WorldWideMarkets Episode 691 — Transcript

Recorded: Tuesday late morning, 18 August 2026 | Published: 19 August 2026 | Runtime: 20:53

Lightly edited for readability. Verbal fillers and repetitions removed; meaning unchanged.

Simon Brown (00:00)

Markets this week: cheap for a reason. Absa versus Nedbank. Bond yields continue their march higher. A big ETF database upgrade. And 60 days of peace ended on Monday — but no peace. And then stocks on the move.

I’m Simon Brown. This is WorldWide Markets episode 691 for 19 August, and I recorded this on late Tuesday morning.

WorldWide Markets is powered by Standard Bank Global Markets Retail, and by Shyft, the global money app that puts travel, shopping, payments and investments in the palm of your hand. Enjoy the cheapest forex rates anytime, anywhere. Shyft, powered by Standard Bank. Thanks to Standard Bank. Thanks to Shyft.

Some folks have contacted me and said, hey, I haven’t been informed about a migration. If you haven’t, then you’re not in that cohort. I’m also in a later cohort — they’re doing it in bunches. If you haven’t been communicated with, that’s why. Don’t stress it.

Absa vs Nedbank: the two cheap banks (00:48)

We had Nedbank results a week ago. We had Absa results this morning, as I’m recording, Tuesday morning. And I thought to myself: these are the two cheap banks on our market.

We’ve got Standard Bank and FirstRand at price-to-books of around two-ish — maybe Standard Bank a little under, FirstRand a little over. Capitec is out there at six or seven. But then we’ve got Absa and Nedbank at 1.1, 1.2. And I thought, hang on a second, is there something here?

The short answer is yes, but. I was going to pitch this as a battle of the banks, a battle of the cheap banks — but they are so very similar in so many cases. Fifteen percent return on equity in the first half. Trading around 1.2 times tangible book. Credit loss ratio 0.9%. Common equity tier one 12.7%, more or less.

So the difference is less about valuation and more about which turnaround story you have more faith or belief in. And that is the really important point. Neither of them is cheap in the cheap-cheap sense. They are averagely priced with, frankly, below-average returns. So it’s not whether they’re undervalued — it’s whether they can close that ROE gap. And we’ll come to return on equity in a moment.

Some numbers. Dividend yield: Absa seven and a half percent, Nedbank seven percent. So you’re getting paid quite nicely to hold them. You’re probably going to get a little less if you put money in a bank account at either of those two. So you’re not doing too badly there at all.

Cost-to-income ratio. Now things get quite stark here. Absa 53.4%, up from 53.2%. Nedbank 56.2%, down from 56.9%. All numbers are six months to end June — the exception is FirstRand, they have a December year-end, so this is a half-year to December.

So 53.4% for Absa, 56.2% for Nedbank. Lower is better. And FirstRand is at 48.7% and Standard Bank at 49.3%.

I’ve told this story before. Jacko Maree, then CEO of Standard Bank, said to me that we were never going to get cost-to-incomes back into the low 50s. He probably said that to me 15-plus years ago. And well, here we are. Sim Tshabalala has absolutely been relentless — and so has FirstRand — in getting costs out of the system. And that has fundamentally benefited shareholders. Absolutely it has.

But also, return on equity. A bank earning a 15% return on equity, when the cost of equity — which Nedbank publishes — is 14%, is frankly creating almost no economic value.

For reference: 15% ROE for Absa and Nedbank, FirstRand 21.1% — the standout there — and Standard Bank 19.8%. Again: Absa and Nedbank, cheap for a reason.

So you’re getting paid to hold them. Thank you for the dividend, absolutely important there. But what you need is that uplift in return on equity.

Nedbank is looking to push it higher. If you can get that ROE to 17%, the price-to-book should move to around 1.4 times. And that gives you about 20% uplift straight off the bat, nice and simple. And they’ve said it: they want 17% ROE by 2028. They guided 15.4%.

Absa is looking for around 15%, with no stated uplift. And that perhaps is the biggest difference between the two. Nedbank is saying we’re looking for a higher ROE — an ROE that’s still below FirstRand, still below Standard Bank, but higher. Absa is not.

So where are some other points here? Maybe some hidden value. Absa’s South African business: headline earnings grew 17% in South Africa, a really big number, and that’s 72% of the business, performing well and re-rating. Unfortunately, rest of Africa is down 10%. So if you think the rest of Africa is cyclical rather than structural, you’ve got a really good-looking business in Absa. Can they get that Africa business turned around? At the moment it’s hurting Absa.

Weirdly, Nedbank is the other way around. They’ve just exited Ecobank, and if you remove that from the numbers — the Nedbank numbers last week — HEPS is around 12%. But they’re now buying NCBA Group Plc in East Africa. So in essence, going back into Africa. But the big question there: can Absa turn it around?

Book composition. Nedbank is a property bank in a way that Absa is not. Home loans for Nedbank, R226 billion. Commercial mortgages, R219 billion. Let’s call it R445 billion — about 40% of the gross loan book. So this really is a concentrated bet on SA property, residential and commercial.

Absa’s home loan book is about R319 billion. That’s 21% of its gross. It doesn’t pull out commercial separately, but we can probably say it’s likely to be a little bit lighter than what we’re seeing from Nedbank.

