Absa Group, the parent company of Absa Bank Kenya, has seen its share price fall 10.3% over the past five trading days after warning of a tougher operating environment and lowering its 2026 economic growth forecasts for Kenya, South Africa and Ghana.
The banking group, which issued a voluntary trading update ahead of its half-year results, said persistent geopolitical tensions, shifting interest rate expectations and weaker economic conditions across key African markets are expected to weigh on earnings in some of its businesses.
Absa now expects headline earnings from its Africa Regions operations to decline during the first half of 2026, citing lower net interest income and higher credit impairments. The lender is scheduled to publish its half-year results on August 18, 2026.
Why Absa Group Shares are Falling
The revised outlook comes after the group trimmed its 2026 GDP growth expectations for its three largest African markets: South Africa, Ghana and Kenya. Management said the conflict in the Middle East has pushed up global inflation expectations while dampening economic growth, creating a more uncertain operating environment.
The weaker outlook has weighed on investor sentiment, contributing to a 10.3% decline in Absa Group’s share price over the past five trading days.
In South Africa, Absa said the country’s central bank unexpectedly raised its policy rate in May instead of delivering further cuts as previously anticipated. Ghana, meanwhile, has experienced sharper-than-expected reductions in policy rates, a development the bank expects to temporarily weigh on margins before supporting economic activity over the longer term.
Absa Cuts Kenya, South Africa and Ghana GDP Growth Forecasts
Absa said it has reduced its 2026 GDP growth expectations for Kenya, South Africa and Ghana as geopolitical tensions and changing monetary policy continue to affect economic activity across its key markets.
Although the bank did not disclose updated GDP figures, it said the revised outlook influenced its earnings expectations, particularly in its Africa Regions business, where lower policy rates are expected to compress lending margins.
Lower Net Interest Income Expected to Weigh on Absa Earnings
Despite the more cautious macroeconomic outlook, Absa expects group revenue for the six months ended June 30, 2026, to grow by low to mid-single digits compared with the same period last year. Non-interest income is forecast to outpace net interest income growth.
Net interest income is expected to increase only by low single digits as lower policy rates across several African markets compress lending margins. Customer loans and deposits are both projected to grow by mid-single digits.
Within the retail business, Personal and Private Banking loans are expected to expand by mid-single digits, supported by continued growth in vehicle and asset finance in South Africa. Corporate and Investment Banking, excluding reverse repurchase agreements, together with Business Banking, are expected to deliver high single-digit loan growth.
Fee and commission income, together with insurance income in South Africa, are expected to support non-interest revenue growth after trading income moderated following a strong first quarter.
Operating expenses are forecast to increase by low to mid-single digits, resulting in slightly negative operating leverage and a modest increase in the cost-to-income ratio. Pre-provision profit is expected to record low single-digit growth.
Higher Credit Impairments Expected in Absa’s Africa Regions Business
Credit impairments are expected to remain broadly unchanged across the group, although performance will differ across business divisions. Personal and Private Banking is expected to report slightly lower impairments because of improved customer repayment trends, partly offset by higher provisions linked to the weaker macroeconomic outlook.
Business Banking and Corporate and Investment Banking are expected to record higher impairments, with the latter increasing from a relatively low base.
Overall, Absa expects group headline earnings to grow by mid-to-high single digits during the first half of 2026, producing a return on equity similar to the 14.8% reported during the same period last year.
The bank also expects its Common Equity Tier 1 capital ratio to finish the period slightly above the upper end of its board target range of 11% to 12.5%. It intends to maintain an interim dividend payout ratio of around 55%.
Absa Expects Africa Regions Earnings to Decline in H1 2026
For the first time, Absa will report its three operating divisions on a Pan-African basis. Corporate and Investment Banking is expected to post broadly flat headline earnings, with growth from Investment Banking and Global Markets offset by weaker Transactional Banking performance.
Personal and Private Banking is forecast to deliver low double-digit headline earnings growth, helped by lower credit impairments. Business Banking is expected to record modest earnings growth, although Africa Regions is likely to report weaker performance because of margin compression.
Management said the stronger South African rand is expected to slightly reduce reported group revenue, operating costs and headline earnings during the reporting period.
While South African operations are expected to deliver strong headline earnings growth on the back of solid pre-provision profit and lower credit losses, earnings from Africa Regions are forecast to decline because of weaker net interest income and higher credit impairments.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.