Absa FY’24 HEPS up 10%

Absa Group announced a 10 per cent increase in its 2024 earnings, driven by a strong second-half recovery and improved risk management. Despite a 5 per cent rise in operating costs and a credit loss ratio slightly above target, the bank remains focused on achieving its 16 per cent Return on Equity (RoE) target by 2026 and refining its retail banking strategy for sustainable growth. Interim group CEO, Charles Russon, highlighted the importance of rebuilding trust through precise execution and delivering on promises to regain investor confidence. The bank experienced a significant turnaround in the second half of the reporting period, with a 27 per cent increase in headline earnings per share and an RoE of 15.5 per cent, compared to 14 per cent in the first half. While the RoE remains below the target, Absa has outlined key levers to drive it towards the 16 per cent goal, including sustainable growth, client profitability measurement, precise capital allocation, and productivity and efficiency programs. As part of its retail banking strategy, Absa plans to unify its fragmented retail SA franchise and adopt a holistic approach to customer-client relationships. In addition, the bank aims to revamp its relationship banking for wholesale and corporate clients to enhance revenue generation. Despite challenges in some African markets, Absa's regional operations saw a 12 per cent growth, underpinned by the strength of the RAND. The bank acknowledges headwinds such as drought in Zambia, sovereign distress, cash reserving, and hyperinflation in Ghana, but remains optimistic about its growth prospects in Africa. Charles Russon emphasized the strategic pivot towards prioritizing sustainable growth over market share expansion, leveraging the bank's existing scale, and focusing on profitable opportunities for capital deployment. The shift towards sustainable growth presents challenges and trade-offs, but Absa is committed to navigating these hurdles and pursuing a strategic path to long-term success.