First Read: Absa Group "1H26 trading update, missing on revenue, weaker..."

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First Read: Absa Group "1H26 trading update, missing on revenue, weaker..."

wer than previous

12/27E 3,663 3,566

guidance at ~15% vs. ~16% before. The update mentions that revenue and earnings 12/28E 4,031 3,912

momentum remains on track medium-term as NIMs should stabilise in African Regions,

but it is a slower start than we have modelled. The regional guidance indicates a Stephan Potgieter, CFA

stronger performance in South Africa with solid pre-provision profit growth, but a Analyst

decline in headline earnings in Africa Regions Lower NII, but also higher credit losses yoy stephan.potgieter@ubs.com

+44-20-7568 8162

off a low base). FY26 is viewed by management as a transition year. A new operating

model is in place, to report on a pan-African basis going forward. New leadership is also

now largely in place, although the CEO indicates it will take time to refine strategies. The

medium-term ROE target of 16%-19% has been reiterated with the time frame to

achieve this also unchanged. We think it would break into the ROE target range in

FY27E with several initiatives, including cost optimisation to come through. Details of

the new strategy will be unpaced at a CMD in Q4.

Valuation: 1.1x P/BV vs. ROE ~15% (FY26E), medium-term ROE target 16%-19%

Our price target is based on a two-stage economic profit model assuming a sustainable

ROE of 16.75%, COE 14.2%.

Highlights (Rm) 12/23 12/24 12/25 12/26E 12/27E 12/28E 12/29E 12/30E

Revenues 104,642 109,949 115,697 123,016 131,186 140,370 150,032 160,133

Pre-tax profit 30,233 33,463 36,914 41,836 45,943 50,365 54,913 59,789

Net earnings (reported) 19,891 21,537 22,214 27,862 30,699 33,783 36,913 40,255

Net earnings (UBS) 20,074 22,059 24,762 27,862 30,699 33,783 36,913 40,255

Tier 1 ratio % 14.2 14.4 14.3 14.1 14.1 14.1 14.1 14.2