Absa Group reported headline earnings of $542 million for the first half of 2024, with expectations of improved performance in the second half as its South African retail businesses showed earnings growth across the portfolio during the first six months of the year.

“All of our underlying businesses in the South African retail portfolio reported headline earnings growth, which is indicative of a recovery in business performance,” said Arrie Rautenbach, Absa Group Chief Executive Officer.

“While economic conditions remain challenging, our delinquency profile has stabilised as a result of the decisive action we have taken.

"We remain committed to our integrated strategy, focusing on seamless customer experience, and delivering sustainable, balanced growth and value creation.”

The Group’s Product Solutions Cluster in South Africa, which includes home loans, vehicle asset financing, insurance, advisory, and more, reported a 7% increase in headline earnings.

Everyday Banking, which covers card, personal loans, and transactions in South Africa, saw a 9% rise in headline earnings, while Relationship Banking, encompassing SME, commercial, and private wealth in South Africa, experienced a 1% growth in headline earnings.

However, the Group’s Absa Regional Operations retail and business banking (ARO RBB) cluster reported a 12% decline in headline earnings due to exchange rate impacts, despite an 11% increase in constant currency revenue.

This highlighted the ARO portfolio’s potential as a source of growth and diversification.

The Corporate and Investment Banking Pan African unit's headline earnings remained largely unchanged from a high base the previous year, as higher impairments affected earnings during the period under review.

Overall, total Group headline earnings declined by 5% from a high base a year earlier, as cost increases outpaced revenue growth.

Despite this, the five-year compounded average growth rate in diluted headline earnings per share remains at 6%.

The Group's capital and liquidity position continues to be healthy, with key metrics within its risk appetite and above the required regulatory minimum levels.

The Group’s balance sheet remains strong, with a Common Equity Tier 1 (CET 1) ratio of 12.7%.

“We anticipate a stronger performance in the second half of 2024, driven by further improvements in our credit losses and stronger non-interest revenue generation,” said Deon Raju, Absa Group Financial Director.

In the first half of 2024, Absa’s active customer base expanded by 3% to 12.5 million, while the number of digitally active customers increased by more than 12% to 4.3 million as the Group encouraged digital channel usage.

Customer experience scores in the South African retail portfolios improved compared to a year earlier, and Absa had the lowest number of formal complaints lodged with the Ombudsman in South Africa among the five largest banks in 2023, reporting a decline in the number of complaints.

“Our ongoing investments in digital innovation, customer experience enhancement, and our repositioned brand are key drivers for future growth and operational excellence,” said Rautenbach.

Absa also made significant progress in non-financial performance metrics, including sustainability, as the Group continues to deliver on its ambition to be an active force for good.

The Group has arranged $5.1 billion in sustainable finance deals since 2021 and is on track to exceed its target of $5.3 billion by 2025.

With the current interventions in place, and barring any major unforeseen macroeconomic or regulatory developments, Absa expects full-year revenue to increase by mid-single digits.

This growth is expected to support stronger pre-provision profit growth and, combined with a lower credit loss ratio compared to the first half, should also drive better earnings growth in the second half of 2024.