Banking giant eyes African expansion as full-year profit rises 12%

Absa Group is accelerating its expansion across Africa, as operations outside its home market emerge as the bank’s fastest-growing business, even as South Africa remains its largest market, Chief Executive Kenny Fihla told Reuters on Tuesday.

The strategy comes as South African lenders step up acquisitions and expansion in East Africa, a region increasingly viewed as a strategic trade corridor linking Africa with the Middle East, India and Asia. The shift also coincides with the retreat of several European and French banks from parts of the continent, creating space that regional lenders are moving quickly to fill.

“Our Africa Regions business now contributes around one-third of the group’s earnings and grew faster than our South African operations, reinforcing the strength of our pan-African footprint and our ability to connect inter- and intra-Africa trade corridors,” Fihla said.

He added that the group sees clear opportunities to increase the Africa Regions contribution by accelerating growth in markets such as Uganda, Tanzania and Zambia while sustaining strong momentum in larger markets including Kenya and Ghana.

The expansion push comes as Absa posted a solid financial performance for the year, with headline earnings rising 12 percent, supported by lower credit impairments and growth across its major business segments.

The results mark progress under a refocused strategy introduced after Fihla took over as chief executive in October 2024. While the bank had previously emphasised purpose-led transformation and sustainability, the current strategy places greater emphasis on customer-led growth, operational resilience and strengthening its position as a leading pan-African bank.

Revenue for the lender, which operates in 12 other African countries and derives about 31 percent of its earnings from those markets, increased 5 percent to R115.7 billion ($6.3 billion). Pre-provision profit rose 4 percent to R53.5 billion ($2.9 billion), while impairments declined by 6 percent.

The credit loss ratio improved significantly to 55 basis points from 103 basis points previously, reflecting stronger asset quality and improved credit management. Absa also raised its dividend by 12 percent to 1,635 cents per share.

“We are seeing the benefits of our operating model changes, sharper client focus and continued improvements in credit outcomes,” the group said. “Growth across several of our businesses, particularly in Corporate and Investment Banking and our Africa Regions operations, highlights the strength of our diversified franchise.”

The financial performance of the group, which serves about 13.1 million customers, reflects a combination of lower credit impairments, cost management and steady momentum across key business segments, particularly Corporate and Investment Banking (CIB) and the Africa Regions division.

Revenue growth was supported by stronger non-interest income, driven by robust trading revenue and moderate net interest income growth, despite modest retail loan expansion and some margin compression.

From a geographic perspective, the Africa Regions business delivered significantly stronger earnings growth than South Africa, supported by solid pre-provision profit growth and continued customer expansion. In contrast, the domestic market benefited mainly from improved credit performance across several loan portfolios.

Impairments declined six percent overall, with the improvement in the credit loss ratio driven largely by stronger performance in Personal and Private Banking portfolios in South Africa and Africa Regions, as well as in Corporate and Investment Banking. The improvement was supported by proactive risk management, enhanced collections processes and strategic portfolio repositioning.

“This foundation enables us to continue investing in strategic priorities while maintaining balance sheet strength and a resilient capital position,” said Deon Raju, group financial director.

A productivity programme launched in 2024 also delivered cumulative savings of R3.1 billion ($168 million) through optimisation of back-office operations, distribution channels, third-party suppliers and software licensing.

“As we look ahead, we remain focused on enhancing operational efficiencies, driving sustainable revenue growth and delivering improved returns for our shareholders,” Raju added.

Most of the bank’s business units delivered solid earnings growth during the period. Corporate and Investment Banking headline earnings increased 14 percent to R13 billion ($706 million), while Personal and Private Banking rose 7 percent to R7.5 billion ($407 million).

Business Banking headline earnings increased 8 percent to R3.9 billion ($212 million), while the Africa Regions division recorded the strongest growth, with headline earnings surging 51 percent to R2.5 billion ($136 million).