South African Banks Unpacking endowment risk in Africa

Research evidence excerpt

South African Banks Unpacking endowment risk in Africa

21 July 2026

South African Banks EquitiesCommercial Banks

Unpacking endowment risk in Africa South Africa

◆ We quantify each bank’s endowment exposure to each Henry Hall*

African country to be better able to forecast NIMs Banks Analyst HSBC Bank Middle East Limited, DIFC

henry.hall@hsbc.com

◆ Lower rates in Africa to reduce Absa and Stanbank’s EPS by +27 11 880 1855

5.4% and 2.4% y-o-y respectively in 2026e, ceteris paribus Harish Paliwal*

Associate

Bangalore

◆ Earnings forecasts unchanged; small hikes to TPs; Absa,

Capitec, FirstRand, Nedbank still rated Buy, Stanbank Hold * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is

not registered/ qualified pursuant to FINRA regulations

Endowment is the phenomenon whereby banks’ NIMs fluctuate with interest rates.

Endowment is a function of net free funds and changes in interest rates. Absa

recently announced that it will miss its 2026 ROE target and attributed the miss to

lower interest rates in some African countries in which it operates, notably Ghana.

South African banks provide limited disclosure regarding their African operations, so

we used all available disclosures to quantify each bank’s exposure to each African

country. We then estimated net free funds per bank per country and used that,

together with changes in interest rates in each country, to forecast the net impact of

reduced endowment on each bank’s NII in 2026. We performed reasonability tests of

our estimates against banks’ disclosed NII sensitivities.

Absa has the largest amount of estimated net free funds in Kenya, Ghana, Zambia

and Uganda. We estimate lower endowment will result in a ZAR1.84bn y-o-y

reduction in NII in 2026 with the bulk of this coming from Ghana. This equates to a