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By Nqobile Dludla
JOHANNESBURG (Reuters) -South African lender Absa forecast mid-single digit revenue growth for 2025 and fewer bad loans following a 10% jump in its annual profit, driven by improved performance in the second half.
Some of Absa's most sensitive retail and small business customers found relief as inflationary pressures eased, interest rates fell and power blackouts became less frequent.
In addition, the lender said improving weather conditions that will limit insurance claims and strong infrastructure investment should improve the regional outlook this year.
Based on these assumptions, Absa expects mid-single digit revenue growth, with broadly similar growth in net interest income and non-interest income, Group Financial Director Deon Raju told investors.
The lender, with a presence across 16 countries posted headline earnings per share of 26.62 rand for the year ended on December 31.
Revenue climbed 5% to 109.9 billion rand ($6 billion), as net interest income - the difference between the amount banks earn from loans and pay on deposits - rose 4% to 71 billion rand.
Credit impairment charges fell 8% to 14.3 billion rand, reflecting initiatives to collect money owed, efforts to lower risks in its retail business in South Africa and as customers benefited from rate cuts.
This resulted in a credit loss ratio - a measure of bad loans as a percentage of total loans - improvement of 103 basis points (bps) from 118 bps.
In 2025, the group's credit loss ratio is expected to improve to the top end of its target range of 75 to 100 basis points.
Absa is in the process of combining its retail units and products into one retail banking unit.
"We believe combining the businesses will accelerate our retail turnaround in South Africa, with stronger revenue trends (in the) medium term," interim CEO Charles Russon told investors.
Raju said the bank is also targeting 5 billion rand in cost savings by 2027, including on lower head office costs and automation.
($1 = 18.3176 rand)
(Reporting by Nqobile Dludla; Editing by Tom Hogue, Sherry Jacob-Phillips and Barbara Lewis)
