South Africa Banks: Sector undervalued with positive pre-close update potential

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South Africa Banks: Sector undervalued with positive pre-close update potential

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South Africa Banks

Sector undervalued with positive pre-close

update potential

Rating Change

Valuation and EPS growth underpin; moving more positive 18 June 2026

SA banks should benefit from lower oil prices and fading war risks. We see 11% 3Y Equity

sector EPS growth and valuation upside from lower risk-free rates (POs +7–10%, South Africa

ex‑Investec). We reiterate Buys on Investec, FirstRand and Capitec, keep Standard Bank Banks

at Neutral, and upgrade Absa and Nedbank to Neutral. June pre-closes should show Harry Botha >>

positive revenue momentum (FirstRand strongest, Absa lagging), supporting FY Research Analyst

guidance. However, for 1H26E our EPS growth is only above consensus on Standard Merrill+27 113Lynch055 (South152 Africa)

Bank (4ppt higher), with Absa and FirstRand in line and Nedbank c.2ppt below. We harry.botha@bofa.com

reduce our Investec PO by 1% as a lower Rathbones valuation offsets a COE reduction.

FirstRand’s positive operational momentum to continue Exhibit 1: We reiterate Buy ratings on

We expect FirstRand to maintain its positive operational momentum in all key segments Investec, Capitec and FirstRand, and

in 2H26E. While we expect FirstRand’s UK motor finance redress to result in 4% lower Neutral Standard Bank. We upgrade Absa

and Nedbank from Underperform toEPS YoY, the Group is on track for 16% EPS growth excluding 2026E redress. We expect

Neutral.FirstRand’s UK exit to raise its profitability profile (ROE +3ppt once capital deployed or

SA banks POs and ratings

returned) with shareholder cash returns likely on completion of a sale.

PO Previous Change

Absa ZAR262 ZAR245 6.9%Growth challenges starting to lift for Nedbank