1H26 Results First Take: In-line earnings, welcome PPOP momentum, soft asset quality

Research evidence excerpt

1H26 Results First Take: In-line earnings, welcome PPOP momentum, soft asset quality

UpdateMa positive JAWS ratio of 1.2% - the clearest beat in the release.

PPOP +11%, a welcome beat (MSe:+9, Cons: +9%). Sustaining this trajectory key to

building market confidence in the 17% medium-term ROE target.

Credit losses+26%Y to R4.8bn, well above MSe (+18%) and consensus (+0%),

taking CLR to 95bps (H1 2025: 81bps) versus MSe's 88bps - key miss in the

results. PPB (CLR 205bps) drove the deterioration - Card Issuing swung to a loss,

Home Loans CLR rose to 57bps, reflecting updated forward-looking macro

assumptions and early-stage arrears migration rather than a single identifiable one-

off. All this was partly offset by a strong CIB credit performance (0bps) and

improved NAR:SADC (67bps, from 154bps). BCB's CLR rose to 40bps (from 11bps)

on a single large client exposure, described as largely idiosyncratic. Group coverage

ratios eased (overall ECL coverage 2.93% vs 3.21% in 1H25) as stage 3 loans fell 6%Y

to R46.3bn, so the higher charge reflects the macro overlay and stage 1/2 flow-

through rather than a deteriorating stock of non-performers. Suggests early stage

pressures linked to macro pressures and front book strain from stronger than

system loan growth over the past 18-24 months working though. Still leaves CLR

tracking above both MSe and management's own FY26 guide.

ROE 15.0% (H1 2025: 15.2%) beat MSe (14.5%) and consensus (14.6%). CET1 fell

to 12.6% (FY25: 12.9%, H1 2025: 13.1%), still within the 11.0-12.5% target range.

On FY26e guidance: NII guidance upgraded to ‘Slightly above mid single digits’

previously ‘around mid-single digits’ (MSe: +8%). NIR guided to upper single digits

(unchanged) (MSe: +9%). CLR guided to ‘around mid 80bps (MSe: 91bps), upwardly