Johannesburg: AfricUpdate – News Desk
Absa Group delivered strong earnings growth for the first half of 2025, reflecting successful execution of its strategic priorities. Headline earnings increased 17% as credit impairments declined and pre-provision profit grew. Revenue increased, underpinned by strong non-interest income growth and stable net interest income, reflecting solid divisional revenue contributions. From a geographic perspective, double-digit earnings growth was delivered by the Group’s South African operations, mainly due to lower impairments, while Africa regions’ performance was mainly driven by strong pre-provision profit growth as underpinned by strong customer growth.
“Our interim earnings performance demonstrates good progress on strategic priorities during this period, including operational reorganisation and divisional alignment, and enhanced client focus. Headline earnings increased 17% and our return on equity continues to improve, showing the benefit of our diversified footprint with operations in 16 countries.” Kenny Fihla, Chief Executive Officer, Absa Group
A 14% decrease in impairments played a significant role in delivering earnings growth and included a robust collections strategy, credit model enhancements, and changes to new-business lending criteria, particularly in vehicle asset finance and unsecured lending. The credit-loss-ratio reduced in line with guidance and is at the top end of Absa’s through-the-cycle target range at 100 basis points.
“Among the key contributors to our strong performance are a notable improvement in our credit-loss-ratio, strong growth in non-interest income particularly trading, and cost management supported by our productivity programme. To date, Absa has achieved R2.4 billion of the R5 billion savings it had committed to achieving by 2027 under a productivity programme launched in 2024. While we continue to operate in a highly competitive environment, we remain focused on identifying opportunities to grow our balance sheet, our customer base and maintain our competitive positioning across our markets” Deon Raju, Financial Director, Absa Group
Absa Group business units’ performance in the first half of 2025 reflects the benefits of disciplined execution, with most business units reporting strong earnings growth. Business unit June 2025 Headline earnings Change year-on-year. Personal and Private Banking R3.2 billion Increased 23%. Business Banking R1.7 billion Decreased 12%. Corporate & Investment Banking R6.4 billion Increased 10%. Absa Regional Operations Retail and Business Banking (ARO RBB) R1.1 billion Increased 35%.
The newly formed Personal and Private Banking (PPB) business unit delivered strong earnings growth, primarily driven by a significant reduction in credit impairments, despite muted revenue growth due to modest industry loan expansion and a more conservative risk appetite in lending. PPB is continuing its investment in enhancing the bank’s digital capabilities to deliver a seamless, human-centered banking experience for its customers. The areas of focus include enhancing mobile and digital platforms, embedding artificial intelligence (AI) and data analytics and strengthening cybersecurity.
Business Banking (BB) earnings fell short of expectations and were impacted by subdued revenue growth and higher credit-related impairments. Corporate and Investment Banking (CIB) reported solid earnings growth and benefitted from lower credit-related impairments and robust trading revenue, although net interest income growth remains constrained. CIB remains an anchor for the Group, contributing more than half of the Group’s earnings.
Absa Regional Operations Retail and Business Banking (ARO RBB) showed strong growth in revenue and pre-provision profit with a significant improvement in headline earnings. These results were supported by strong customer acquisition and fee income growth, which helped offset higher credit-related impairments. Head Office, Treasury, and other operations reported a substantially lower earnings loss, reflecting the impact of asset and liability management optimisation and the discontinuation of hyperinflationary accounting in Ghana due to lower inflation in that market.
Absa Group’s customer base increased 2% to 12.8 million in the first half of the year and Group-wide digitally active customers increased 8% to 5 million customers. Continued efforts in evolving product offering and digital channels were evident from, for example, the launch of our Kiganjani App in Tanzania, making it easier for customers to manage their finances from anywhere.
Absa increased its investment in IT-related spend, with costs increasing 5% to R8.2 billion, mainly reflecting investment into new digital capabilities resulting in higher cybersecurity, as well as software license and maintenance costs. Ongoing investments in new technologies, the use of AI and digitisation are expected to yield benefits through operational streamlining and automation which will further enhance delivery on client-centric solutions.
Absa is continuing its journey to advance its sustainable finance agenda and is refining its ESG strategy to focus on high-impact sectors while advocating for regulatory support to unlock further investment in industrial decarbonisation and infrastructure. Absa has kept its full-year 2025 guidance largely unchanged, projecting mid-single digit revenue growth and a return on equity of about 15%. The bank noted that a weaker rand is expected to provide some support to earnings, while performance from its Africa regions is forecast to outpace South Africa.
Economic conditions remain challenging. Absa expects South Africa’s economy to expand by only 0.9% in 2025, citing a weak start to the year and the impact of US trade tariffs. In contrast, GDP across its African regional markets is projected to grow by 4.8%. Despite heightened global uncertainties, Absa said lower inflation and policy rates, sustained infrastructure investment, favourable weather, multilateral support, and ongoing reforms will continue to underpin the longer-term outlook.
