Absa Group expects the stronger rand to reduce revenue, costs and headline earnings slightly during the first half of its 2026 financial year.The group said in a voluntary trading update for the six months ending June that it expects strong headline earnings growth in South Africa, given solid pre-provision profit growth and a lower credit loss ratio. However, it expects Africa regions’ headline earnings to decline due to lower net interest income and higher credit impairments.“Our operating environment remains challenging and uncertain. The Middle East conflict increased global inflation expectations and dampened GDP growth,” the group said on Tuesday.Absa has reduced its 2026 GDP growth expectations slightly for the largest countries in which it operates — South Africa, Ghana and Kenya. The South African Reserve Bank increased the policy rate in May, whereas Absa had previously expected further rate cuts. Policy rates in Ghana have reduced materially and are lower than Absa expected, which is a near-term drag but should stimulate growth, it said.Growth in fee and commission income and in insurance income in South Africa is expected to be solid, while trading growth moderated after a strong first quarter— AbsaFor the first half, Absa expects revenue to grow by low to mid-single digits, with non-interest income growing faster than net interest income.Net interest income growth remains modest, growing by low single digits, reflecting margin compression largely due to lower policy rates in Africa regions, it said.Net customer loans and customer deposits are expected to grow by mid-single digits, while personal and private banking (PPB) net customer loans are expected to grow by mid-single digits. Solid vehicle and asset finance growth should offset modest growth in home loans and unsecured lending in the South African business. Corporate and investment banking (CIB) net customer loans excluding reverse repurchase agreements and business banking (BB) net customer loans are expected to grow by high single digits, it said.“We expect mid-single digit growth in non-interest income. Within this, growth in fee and commission income and in insurance income in South Africa is expected to be solid, while trading growth moderated after a strong first quarter,” it said.Operating expenses is expected to grow by low to mid-single digits. We are confident that our revenue and earnings momentum remains on track medium-term, given healthy growth in our client franchise and net interest margin stabilisation post the rate cutting cycle, particularly in Africa regions— AbsaIt expects broadly flat credit impairments and an improved credit loss ratio. “We expect slightly lower PPB credit impairments, driven by a better delinquency performance, partly offset by an increase in coverage due to the deteriorating macroeconomic forecast. We expect BB and CIB credit impairments to increase, with the latter off a low base.”It expects headline earnings growth of mid- to high single digits, resulting in a similar Return on Equity (RoE) to the 14.8% in the first half of 2025. It plans to maintain a dividend payout ratio of around 55% for the first half.The group will report all three of its business units on a Pan-African basis for the first time when it releases interim results on August 18.“Given the elevated geopolitical and macroeconomic uncertainty, we will provide detailed 2026 guidance when we report our 1H26 results,” it said.The group expects to achieve a 2026 RoE of around 15%, mostly due to weaker net interest income than it originally anticipated given margin compression in Africa regions. “We are confident that our revenue and earnings momentum remains on track medium-term, given healthy growth in our client franchise and net interest margin stabilisation post the rate cutting cycle, particularly in Africa regions.”Business Day