Absa Group (ABG) Trading Update summary

Earnings and profitability trends

• First-half earnings are expected to grow by mid-teens, with ROE improving to around 14.8%, partly due to ceasing hyperinflationary accounting in Ghana.

• Net interest income growth is muted due to softer loan growth and margin compression, especially in South Africa, but better loan growth is anticipated in the second half.

• Non-interest income grew at high single digits, driven by trading revenue and fee growth, and is expected to outpace net interest income.

• Cost growth remains well-managed, with a focus on containing costs to inflationary levels and operating expenses to grow mid-single digit.

• Credit loss ratio improved to the top end of the 75-100 bps target range, with stable or improving trends in impairments.

Strategic initiatives and operational updates

• Retail business in South Africa has been reorganized to accelerate turnaround, combining key clusters and reporting as personal and private banking.

• Staff share scheme and depositor insurance costs have been reallocated to divisions, with restated financials to be provided.

• Group Treasury benefits from ALM optimization, and a preference share buyback was approved.

• Productivity program targets $5 billion in cumulative gross savings by 2027, with the largest impact expected in 2025.

Regional and segment performance

• Ghana's market has turned around, with strong customer, NIR, and revenue growth, and currency strength reducing the need for hyperinflationary accounting.

• Business banking is softer than expected, impacted by delayed agri lending, lower cash volumes, and scheme fees.

• Asset growth is expected to improve in the second half, with pipelines in wholesale and agri lending showing promise.

• South Africa's mortgage market remains competitive with fine margins, and growth is slightly below market.

• Personal and Private Banking to see strong earnings growth from lower credit impairments, despite muted revenue.