Major South African bank stages a comeback

Absa has reported a solid set of results for the first half of its 2025 financial year, as the bank’s turnaround plan starts to bear fruit.

However, the bank’s Business Banking segment took a significant hit while its Head office, Treasury, and other operations segment continued to make a headline loss.

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.

Absa released its results for the six months through June 2025 on Monday, 18 August, which showed a strong performance for the group.

This is the first set of results released under the leadership of the bank’s new CEO, Kenny Fihla, who took over its top job in June 2025 and is optimistic about the company’s ability to turn its operations around.

The bank’s revenue grew 5% to R56.5 billion while operating expenses rose 6% to R30.0 billion, resulting in a slightly higher cost-to-income ratio of 53.2%.

In the first six months of 2025, Absa’s revenue was boosted by 10% growth in non-interest income to R20.18 billion, although net interest income still contributed the majority to revenue at R36.31 billion.

The bank’s net interest margin on average interest-bearing assets reduced to 4.58% from 4.69%, largely due to a decline in its deposit margin. Net loans and advances grew 8%, while deposits rose 13%. 

The company explained that customer loans and advances had a negative impact on the group margin, mostly from tighter pricing and higher suspended interest in Business Banking

Absa’s pre-provision profit grew 4% to R26.44 billion, while its credit impairment charges fell 14% to R7.17 billion, producing a 1.00% credit loss ratio from 1.23%.

The group’s net asset value (NAV) per share grew 11% to 20,048 cents. Basic earnings per share rose to 1,345.1 cents per share, up 13.98% from the first half of the 2024 financial year.

The company’s headline earnings per share grew by 16.54% to 1,431.6 cents per share.

Absa’s interim results also provided insight into how the bank’s individual segments performed, with the bank recently having changed its operating segments as part of its turnaround strategy.

The bank’s Corporate and Investment Banking segment saw headline earnings grow by 10% to R6.44 billion, driven by 5% pre-provision profit growth and lower credit impairments.

Personal and Private Banking’s headline earnings increased significantly by 23% to R3.17 billion, thanks to a 16% decline in credit impairments.

However, the company’s Business Banking segment saw a 12% decline in headline earnings to R1.71 billion, due to 23% higher credit impairments.

Absa’s Head office, Treasury and other operations segment continued to make a headline loss of R538 million, although this is a 47% improvement from the comparable period.

The company attributed this improvement to higher earnings in Treasury South Africa due to asset and liability management and prime-Jibar remarks.

In addition, the company cited discontinuing hyperinflationary accounting in Ghana this year versus a R253 million loss in the first half of 2024.

On the back of these results, Absa declared a 15% higher ordinary dividend per share of 785 cents for the first half of its 2025 financial year.