Absa interim CEO Charles Russon
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Absa Group, the bank with a robust presence across 16 African countries, increased headline earnings per share (HEPS) by 10% in the year to end-December 2024, strong growth considering HEPS fell 5% at the interim stage and was up by only 3% in 2023.
The group, with some 12.7 million active customers, lifted total income 5% to R109.95 billion. Net asset value per share increased 11% to 19 311 cents. The cost-to-income ratio was unchanged at 53.2%. The dividend per share was raised 7% to 1 460 cents.
Interim CEO Charles Russon said the results were underpinned by a material improvement in the second half. Earnings were driven by both a more supportive environment, as well as steps taken to support performance.
All the bank’s businesses saw earnings growth: CIB (Corporate Investment Banking) earnings were up 4%, Relationship Banking earnings increased 4%, Everyday Banking earnings were up by 1%, Product Solutions was up 1%, while Absa Regional Operations Retail and Business Banking (ARORBB) earnings increased 15%.
“Our organisation rallied in the second half, refining our focus areas to ensure our actions are targeted and precise in generating value and earnings uplift. We are confident in our ability to deliver value to stakeholders while expanding access to innovative financial solutions across our markets,” Russon said Tuesday in a statement.
In South Africa, headline earnings were up 14% to R15.9bn as impairments within the Everyday Banking (EB) and Product Solutions Cluster (PSC) moderated, and non-interest revenue (NIR) reflected improvement. Headline earnings growth in Africa Regions was up 8% to R6.2bn, but the stronger rand, higher cash reserving requirements in larger markets, and hyperinflation accounting in Ghana resulted in muted reported currency growth.
Gross loans and advances increased 6.2%. Deposits increased by 12.2%. Non-interest revenue saw growth of 6%, reinforcing the strength of the group’s underlying business and diversified income streams.
Russon said they were shifting from a focus on market share growth to sustainable growth, delivering the right returns, and from a product focus to both product and client/customer franchise profitability. This ensured more disciplined capital allocation to high-value sectors, refined pricing strategies to better reflect risk, and towards enabling better decision-making and performance tracking.
Improving customer health and better risk management practices helped to facilitate an 8% decline in impairment charges, and the credit loss ratio (CLR) fell to 103 basis points, which was slightly above the upper end of the targeted CLR range. In the second half, the CLR was 86 basis points.
"Key structural improvements, including disciplined risk management, cost efficiencies, and optimised capital allocation, are starting to translate into improved results. Our stronger second-half performance gives confidence that we are taking the right action to support the delivery of a 16% RoE by 2026,” said Deon Raju, Absa Group financial director.
The Product Solutions Cluster earnings were up 38% to R3.3bn, and Everyday Banking earnings were up 18% to R4.0bn. Drivers of this growth were NIR (non-interest revenue from both fees and bancassurance revenues) and moderating impairment charges.
Relationship Banking earnings were up 4% to R4.3bn due to strong NII (net interest income) growth reflecting solid balance sheet growth and lower impairment charges, partly offset by lower NIR (partially due to lower cash revenues).
Absa Regional Operations Retail and Business Banking (ARO RBB) earnings increased by 12% to R1.8bn due to strong revenue growth reflecting growth in active transactional customers and cost containment despite higher inflation challenges.
Corporate Investment Banking (CIB) earnings increased by 6% to R11.7bn driven by revenue growth of 12% underpinned by growth in client franchise revenue, higher trading revenues, and net fee and commission income, partly offset by increased credit impairment charges off a low base. CIB credit impairments grew 101% to R1.54bn, resulting in a credit loss ratio of 0.29%, at the top end of its through-the-cycle range, from a low 0.17%.
CIB South Africa credit impairments rose 44% to R1.22bn, resulting in a 0.28% credit loss ratio from 0.22%. The increase was largely due to higher single-name charges.
The Head Office loss increased from R2.4bn to R3bn, mainly due to the impact of hyperinflation accounting for Ghana, higher IFRS 2 charge for the eKhaya B-BBEE transaction, lower Treasury SA revenues, and higher ARO dividend withholding taxes.
The bank has forecasted mid-single-digit revenue growth for the new financial year, with broadly similar growth in net interest income and non-interest income.
Mid- to high-single-digit customer loan growth and low to mid-single-digit customer deposit growth were expected. The group forecasted its credit loss ratio to improve to the top end of its through-the-cycle target range of 75 to 100 bps. “The first half of 2025 credit loss ratio should improve noticeably year-on-year from 123 bps in the first half of 2024.”
A return on equity of slightly above 15% was forecasted, an increase, from 14.8% in 2024.
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