{"id":845785,"date":"2025-12-08T13:00:00","date_gmt":"2025-12-08T11:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=845785"},"modified":"2025-12-08T11:29:32","modified_gmt":"2025-12-08T09:29:32","slug":"absa-is-opening-the-taps","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/845785\/absa-is-opening-the-taps\/","title":{"rendered":"Absa is opening the taps"},"content":{"rendered":"\n

Absa says there has been modest retail loan growth in South Africa over the year, but it is slowly starting to extend loans to customers. <\/p>\n\n\n\n

This was provided in the group\u2019s latest guidance for 2025, where the group expects mid-single-digit revenue growth. <\/strong><\/p>\n\n\n\n

The group said that it expects stronger growth in non-interest income than in net interest income. <\/p>\n\n\n\n

\u201cNet interest income growth will remain muted, due to modest retail loan growth in South Africa<\/strong> and slight margin compression,\u201d it said. <\/p>\n\n\n\n

\u201cHowever, it will improve in the second half. We expect mid- to high<\/strong> single-digit customer loan growth<\/strong>.\u201d\u00a0<\/p>\n\n\n\n

The group said that the move will be driven by strong second-half growth in wholesale lending and mid-single-digit deposit growth.<\/p>\n\n\n\n

For 2026, the group\u2019s net interest income is expected to improve further, driven by the mid- to high single-digit loan growth.<\/p>\n\n\n\n

Within non-interest income for 2025, fee income growth remains moderate.<\/p>\n\n\n\n

Net insurance income is also lower due to the disposal of its insurance business in African regions. Trading revenue, however, continues to grow strongly. <\/p>\n\n\n\n

The group\u2019s credit loss ratio is expected to improve to the upper half of its through-the-cycle target range of 75 to 100 basis points (103 bps in 2024), resulting in lower credit impairments. <\/p>\n\n\n\n

There were improvements in Personal and Private Banking (PPB), Corporate and Investment Banking (CIB) South Africa and Absa Regional Operations Retail and Business Banking (ARO RBB). <\/p>\n\n\n\n

These improvements offset increased charges in Business Banking (BB) and CIB ARO.<\/p>\n\n\n\n

The group also expects mid-single-digit growth in operating expenses, resulting in a slightly higher cost-to-income ratio than the 53.2% recorded in 2024. <\/p>\n\n\n\n

This comes from the low to mid-single-digit growth in pre-provision profit. Direct cost savings will also offset higher performance cost growth.<\/p>\n\n\n\n

Thus, the group expects an RoE of around 15% from 14.8% in 2024, with headline earnings per share growth in the low double digits. <\/p>\n\n\n\n

The group expects to maintain its dividend payout ratio of 55% for 2025. <\/p>\n\n\n\n

While the group is headquartered in South Africa, it stated that the weaker average rand for the period should slightly underpin earnings. <\/p>\n\n\n\n

Africa Regions’ earnings growth should be noticeably higher than South Africa’s.<\/p>\n\n\n\n

From a divisional perspective, we expect strong ARO RBB earnings growth, continued momentum in CIB and a minor head office loss to drive group earnings growth. <\/p>\n\n\n\n

This will outweigh moderate PPB growth and lower BB earnings.<\/p>\n\n\n\n

Outlook\u00a0<\/h2>\n\n\n
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\"\"<\/a><\/figure><\/div>\n\n\n

Absa forecasts improved GDP growth across all its key markets in 2026, with significantly stronger GDP growth from its African regions than from South Africa. <\/p>\n\n\n\n

That said, the rand appreciation is likely to be a headwind for group revenue and earnings next year.<\/p>\n\n\n\n

Revenue growth is expected to improve in constant currency but remain moderate in 2026, with reported revenue increasing by mid-single digits. <\/p>\n\n\n\n

The group\u2019s net interest income should improve somewhat, given the aforementioned loan growth. <\/p>\n\n\n\n

Its net interest margin is likely to compress slightly, especially as wholesale loan growth exceeds that of retail and the Africa Regions, given lower policy rates.<\/p>\n\n\n\n

Non-interest income is again expected to exceed net interest income slightly, given the strong growth across CIB and Africa Regions. BB and PPG growth should improve. <\/p>\n\n\n\n

Lower policy rates and improved GDP growth will also lead to a further decline in its credit loss ratio next year, bringing it to the middle of its through-the-cycle target range of 75 to 100bps. <\/p>\n\n\n\n

The group expects continued improvements in its retail charge in South Africa, given the already far better early arrears at present. <\/p>\n\n\n\n

These drivers should generate an RoE of roughly 16% in 2026, with the group setting an RoE target range of 16% to 19% from 2027 to 2030.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

Absa is slowly extending loans to customers, but still expects non-interest revenue to outpace interest revenue. <\/p>\n","protected":false},"author":95,"featured_media":816384,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[961],"tags":[29],"class_list":["post-845785","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking","tag-absa"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/845785","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=845785"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/845785\/revisions"}],"predecessor-version":[{"id":845788,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/845785\/revisions\/845788"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/816384"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=845785"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=845785"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=845785"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}