One of South Africa’s biggest banks bouncing back

After years of underperforming its peers, Absa appears to be on the mend, with its 2024 results showing a marked improvement in the bank’s profitability.

Absa is one of South Africa’s biggest banks, forming part of the country’s so-called ‘Big Four’ banks alongside Standard Bank, Nedbank, and FNB.

However, in recent years, Absa has been struggling to compete with its peers, particularly as challengers like Capitec have started to not only compete but dominate certain segments of the banking industry.

This has largely been due to leadership instability within Absa, which has had six interim and permanent CEOs since 2019.

Combined with strategic missteps in the past few years, Absa has fallen behind while competitors like Standard Bank and Capitec continued to expand.

Therefore, Absa embarked on a business restructuring that has seen the bank reduce its number of units to four, enhancing efficiency and productivity.

This restructuring seems to be bearing fruit for the bank, which released a strong set of results for its 2024 financial year on Tuesday, 11 March 2025.

The bank reported a significant surge in income, which grew 5.07% to R109.95 billion in the year through December 2024.

Absa’s net interest income grew by 4.48% to R71.11 billion in the period, while its non-interest income increased by 6.17% to R38.84 billion.

The bank’s profit for the year skyrocketed, growing by 10.37% to R24.90 billion.

Its basic earnings per share also showed impressive growth of 8.29% to 2,599.2 cents per share.

This growth was largely driven by the bank’s Corporate and Investment Banking (CIB) division, which was the largest contributor to Absa’s total headline earnings of R22.06 billion.

CIB contributed R11.74 billion to this total, followed by the bank’s Relationship Banking division at R4.29 billion, making CIB the biggest contributor by far.

The bank explained that growth in CIB was supported by higher client activity in this segment in trading, lending and investment banking.

In addition, more favourable market conditions in Absa’s key African markets contributed to higher profitability in this division.

While not nearly as large as CIB, Absa’s Everyday Banking and Relationship Banking divisions were also strong drivers of growth.

Both segments increased their loan volumes in the year, particularly in home loans and vehicle finance.

High transactional volumes in these segments also drove earnings growth alongside improved pricing strategies.

Another major contributor to Absa’s strong results is the bank’s effective management of its expected credit losses on loans and advances in the period.

The bank implemented stricter risk controls and improved credit decision-making, which led to lower-than-expected impairments.

A similarly strict approach to costs in the period also allowed Absa to make efficiency gains, managing its operational expenses while maintaining its investment in key growth areas.

Some of these growth areas benefitted Absa well in 2024, with several strategic acquisitions bearing fruit.

For example, Absa’s acquisition of HSBC’s domestic Wealth, Personal and Banking business in Mauritius helped boost the bank’s international footprint.

The bank also increased its shareholding in Sanlam over the period, which strengthened Absa’s investment capabilities.

On the bank of these strong results, Absa’s board declared a final dividend of 775 cents per share.