{"id":866068,"date":"2026-07-10T16:19:23","date_gmt":"2026-07-10T14:19:23","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=866068"},"modified":"2026-07-10T16:22:59","modified_gmt":"2026-07-10T14:22:59","slug":"bad-turn-for-absa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/866068\/bad-turn-for-absa\/","title":{"rendered":"Bad turn for Absa"},"content":{"rendered":"\n

A selloff in Absa Group shares may have further to run as the South African lender\u2019s disappointing earnings guidance causes once-bullish analysts to turn cautious on the stock.<\/p>\n\n\n\n

Absa shares have fallen about 10% year-to-date, with almost a third of those losses coming this week after Goldman Sachs Group and Avior Capital Markets downgraded the stock. <\/p>\n\n\n\n

The decline is in sharp contrast to the broader South African banking shares index, which has rallied about 7%, recouping losses triggered by the start of the war in Iran.<\/p>\n\n\n\n

The latest leg of the selloff began June 30 after South Africa\u2019s third-largest lender by assets said first-half 2026 headline earnings and revenue would grow by only the low to mid-single digits year-on-year, falling short of expectations. <\/p>\n\n\n\n

Avior\u2019s Adrienne Damant cut her rating to underperform from outperform, becoming the only analyst tracked by Bloomberg to have a sell-equivalent on the stock. <\/p>\n\n\n\n

She forecasts Absa\u2019s headline earnings growth to be the lowest of all its peers, including Standard Bank Group Ltd., Nedbank Group Ltd., and FirstRand Ltd.<\/p>\n\n\n\n

The biggest driver, according to Damant, is pressure on net interest income as interest rates decline in key African markets, particularly Kenya and Ghana. <\/p>\n\n\n\n

Net interest income, Absa\u2019s primary profit engine, contributed 64% of total income in the 12 months through December. <\/p>\n\n\n\n

Kenya, which contributes 6% of Absa\u2019s group interest income, cut rates by 425 basis points since August 2024, while Ghana lowered rates 1,500 basis points in this period, she noted.\u00a0<\/p>\n\n\n\n

\u201cWe believe the share is unlikely to re-rate over the next year,\u201d Damant said.<\/p>\n\n\n\n

Absa didn\u2019t respond to a request for comment.<\/p>\n\n\n\n

Meanwhile, Goldman Sachs\u2019 Kazim Andac cut his rating to neutral from buy, saying Absa\u2019s \u201coperating metrics are tracking below expectations.\u201d<\/p>\n\n\n\n

He too blamed a larger-than-expected impact from rate cuts across African markets for the pressure on net interest margins.<\/p>\n\n\n\n

Echoes of the past<\/h2>\n\n\n\n
\"\"<\/a>
Absa CEO, Kenny Fihla <\/figcaption><\/figure>\n\n\n\n

The selloff rekindles memories of a turbulent period between 2019 and 2025, when Absa cycled through six top executives in as many years before appointing Kenny Fihla as chief executive officer. <\/p>\n\n\n\n

The upheaval hurt profitability, making Absa one of the worst performers out of Africa\u2019s largest lenders.\u00a0<\/p>\n\n\n\n

\u201cThe market interpreted this as a return to a period prior to the arrival of Kenny Fihla as CEO where the market had become accustomed to Absa leadership repetitively over-promising and under-delivering with impunity on their remuneration, despite shareholders not achieving satisfactory returns,\u201d said Radebe Sipamla, co-portfolio manager at Mergence Investment Managers Ltd., who holds Absa shares.\u00a0<\/p>\n\n\n\n

He expects the latest update from Absa to weigh on share valuations as it \u201cforced many on the buy-side and sell-side to acutely relook at their earnings estimates for Absa, and in most cases revise them lower.\u201d <\/p>\n\n\n\n

Some analysts also question whether Fihla can fully implement his\u00a0pan-African expansion<\/a>\u00a0strategy, which includes\u00a0targeting<\/a>\u00a0commodity-rich nations, including Tanzania, Uganda and Zambia. It\u2019s also seeking to\u00a0raise its Kenya unit stake<\/a>\u00a0to 85% via a $238.7 million tender. \u00a0\u00a0<\/p>\n\n\n\n

Absa\u2019s core regulatory capital is only modestly above its board-approved target of 11%-12.5%, implying limited headroom for mergers and acquisitions, according to Bloomberg Intelligence analysts Philip Richards and Uzair Kundi. <\/p>\n\n\n\n

Slowing revenue may jeopardise Absa\u2019s goal of achieving 16% return on equity this year, and threaten its target of lifting ROE to as much as 19% by 2028, they add.<\/p>\n\n\n\n

\u201cWe see limited M&A optionality,\u201d they said, adding Absa needs net interest income growth, higher non-interest revenue, contained costs and balance sheet optimisation to fire together, which “seems ambitious”.<\/p>\n\n\n\n

Even so, most analysts appear to be in wait-and-see mode. <\/p>\n\n\n\n

Of the 11 analysts tracked by Bloomberg, six still rate the stock a buy. That includes JPMorgan Chase & Co. analyst Baron Nkomo, who highlights the new management team as a positive following years of instability. \u00a0<\/p>\n\n\n\n

\u201cAbsa\u2019s resilient operational and financial performance in recent times is under-appreciated,\u201d Nkomo wrote in a note after the June 30 trading update. <\/p>\n\n\n\n

\u201cWith a more positive outlook in its key markets, including both South Africa and rest of Africa regions, we think improving fundamentals will provide support to the shares.\u201d<\/p>\n\n\n\n

Valuation could be a source of support, with shares carrying a near 50% discount to the FTSE\/JSE Africa banks index on a forward price-to-book value basis. <\/p>\n\n\n\n

They also trade at 6.5 times forward earnings, versus a 9.8 times average for peers.<\/p>\n\n\n\n

The next big test for the shares comes on 18 August, when Absa reports first-half earnings that will be scrutinised for clues on the earnings outlook.<\/p>\n\n\n\n

\u201cAbsa needs to prove it can grow its revenue faster than its operating costs in the next two years,\u201d Avior\u2019s Damant said.<\/p>\n","protected":false},"excerpt":{"rendered":"

A selloff in Absa Group shares may have further to run as the South African lender\u2019s disappointing earnings guidance causes once-bullish analysts to turn cautious on the stock.<\/p>\n","protected":false},"author":59,"featured_media":794531,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"posted","_sma_x_autopost_error":"","_sma_x_post_id":"2075585851694739723","_sma_x_attempts":1,"footnotes":""},"categories":[961],"tags":[29,1850],"class_list":["post-866068","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking","tag-absa","tag-bloomberg"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/866068","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\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=866068"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/866068\/revisions"}],"predecessor-version":[{"id":866070,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/866068\/revisions\/866070"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/794531"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=866068"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=866068"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=866068"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}