Absa Group Limited

Analyst thesis

Our recommendation is based on:

• Absa Group Limited (ABG) benefits from a diversified earnings base across retail, business, corporate, and investment banking operations in South Africa and selected African markets. The group’s domestic franchise supports resilient earnings and capital generation, while its African operations provide exposure to faster-growing banking, payments, and lending markets that support longer-term growth opportunities.

• ABG benefits from improving South African operating conditions, including easing load-shedding, moderating inflation and lower interest rates, supporting consumer activity, transactional volumes, and credit demand. Structural banking growth opportunities across Africa also remain supportive. However, subdued South African GDP growth (~1.6%), elevated unemployment, competitive pressures, and foreign exchange (FX) as well as sovereign risks across African operations remain key constraints on earnings growth.

• Strong capital generation and resilient profitability: ABG continues to deliver solid returns, supported by disciplined risk management, improving operational efficiency, and a diversified funding base. Capital levels remain robust, supporting dividend distributions, balance-sheet flexibility, and continued investment in digital banking capabilities across the group.

• ABG currently trades broadly in line with our intrinsic value of R240 per share, suggesting that improving operational execution, resilient earnings, and the medium-term growth outlook are largely reflected in the valuation.