Coronation has done something that looks, at first glance, contradictory: it has bought into Absa while saying out loud that it doubts the bank can fix its retail business. The roughly R800 billion asset manager revealed in its latest quarterly review that it “initiated a position in Absa during the period,” drawn by low market expectations and what it called “a compelling turnaround story” in the South African business plus continued success in Absa's African operations.
The doubt it can't shake
That optimism comes wrapped in scepticism. Coronation says it has been wary of Absa's South African retail arm “for a long time,” and that the view “has been vindicated as it has shrunk itself to a near immaterial portion of earnings.” The bank's retail franchise, once a market leader, has ceded ground to rivals over two decades. Where Coronation is more upbeat is corporate banking: it says it is pleased with the hires Absa has made since Kenny Fihla took over as group chief executive just over a year ago. To build what he has called a dominant pan-African player, Fihla has filled Absa's top ranks with new talent, much of it poached from his former employer, Standard Bank, with the corporate and investment bank now run by his long-time colleague Zaid Moola.
A cheap price, a cautious market
The investment case rests on value. In its 2025 financial year, Absa's personal and private banking business reported headline earnings of R7.5 billion, dwarfed by the R13 billion its corporate and investment bank brought in, the very imbalance Coronation keeps pointing to. Coronation notes Absa trades on a modest earnings multiple and offers an 8% to 9% dividend yield, a sign “the market is taking a very cautious view on Mr Fihla's ability to turn the business around.” The way it sees it, that caution is the opportunity: if Fihla succeeds, the shares offer strong returns, and the high dividend cushions the downside if the turnaround stalls.
It is a bet on a low bar being cleared rather than a vote of full confidence, and whether Fihla can lift Absa's retail bank off the floor is the question Coronation, and the market, are watching.
