Absa Group has delivered an upbeat pre-close trading update, signalling low double-digit growth in headline earnings per share for the full year to December 2025 and confirming a return on equity of approximately 15 per cent, a modest advance on the 14.8 per cent recorded in 2024. The Johannesburg-based lender attributes this improved performance largely to a decisive turnaround in credit quality that has exceeded even internal expectations, allowing a material release in impairment charges at a time when many domestic peers continue to battle elevated bad-debt provisions. As reported by Business Day, the statement sent Absa shares more than 2.5 per cent higher on Monday, touching an intraday peak above R226 before settling near R222.
Central to the upgrade is a projected credit loss ratio landing in the upper half of the bank’s through-the-cycle target band of 75 to 100 basis points, a notable improvement from the 103 basis points reported for 2024. This sharper-than-anticipated decline reflects disciplined risk management across retail, business banking, and corporate portfolios, with particular relief coming from Personal and Private Banking, domestic Corporate and Investment Banking, and the pan-African retail and business banking units. The lower provisioning burden is expected to flow directly to the bottom line, underlining how credit cycles remain the dominant driver of profitability in South Africa’s highly concentrated banking sector.
Revenue growth for 2025 is forecast in the mid-single-digit range, with non-interest income again outpacing net interest income. Trading desks have continued to benefit from elevated market volatility and favourable positioning in foreign-exchange and fixed-income products, while fee and commission income grows at a more measured pace. Net interest income faces ongoing pressure from subdued retail lending appetite and slight margin compression in the first half, although management anticipates a pickup in the final quarter as policy-rate cuts begin to stimulate credit demand. Operating expenses are guided to rise at a similar mid-single-digit tempo, nudging the cost-to-income ratio marginally higher from the 53.2 per cent achieved in 2024.
On the balance sheet, Absa expects to close the year with a core equity tier-1 ratio at the upper boundary of its 11.0 to 12.5 per cent target, providing ample headroom above both regulatory minima and the bank’s internal risk appetite. Reassuringly for income-focused investors, the board has reaffirmed commitment to a 55 per cent dividend payout ratio, a stance that contrasts with some international peers who have trimmed distributions to rebuild capital buffers. Regional operations across the rest of Africa are set to deliver markedly stronger earnings momentum than the South African franchise, buoyed by faster economic expansion and less severe monetary tightening cycles.
Looking to 2026, management has pencilled in further progress, with return on equity projected to reach around 16 per cent as the credit loss ratio drifts toward the midpoint of the target range. Anticipated GDP acceleration across key markets and a more accommodative interest-rate environment are cited as primary tailwinds. Reported revenue is again expected to expand by mid-single digits, supported by a gradual reacceleration in lending volumes and continued resilience in transactional and trading revenues.
Over the medium term spanning 2027 to 2030, Absa has raised its ambition to a 16 to 19 per cent return-on-equity corridor, with confidence that the upper half of that band will be attained by 2028. Achieving this will hinge on sustaining upper single-digit net interest income growth, restraining direct operating-cost inflation to mid-single digits, and driving the cost-to-income ratio down toward an aspirational 50 per cent. Such discipline would align Absa more closely with the efficiency benchmarks of leading emerging-market banks while preserving its reputation as a reliable dividend payer.
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In an environment still marked by geopolitical uncertainty and domestic structural constraints, Absa’s upgraded guidance stands out as one of the more constructive updates from South Africa’s big four lenders this reporting season. With impairments now firmly on a downward trajectory and capital generation remaining robust, the group appears well positioned to capitalise on the anticipated economic upswing without sacrificing the prudent risk settings that have underpinned its post-pandemic recovery.