As at 21 May 2026

Executive Summary

Key highlights

In this report, we review the FY25 results released in March 2026:

Financial results at a glance:

• Net interest income (NII): NII increased by 4.0% from R71.1 billion in FY24 to R73.9 billion, supported by loan growth and higher average interest-bearing assets. The net interest margin compressed by 10 basis points (bps) to 453 bps, reflecting deposit margin pressure and lower policy rates across key markets.

• Non-interest revenue (NIR): NIR rose by 7.5% from R38.8 billion to R41.8 billion, underpinned by stronger trading income, fees and commissions, and gains from investment activity.

• The insurance business delivered a softer performance in FY25, with the insurance service result declining by 2.8% from R2.1 billion to R2.07 billion, and Insurance SA headline earnings falling 6.6% from R1.1 billion to R1.0 billion, primarily driven by higher claims experience, margin compression in the short-term insurance book, and weaker underwriting performance in parts of the retail insurance portfolio.

• Credit impairment charges declined by 6.3% from R14.3 billion in FY24 to R13.4 billion, reflecting improved collections, better portfolio trends, and lower impairments across personal and private banking, and corporate and investment banking.

• Operating expenses grew by 6.4% from R58.5 billion to R62.2 billion, driven by higher staff costs, continued investment in digital capabilities, marketing costs, and equipment costs.

• Group ROE improved to 15.0% (FY24: 14.8%). Total dividends rose from 1 460 cents per share in FY24 to 1 635 cents per share, representing a 12.0% increase.

• Corporate and investment banking (CIB) delivered the strongest growth, with headline earnings rising by 13.9% from R11.4 billion in FY24 to R13 billion. Personal and private banking (PPB) increased by 7.1% from R7.0 billion in FY24 to R7.5 billion, while business banking (BB) declined by 8.2% from R4.2 billion to R3.9 billion.

Analyst thesis

Our recommendation is based on:

• Absa Group Limited (ABG) benefits from a diversified earnings base across retail, business, corporate, and investment banking operations in South Africa and selected African markets. The group’s domestic franchise supports resilient earnings and capital generation, while its African operations provide exposure to faster-growing banking, payments, and lending markets that support longer-term growth opportunities.

• ABG benefits from improving South African operating conditions, including easing load-shedding, moderating inflation and lower interest rates, supporting consumer activity, transactional volumes, and credit demand. Structural banking growth opportunities across Africa also remain supportive. However, subdued South African GDP growth (~1.6%), elevated unemployment, competitive pressures, and foreign exchange (FX) as well as sovereign risks across African operations remain key constraints on earnings growth.

• Strong capital generation and resilient profitability: ABG continues to deliver solid returns, supported by disciplined risk management, improving operational efficiency, and a diversified funding base. Capital levels remain robust, supporting dividend distributions, balance-sheet flexibility, and continued investment in digital banking capabilities across the group.

• ABG currently trades broadly in line with our intrinsic value of R240 per share, suggesting that improving operational execution, resilient earnings, and the medium-term growth outlook are largely reflected in the valuation.