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ABSA GROUP is downgraded to Slightly Positive due to increased risk
The independent financial analyst theScreener just slightly lowered the general evaluation of ABSA GROUP (ZA), active in the Money Center Banks industry. As regards its fundamental valuation, the title confirms its rating of 3 out of 4 stars. Its market behaviour, however, has slightly deteriorated and can be now qualified as moderately risky. This risk increase, even if marginal, forces theScreener to slightly downgrade the title, which now displays an overall rating of Slightly Positive. As of...
- Harry Botha
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 effi...
- Harry Botha
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,...
- Harry Botha
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, ...
- Harry Botha
- Harry Botha
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 forec...
- Harry Botha
SA Banks | Unpacking SA consumer credit
We have used aggregated credit bureau data to analyse important trends in consumer credit in SA. The data shows that SA banks' arrears to advances remain low. However, the operating environment does not support meaningful leading growth. Therefore, we expect SA banks to report flat retail credit impairment charges in H2 ‘18, supporting earnings growth. Please find our analysis and updated forecasts in this report.
- Harry Botha
ABSA | Delivering the lending growth
ABSA Group's (ABG) H1 '18 results showed that management is delivering on the most important short-term objectives: The Separation project with Barclays PLC is on time and within budget, and lending growth is improving. Please find our analysis of the results and our updated forecasts in this note.
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