Absa Group Share Price Drops 5.72% After Forecasting

Modest Earnings Growth

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Absa Group's share price has taken a hit, plummeting by 5.72% in early trading, following the release of a trading statement that forecasts modest earnings growth for the six months to March 31, 2026.

### Earnings Forecast and Share Price Decline

The bank's directors said a stronger rand will negatively impact its earnings growth from its Africa Regions in the six months to March 31, 2026. The decline in share price is a relatively large one for one of South Africa's biggest banks.

The share price fell to R230.14 on the JSE, although it remains 29.5% higher than the same time last year. The earnings forecast would leave the group with a similar return on equity (RoE) to the 14.8% in the first half of last year.

### Africa Regions and Earnings Growth

The bank expects strong headline earnings growth in South Africa, given solid pre-provision profit growth and a lower credit loss ratio. Conversely, the bank expects Africa Regions headline earnings to decline due to lower net interest income and higher credit impairments.

The operating environment remains challenging and uncertain, with the Middle East conflict increasing global inflation expectations and dampening GDP growth. The SA Reserve Bank increased the policy rate in May, while policy rates in Ghana have reduced materially and are lower than expected.

### Revenue and Costs

Group revenue is expected to grow by low to mid-single digits during the six months, with non-interest income growing faster than net interest income. Net interest income growth remains modest, growing by low single digits, reflecting margin compression largely due to lower policy rates in Africa Regions.

Net customer loans and customer deposits are expected to grow by mid-single digits, with personal and private banking net customer loans expected to grow by mid-single digits. Corporate and investment banking customer loans and business banking net customer loans are expected to grow by high single digits.

### Credit Impairments and Dividend Payout

Broadly flat credit impairments and an improved credit loss ratio are expected. The bank plans to maintain its dividend payout ratio at around 55% for the interim period.

CIB headline earnings are expected to be broadly flat, while PPB is expected to report low double-digit headline earnings growth, in part due to lower credit impairments. Modest BB headline earnings growth is expected, with solid growth in South Africa while Africa Regions declined given margin compression.

### Conclusion

The full results for the six months to March 31, 2026, are expected to be released on August 18. The bank remains confident that its revenue and earnings momentum remains on track medium-term, given healthy growth in its client franchise and net interest margin stabilisation post the rate cutting cycle.