Absa Group (OTCPK:AGRP.Y) Update / Briefing Transcript

Absa Group (OTCPK:AGRP.Y) Update Summary Company Overview - Company: Absa Group - Date of Call: December 08, 2025 - Context: Pre-close call for 2025 financial guidance and medium-term targets Key Points Industry and Market Context - Geographical Focus: Over-concentration in South Africa, Ghana, and Kenya, with plans to diversify into other African markets [3][4] - Economic Conditions: Slightly improved GDP growth in South Africa, with lower inflation and interest rates than previously forecasted [10] - Loan Growth: Mid-to-high single-digit growth expected, driven by wholesale lending, with retail activity remaining subdued [10][36] Financial Guidance and Performance - Revenue Growth: Expected mid-single-digit revenue growth for 2025, with stronger growth in non-interest income than net interest income [11][12] - Credit Loss Ratio: Anticipated improvement to the upper half of the target range of 75-100 basis points, down from 103 basis points in 2024 [12] - Cost-to-Income Ratio: Targeting a reduction to closer to 50% as quickly as possible, with a current ratio of 53.2% [4][12] - Return on Equity (ROE): Expected ROE of around 15% for 2025, with a target of 16%-19% for 2027-2030 [13][16] Strategic Pillars 1. Customer-Led Growth: Shift from product-led to customer-focused strategies, emphasizing customer experience and understanding client needs [2][5] 2. Diversification: Geographical and business line diversification to reduce dependency on South Africa, Ghana, and Kenya [3][4] 3. Efficiency Improvement: Focus on cost efficiency and capital allocation, targeting wasteful expenditures and reducing outsourcing [5][12] 4. New Growth Opportunities: Investment in digitization, wealth offerings, and value-added services, including insurance [5][6] Management and Cultural Shift - Leadership Changes: New appointments in senior management, including the Chief Executive of Corporate and Investment Banking (CIB) and Personal and Private Banking [8][72] - Cultural Transformation: Emphasis on shifting from an inward-focused culture to a customer-centric approach, with support from staff [7][8] Challenges and Risks - Market Competition: Increased competition in fee income and challenges in maintaining growth in personal and private banking [24][59] - Economic Headwinds: Potential impacts from currency fluctuations and economic conditions in various African markets [13][49] Future Outlook - 2026 Projections: Anticipated stronger GDP growth across key markets, with a focus on improving loan growth and non-interest income [14][15] - Long-Term Goals: Commitment to achieving a cost-to-income ratio of approximately 50% by 2028 and improving ROE through strategic execution [16][18] Additional Insights - Client Coverage: Need for improved client coverage and understanding of client segments to enhance market share and revenue growth [29][59] - Investment in Technology: Plans to reduce technology costs while focusing on impactful investments in digital capabilities [42][43] This summary encapsulates the key insights and strategic directions discussed during the Absa Group's pre-close call, highlighting the company's focus on customer-centric growth, diversification, and efficiency improvements while navigating market challenges.