Absa Group Limited

Barclays Africa Group is engaged in provision of personal and business banking, credit cards, corporate and investment banking, wealth and investment management as well as bancassurance. Co. operates in three business segments; Retail and Business Banking (RBB) delivers targeted solutions to individuals and small businesses; Corporate, Investment Bank and Wealth operates a global model, leveraging their offerings, tapping into global expertise to provide comprehensive solutions across borders; and Financial Services cluster enhances the RBB customer and client value proposition with financial solutions.
  • Ticker101N
  • ISINZAE000255915
  • ExchangeJohannesburg Stock Exchange
  • SectorBanks
  • CountrySouth Africa

Increased risk weighs on ABSA GROUP LTD., penalising its rating down to Slightly Negative

The independent financial analyst theScreener just lowered the general evaluation of ABSA GROUP LTD. (ZA), active in the Money Center Banks industry. As regards its fundamental valuation, the title still shows 2 out of 4 possible stars. Its market behaviour, however, has slightly deteriorated and will be qualified as risky moving forward. theScreener considers that these new qualifications justify an overall rating downgrade to Slightly Negative. As of the analysis date May 5, 2020, the closing price was ZAR 86.29 and its target price was estimated at ZAR 73.56.

ABSA | Set to deliver growth despite SA constraints

ABSA's (ABG) H1 '19 results showed positive cost containment trends and an operational improvement in RBB SA (65% of Group earnings). However, the results highlighted a disappointing revenue growth performance considering the Group's renewed focus on advances growth (Group +12% y/y, CIB SA +23% y/y). In our view, ABG's ROE target of 18% to 20% by FY ‘21f will be challenging to achieve in a weak SA economic environment. However, we expect management's actions to improve the Group's cost efficiency and competitiveness to result in 8% CAGR in earnings to FY '21f. Please find our analysis and ...

SA Banks | Resilient earnings growth

We expect the big five SA banks (ABG, CPI, FSR, NED and SBK) to continue reporting earnings growth ahead of SA nominal GDP (forecast 6%) over the next three years. We expect cost containment, retail lending growth, the banks' operations outside SA and SA interest rate cuts (keeping credit impairment charges low) to support earnings growth. We also believe that the diversification of SA banks' corporate lending should result in benign credit write-offs compared to previous cycles. In our view, ABSA (ABG), Nedbank (NED) and Standard Bank (SBK) remain undervalued using sustainable ROEs. We ex...

SA Banks | Weighing up returns

The big five SA banks (ABG, CPI, FSR, NED and SBK) can each earn returns in excess of the cost of capital through-the-cycle given their scale and profitability, in our view, despite numerous new fintech players. In our analysis, Capitec and FirstRand (FSR) achieved the highest franchise scores while ABSA (ABG) received the lowest score. However, we believe ABG is penalised for historic underperformance. Over the last 18 months, ABG has restructured its segments and the management structures, set appropriate and competitive risk appetite, increased variable remuneration, and improved the qua...

ABSA | ESG analysis: Getting remuneration right

Please find our ESG analysis and proxy voting recommendation for ABSA in this note, ahead the AGM on the 4th of June 2019.

ABSA | Set to deliver growth despite SA constraints

ABSA's (ABG) H1 '19 results showed positive cost containment trends and an operational improvement in RBB SA (65% of Group earnings). However, the results highlighted a disappointing revenue growth performance considering the Group's renewed focus on advances growth (Group +12% y/y, CIB SA +23% y/y). In our view, ABG's ROE target of 18% to 20% by FY ‘21f will be challenging to achieve in a weak SA economic environment. However, we expect management's actions to improve the Group's cost efficiency and competitiveness to result in 8% CAGR in earnings to FY '21f. Please find our analysis and ...

SA Banks | Resilient earnings growth

We expect the big five SA banks (ABG, CPI, FSR, NED and SBK) to continue reporting earnings growth ahead of SA nominal GDP (forecast 6%) over the next three years. We expect cost containment, retail lending growth, the banks' operations outside SA and SA interest rate cuts (keeping credit impairment charges low) to support earnings growth. We also believe that the diversification of SA banks' corporate lending should result in benign credit write-offs compared to previous cycles. In our view, ABSA (ABG), Nedbank (NED) and Standard Bank (SBK) remain undervalued using sustainable ROEs. We ex...

SA Banks | Weighing up returns

The big five SA banks (ABG, CPI, FSR, NED and SBK) can each earn returns in excess of the cost of capital through-the-cycle given their scale and profitability, in our view, despite numerous new fintech players. In our analysis, Capitec and FirstRand (FSR) achieved the highest franchise scores while ABSA (ABG) received the lowest score. However, we believe ABG is penalised for historic underperformance. Over the last 18 months, ABG has restructured its segments and the management structures, set appropriate and competitive risk appetite, increased variable remuneration, and improved the qua...

ABSA | ESG analysis: Getting remuneration right

Please find our ESG analysis and proxy voting recommendation for ABSA in this note, ahead the AGM on the 4th of June 2019.

ABSA | Improving profitability

ABSA's (ABG) FY '18 results showed that the bank is on track to gradually gain back market share in SA. Accounting changes and costs related to restructuring and separation (from Barclays PLC) distorted ABG's income statement metrics in FY ‘18. However, we believe that the bank's underlying profitability is improving. Despite challenging SA operating conditions, we believe ABG can deliver high single digit earnings growth over the next three years. Please find our analysis and updated forecasts in this note.

Increased risk weighs on ABSA GROUP LTD., penalising its rating down to Slightly Negative

The independent financial analyst theScreener just lowered the general evaluation of ABSA GROUP LTD. (ZA), active in the Money Center Banks industry. As regards its fundamental valuation, the title still shows 2 out of 4 possible stars. Its market behaviour, however, has slightly deteriorated and will be qualified as risky moving forward. theScreener considers that these new qualifications justify an overall rating downgrade to Slightly Negative. As of the analysis date May 5, 2020, the closing price was ZAR 86.29 and its target price was estimated at ZAR 73.56.

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