By Bianke Neethling.
The first half of Absa’s 2025 financial year will show a strong performance for the bank, which has struggled with leadership instability in recent years.
The banking giant, which forms part of South Africa’s so-called Big Four banks, provided an update on its performance for the six months ending 30 June 2025 on Friday, 27 June.
The bank explained that, over this six-month period, the global economic environment remains uncertain and volatile, with increased trade tensions and geopolitical developments reducing growth expectations.
Across the markets where Absa is present, lower inflation resulted in policy rate cuts in most countries. In addition, GDP growth expectations for 2025 have declined in all its markets besides Ghana.
However, positively, the average exchange rates in Absa’s African regions did not depreciate against the rand.
This means forex troubles were not a drag on the bank’s earnings during the first half of its 2025 financial year.
Absa expects mid-single digit revenue growth, with higher growth in non-interest income than net interest income.
The bank warned that net interest income growth is expected to be muted given mid-single-digit loan growth and some margin compression, particularly in South Africa.
However, it 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.
The bank further projected mid-single-digit operating expenses growth. This is expected to produce 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 its 2024 financial year.
In March 2025, Absa’s interim CEO, Charles Russon, explained that the company is seeking to save R5 billion by cutting costs over the next three years.
Absa said its credit loss ratio is expected to improve noticeably to around the top end of its through-the-cycle target range of 75 to 100 basis points, from 123 basis points in H1 2024.
Therefore, the bank expects mid-teen earnings growth for H1 2025 and its RoE to improve to around 14.8% compared to 14.0% in H1 2024.
Absa further expects its Group CET 1 ratio to finish the first half of 2025 around the top end of its target range of 11.0% to 12.5%.
From a divisional perspective, the bank expects strong earnings growth from its reorganised Personal and Private Banking.
This growth will be driven by lower credit impairments, while revenue growth remains muted due to modest industry loan growth and Absa’s risk appetite reduction in personal loans.
In Business Banking, low revenue growth and a higher credit loss ratio are expected to reduce earnings.
However, the bank expects its Corporate and Investment Banking division to benefit from lower credit losses and strong trading revenue, while net interest income growth remains muted.
Absa’s Regional Operations Retail and Business Banking is projected to maintain solid revenue and pre-provision profit growth, with strong growth in active customers and fee income, offsetting higher credit impairments.
Lastly, Absa expects a substantially reduced loss in Head Office, Treasury and other operations.
“The improvement reflects several drivers, including asset and liability management optimisation initiatives, and we stopped applying hyperinflationary accounting to Absa Bank Ghana for H1 2025, given significantly lower inflation in this market,” the bank explained.
“Geographically, South Africa is expected to drive Group earnings growth in H1 2025, mostly due to lower credit impairments since net interest income growth remains muted.”
“Conversely, we expect strong pre-provision profit growth in Africa regions, partially offset by higher credit impairments.”
Absa will release its results for the first half of its 2025 financial year on 18 August 2025.