2024 on Tuesday, said it expects real GDP growth of about 2% in 2025 and 2026, citing market and consumer confidence after the formation of the government of national unity and less load-shedding since March last year.

In response, the bank has guided to mid-single digit revenue growth, with broadly similar growth in net interest income and non-interest income.

Absa also said it expects mid to high single digit customer loan growth and low to mid single digit customer deposit growth.

Its credit loss ratio is likely to improve to the top end of its through-the-cycle target range of 75 to 100 bps, while the credit loss ratio for the first half of 2025 should improve year-on-year from 123 bps in the previous period a year earlier.

Speaking during the virtual financial results presentation, group financial director Deon Raju said Absa expects a better position for South Africa in 2025 despite global uncertainties.

“Our guidance for this year is premised that South Africa is better in the second half, it allows more activity particularly for our South African businesses, so it is important for our revenue that South Africa improves in the second half,” Raju said.

Absa had factored some uncertainty into its forecast and things could change given the global uncertainties which would prompt the bank to review its outlook.

In numbers, Absa's headline earnings grew 10% to R22.05bn and diluted headline earnings grew 10% to 2,657.7 cents. The group’s return on equity increased to 14.8% from 14.4% and its return on average assets rose to 1.11% from 1.07%.

Revenue grew 5% to R109.9bn and the bank declared a 7% higher ordinary dividend per share of 1,460 cents. Also speaking during the results presentation, Absa's interim CEO Charles Russon said real GDP grew 0.6% in 2024 and inflation had improved to an average of 4.5% for the year.

Households had been bolstered by the rates cuts that started in September and the two-pot pension introduced last year.

“Though rates cuts are likely to be less than we had anticipated, they should lower the debt service burden, which should lead to a modest acceleration in household consumption,” he said.

Absa said its East African markets continued to perform strongly with Uganda moving closer to oil production while Zambia was hit by drought. Lower diamond demand had a negative effect on Botswana’s economy.

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