Absa Customers See Relief as Bank Reports Strong Earnings and Lower Credit Impairments

Absa, one of South Africa’s largest banks, has reported strong financial results for 2024, bringing much-needed relief to its customers. The bank’s latest earnings report highlights improved economic conditions, reduced credit impairments, and a positive outlook for the future.

Earnings Growth and Economic Recovery

According to Absa, two key developments in 2024 are expected to shape South Africa’s long-term economic trajectory:

• The formation of the Government of National Unity (GNU)
• A significant reduction in load shedding

While these events haven’t immediately spurred rapid economic growth, they have boosted business and consumer confidence. Additionally, lower inflation in 2024 allowed for a shallow interest rate cut in September, while the introduction of the two-pot retirement system helped improve household finances.

Absa’s headline earnings grew by 10%, reaching R22.059 billion, leading to a 7% increase in dividends per share to 1,460 cents per share.

South African Market Performance

• South Africa’s headline earnings grew by 14% to R15 billion
• Africa Regions earnings remained flat at R6 billion
• Revenue climbed to R109.9 billion
  • Net interest income increased by 4% to R71.1 billion
  • Non-interest income rose by 6% to R38.8 billion

The bank’s credit impairment charges also saw an improvement, dropping by 8% to R14.3 billion, which reduced the credit loss ratio from 1.18% to 1.03%. This improvement signals stronger financial health for both the bank and its customers.

Outlook for 2025

Absa remains cautiously optimistic about 2025. The bank predicts:

• Real GDP growth of 2% in South Africa for 2025 and 2026
• Resilience in Eskom’s operational performance, reducing the risk of severe load shedding
• Gradual improvement in Transnet’s performance
• Rising household incomes, with wage growth outpacing inflation

Although interest rates are expected to remain stable, there is a possibility of another rate cut in March 2025, depending on inflation trends.

Absa also projects GDP-weighted growth of 5.3% in its Africa Regions in 2025, supported by improving weather conditions, infrastructure investments, and lower policy rates.

With strong earnings growth, improving economic conditions, and a cautious but positive outlook, Absa’s 2024 performance brings welcome relief to its customers. The reduction in credit impairments suggests better financial stability, positioning the bank for continued success in 2025.

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