Absa is maintaining the full-year earnings guidance it issued in March, despite an uncertain global economic environment.
For the first half of the 2025 financial year, the group expected mid-single-digit revenue growth, with higher growth in non-interest income than net interest income, it said in a voluntary update on Friday.
“Continuing the second half of 2024 trend, net interest income growth is expected to be muted, given mid-single-digit loan growth and some margin compression, particularly in SA,” it said.
Absa expects high single-digit non-interest income growth, with strong trading revenue, mid-single-digit growth in net fee and commission income and modest net insurance income growth.
It expects mid-single-digit operating expenses growth, producing low- to mid-single digit growth in pre-provision profit and a slightly higher cost-to-income ratio than the 52.7% in the first half of 2024.
The group’s credit loss ratio is expected to improve to near the top end of its through-the-cycle target range of 75-100 basis points (bps), from 123bps a year ago. Consequently, it expects mid-teen earnings growth in the first half of the 2025 financial year.
Return on equity (ROE) is expected to improve to about 14.8% from 14% in the first half of 2024.
“We expect our group CET 1 [common equity tier 1] ratio to finish the first half of 2025 around the top end of our board target range of 11%-12.5%, and we plan to maintain a dividend payout ratio of around 55% for 1H25,” it said.
“In terms of full-year 2025 guidance, we reiterate the guidance that we provided on March 11 2025.”
The group’s reorganised Personal and Private Banking is expected to deliver strong earnings growth, driven by lower credit impairments while revenue growth remains muted, given modest industry loan growth and the group’s risk appetite reduction in personal loans.
In Business Banking, low revenue growth and a higher credit loss ratio are expected to reduce earnings.
Corporate and Investment Banking will benefit from lower credit losses and strong trading revenue, while net interest income growth remains muted.
“We expect Absa Regional Operations Retail and Business Banking to maintain solid revenue and pre-provision profit growth, with strong growth in active customers and fee income, offsetting higher credit impairments,” it said.
It expects a “substantially reduced loss” in Head Office, Treasury and other operations.
The improvement reflects asset and liability management optimisation initiatives: Absa stopped applying hyperinflationary accounting to Absa Bank Ghana for the first half, given significantly lower inflation in this market.
Geographically, SA is expected to drive group earnings growth in the first half of its 2025 year, mostly due to lower credit impairments since net interest income growth remains muted.
It expects strong pre-provision profit growth in African regions, partially offset by higher credit impairments.
Absa’s GDP growth expectations for 2025 have declined in all the countries it operates besides Ghana.
“Contrary to our expectation, the average exchange rates in our Africa regions did not depreciate against the rand and have not been a drag on our group earnings during 1H25.”
The group will release interim results on August 18.
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.