Absa reports strong first half, cuts bad loans

Absa Group delivered a strong financial performance in the first half of 2025, reporting a 17% increase in headline earnings. The growth was primarily driven by a significant reduction in credit impairments—or “bad loans”—and an increase in pre-provision profit.

The group’s revenue also grew, supported by strong non-interest income and stable net interest income. This performance reflects the benefits of a diversified footprint with operations in 16 countries, as well as the successful execution of strategic priorities.

Kenny Fihla, who took over as Absa Group’s Chief Executive Officer on June 17, 2025, noted that the results show “good progress on strategic priorities” and that the group’s return on equity continues to improve.

A key factor in the earnings growth was a 14% decrease in impairments, which was achieved through a combination of a robust collections strategy, enhancements to credit models, and changes to new-business lending criteria, particularly in vehicle asset finance and unsecured lending. This disciplined approach brought the credit-loss ratio to the top end of Absa’s target range at 100 basis points.

According to Deon Raju, Absa Group’s Financial Director, other key contributors included strong growth in non-interest income and effective cost management. The bank has already achieved R2.4 billion of the R5 billion in savings it committed to by 2027 under a productivity program launched last year.

The performance of the group’s business units also highlighted the benefits of this disciplined execution:

Corporate & Investment Banking remained a major contributor, with headline earnings increasing 10% to R6.4 billion.

The newly formed Personal and Private Banking unit delivered a strong 23% earnings growth to R3.2 billion, mainly due to a significant reduction in credit impairments.

Absa Regional Operations Retail and Business Banking showed a remarkable 35% increase in headline earnings to R1.1 billion, driven by strong customer acquisition and fee income growth.

Business Banking earnings, however, fell short of expectations, decreasing 12% to R1.7 billion, impacted by higher credit-related impairments and subdued revenue growth.

Beyond its financial results, Absa reported that its total customer base grew by 2% to 12.8 million, with digitally active customers increasing by 8% to 5 million. The group’s investment in new digital capabilities and cybersecurity led to a 5% increase in IT-related spend to R8.2 billion.

Absa expects the South African economy to grow at a slower rate of 0.9% in 2025, while its Africa region countries are projected to grow by 4.8%. The bank’s guidance for the full year remains largely unchanged, with expectations of mid-single-digit revenue growth and a return on equity of around 15%.