By Adelaide Changole.
Absa Group posted a 14% increase in first-half profit as cost-cutting and an organisational restructure delivered dividends for South Africa’s third-largest bank.
Net income attributable to shareholders climbed 14% to R11.2 billion in the six months through June, the Johannesburg-based lender said in a statement on Monday. Lower credit impairments boosted Absa’s unit in South Africa, it said.
South African banks are using cost controls and relying on fee income and trading revenue to maintain earnings momentum as they grapple with sluggish economic growth, high interest rates and slowing credit growth. Absa announced an overhaul in March that seeks to save R5 billion in costs over the next three years.
The results come after Kenny Fihla took over as the bank’s new chief executive officer on June 17, after being poached from larger rival Standard Bank Group. He’s outlined plans to change the fortunes of its retail unit in its biggest market in South Africa, and plans to revamp its regional operations and bring stability to a firm that has seen the departure of six top managers in as many years.
Absa completed a revamp of some of its units in May, which resulted in the reintroduction of a focused retail-lending business. That division reported a 23% increase in earnings, while its corporate and investment banking unit saw income rise 10%, thanks to strong trading revenue.
Headline earnings from the bank’s operations in Africa grew 13%, driven by an increase in deposits and interest income. Absa’s Africa operations now account for 34% of the bank’s total earnings. Results were also helped by a “
“4% uplift from a weaker rand,” the bank said.
Impairments shrank 14% to R7.2 billion, with the drop in bad loans cutting the bank’s credit loss ratio to 1% — within a board-approved target of 75 basis points to 100 basis points for the first time since 2023. Revenue rose 5% to R56.5 billion, while its return on equity improved to 14.8% from 14% in the same period in 2024.
The losses from the bank’s Head Office, Treasury and other operations dropped 47% to R538 million, thanks to the end of ultra-conservative hyper inflationary accounting for its Ghanaian unit. The bank previously assessed that Ghana’s economy had experienced extreme price appreciation since 2023, after finding that the cumulative three-year inflation rate had averaged more than 100%.
The impact of that price growth reduced profit after tax by R653 million in 2024 and by R403 million in 2023.
The lender said it was optimistic that its performance will improve slightly in the second half, buoyed by continued growth in non-interest income, as well as mid- to high single-digit customer loan growth and customer deposits. It now sees its ROE at 15% by the end of 2025.
The bank declared an interim dividend of R7.85 per share, surpassing the median analyst estimates of R7.02.