ABSA Earnings Growth at 12% Amid Credit Loss Shrink, JSE: ABG Share Price Resumes Uptrend After Dive
South African banking giant Absa Group reported stronger annual earnings as lower credit impairments and steady performance across key...
Quick overview
- Absa Group reported a 12% increase in headline earnings to R24.7 billion, driven by lower credit impairments and steady performance across key divisions.
- The bank's strategic shift under CEO Kenny Fihla emphasizes customer-focused operations and operational resilience, reflecting early benefits in performance.
- Absa's operations outside South Africa showed stronger earnings growth, contributing significantly to overall profitability.
- Improved credit quality is evident as total credit impairments declined by 6%, with the credit loss ratio improving to 88 basis points.
South African banking giant Absa Group reported stronger annual earnings as lower credit impairments and steady performance across key divisions supported results, though the bank continues navigating a shifting strategy under CEO Kenny Fihla.
Earnings Growth Supported by Lower Credit Losses
Absa reported a 12% increase in headline earnings, reaching R24.7 billion ($1.51 billion) for the financial year ended 31 December. The improvement was largely driven by a reduction in bad loans and steady growth across several business units, at the expense of higher interest rates for the broader public.
The bank’s pre-provision profit rose 4% to R53.5 billion, reflecting improved operational performance before accounting for credit impairments.
Meanwhile, revenue increased 5% to R115.7 billion, supported by solid growth in non-interest income, while net interest income remained moderate due to slower retail loan growth and some pressure on lending margins.
Strategic Shift Under New Leadership
Since CEO Kenny Fihla took over in October 2024, the bank has begun reshaping its strategic direction.
Previously, Absa focused heavily on purpose-led transformation, sustainability initiatives, and broad African expansion. Under the new leadership approach, the bank is placing greater emphasis on customer-focused operations, operational resilience, and strengthening its position as a leading pan-African financial institution.
According to Fihla, the latest results reflect early benefits from operational adjustments.
He noted that improvements in the operating model and a sharper focus on clients have helped strengthen the group’s performance across multiple business segments.
While the company’s share price were little changed after the report closing at R238.53, the ferocious pullback stopped and we did see an attempt to rebound. The share price soared 35% since October, soaring from around R280 to nearly R380, but we saw a steep pullback last week. However the 20 SMA acted as support and the underlying trend remains positive, underscoring investor confidence in its strategic progress.
ABGJ Chart Weekly – The Pullback Is Minimal
Stronger Growth Outside South Africa
Absa also highlighted stronger performance from its rest-of-Africa operations, which span 11 markets across the continent.
These businesses delivered faster earnings growth than the South African division, supported by improved profitability and expanding customer bases. The bank pointed to solid pre-provision profit growth and increased client activity in these regions.
Within South Africa, performance was also supported by an improvement in credit conditions.
Credit Quality Improves
A key driver of Absa’s results was the improvement in loan quality.
Total credit impairments declined 6% to R13.4 billion, indicating fewer problematic loans across the bank’s portfolio.
The group’s credit loss ratio, which measures bad loans relative to total lending, improved to 88 basis points, compared with 103 basis points in 2024. This places the ratio comfortably within Absa’s targeted range.
Absa 2025 Earnings Highlights
Headline Earnings:
- Increased 12% to R24.7 billion ($1.51 billion) for the year ended 31 December 2025.
Revenue Growth:
- Total revenue rose 5% to R115.7 billion.
- Growth supported by strong non-interest income and stable net interest income.
Pre-Provision Profit:
- Increased 4% to R53.5 billion, reflecting operational efficiency.
Credit Impairments:
- Overall impairments fell 6% to R13.4 billion.
- Credit loss ratio improved to 88 basis points, down from 103 basis points in 2024.
Dividend:
- Raised 12% to 1,635 cents per share, reflecting confidence in capital strength.
Unit Performance:
- Corporate & Investment Banking (CIB): Headline earnings up 14% to R13 billion.
- Personal & Private Banking (PPB): Headline earnings up 7% to R7.5 billion.
- Business Banking: Headline earnings up 8% to R3.9 billion.
- Africa Regions: Headline earnings up 51% to R2.5 billion, highlighting strong international growth.
Geographic Diversification:
- Bank operates in 12 African countries beyond South Africa, contributing 31% of total earnings.
Operational Takeaways:
- Benefits from operating model changes and sharper client focus.
- Consistent improvement in credit outcomes across portfolios.
- Africa regions outperform domestic market in earnings growth.
Outlook: While Absa’s results highlight steady progress, the bank continues to face challenges from moderate loan growth, margin pressure, and broader economic uncertainty. However, stronger African operations and improved credit quality suggest the bank’s evolving strategy may be starting to gain traction.
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