Absa Group (ABG) H1 2024 earnings summary

Executive summary

• Headline earnings declined 5% year-over-year to ZAR 10.2bn, with ROE dropping to 14% as net asset value per share increased 6% to ZAR 180.14.

• Revenue grew 3% to almost ZAR 54bn, but higher costs and lower non-interest income led to a cost-to-income ratio of 52.7%.

• Net interest margin improved to 469 bps, supported by better loan pricing and margin expansion in Africa Regions.

• Credit loss ratio remained elevated at 1.23%, above the through-the-cycle target.

• Dividend per share was maintained at ZAR 6.85 (685c), with a payout ratio of 56%.

Financial highlights

• Diluted HEPS decreased 5% to 1,227.7c, with a five-year CAGR of 6%.

• Net interest income rose 7% on 5% higher average interest-bearing assets and a slightly wider margin.

• Non-interest income decreased 2% due to lower insurance and trading revenue.

• Gross loans and advances and deposits both grew 5%.

• CET1 capital ratio at 12.7%, above board target and regulatory requirements.

Outlook and guidance

• Expect mid-single-digit revenue growth for 2024, with similar growth in net interest and non-interest income.

• Net interest income growth to slow in H2 due to lower SA retail lending and higher cash reserving in ARO; non-interest income growth to improve in H2.

• Credit loss ratio to improve slightly but remain above through-the-cycle target.

• ROE expected at 14%-15% for 2024; medium-term target of >17% remains, but timing may be updated.

• CET1 ratio to end 2024 in upper half of 11%-12.5% target range; dividend payout ratio to remain around 55%.