But both of them to a degree — and I would say Nedbank more so — really are a story around SA Inc. GDP growth, lower rates, all of those sorts of things. The elections coming up in November: do we start to see cities being rebuilt, by either the incumbents or the new parties, depending who wins in November? Those are important points.

So, a couple of important points. Owning both is absolutely pointless. There’s no upside to that. You’ve got to pick one or the other.

If we’re looking for good SA Inc., they’re both going to do well. There’s certainly an Africa story — if you think Absa can turn that around, they’re probably the better one. Nedbank is looking to improve that ROE, and certainly they can improve it.

Interestingly, the credit impairments: Absa is at 0.94%, but that’s improving from 1.00%. Nedbank was 0.95%, but that’s worsening from 0.81%. So they’re at the same point, but they’re coming from different places.

It’s a really tough call. I think Nedbank marginally is an income holding more than a growth stock — if you want a safer version of the trade. But the point is you don’t want to own both. You want to hold one or the other. It’s up to you as to which one.

But as I said up front, you’re earning seven, seven and a half percent. You’re getting paid to hold them. That is not nothing. That is a real consideration in that regard. So there is perhaps something there.

Price targets and what the charts say (07:03)

Let’s have a quick look. As I said, price-to-books — but I want to have a squiz at price targets.

Nedbank’s price target: six holds, three buys and a strong buy. The average is R326, the low R281, and the high R383. And Nedbank is currently R310. So it’s less than 10% upside on that metric.

If we go look at Absa and get the same data, we have a sell, two holds, four buys and two strong buys. The low is R228, which is five bucks above Absa’s R223. Average R264, and the high is R318.82. That’s very specific.

Here’s the thing. I can remember 15 years ago, when I started hosting Stockwatch — 14 years ago — on Business Day TV, then called Summit TV, people would tell me Absa was cheap. And you know what? They were right. Except it is still cheap.

I’ve got to say, and I appreciate there is new management in there and he is sweeping brooms left, right and centre, I think it’s going to be a little bit longer. I would probably prefer Nedbank.

Interestingly, on the charts — I do my charts on the move — Absa’s on the move, but looking more downward rather than upward. That is not an attractive-looking chart. There is some good support around the R215 to R220 level that really needs to hold. But what we are seeing is lower lows and lower highs. That is not good-looking.

If we have a look at the Nedbank chart, that on the flip side is actually positive, actually moderately bullish, trading up almost at all-time highs, higher highs and higher lows. So different stories there as well.

Hence, I think for me, perhaps it’s Nedbank over Absa. And that’s how I’ll sit with it for now.

Power Hour replay and the Oyster event (08:53)

We had some events last week and I want to touch on some of those.

We did “How to build your ETF portfolio” — justonelap.com/power-hour. The idea was from one ETF to ten. So you start with a single ETF and in time you build it to ten. Except I couldn’t in any way discover how we got to ten. So: one to seven. Truthfully, you actually probably need three, four, maybe five ETFs in a diverse portfolio.

That’s justonelap.com/power-hour, and you will find the video there. That is hugely important, and I think well worth it. It’s getting well regarded — folks are certainly liking what we’ve got there.

We’ve also got an event in two weeks’ time, the second of September, that is a Wednesday. It will be at 10:30 in the morning. It is with Nerina Visser of etfSA, on the Oyster actively managed ETF. It is offshore, it’s got platinum in it, it’s got gold in it, it’s got all the bits and pieces that we want. And Nerina will help us understand what is in there, how it works, and what we are looking for. Well worth it. Justonelap.com/events for booking and more information.

ETF database upgrade — MDD links in beta (10:05)

And then we did some big updates to our ETF database that I want to share.

We’ve been running this now for a year, and it’s just kind of gotten easier because of AI. To be clear, I’m doing much of this — in fact nearly all of it — with AI. That’s 142 ETFs.

So this is the June update. They’re kind of a month behind. I would like to have had the July minimum disclosure documents, but we got the Junes. But here we are, we’ve got them.

And what is interesting is that we have, under huge request, added links to the minimum disclosure documents. Now, there are some Ts and Cs. You have to go to the particular page of an ETF, and you can always find that page nice and simple: justonelap.com slash the code of the ETF. Or you can click through to it from the database.

We’ve got all the data there, everything’s looking lovely, top holdings — and then we’ve got “MDD web link”. Here it is, in beta. And immediately we go to Satrix and it brings an error. I stressed the beta part.

The problem we’re running into — and I promise you it does work on some better than others — is that some of them point directly to the file, which is great. But then at some point that file fades out. And now where are we left? We’re pointing to a file that has been deleted, and there are challenges there.

So let’s try the global one. Does this one work? It doesn’t take you directly to the file, but it takes you to the page for that document. That is a good place to start.

So: justonelap.com/etf-database. Fairly big upgrade. We’re chuffed with it, and certainly it is working. And that makes us happy in that regard.

60 days of peace, expired (11:58)

Peace in our time. No peace in our time.

Monday was 60 days. Remember, 60 — well, 61, 62 — days ago there was an accord. There was going to be 60 days of peace. Everything was going to be lovely. This is between Iran and the US. It lasted about 10 days. Oil got into the low 60s, I think. It lasted a bit, and then of course it all just fell apart. And that has now expired, and who knows where we are.

Trump is saying he doesn’t care, he doesn’t need to do anything. The truth is he can’t. Fundamentally, this is up to Iran. Iran is going to make the decision here as to when there will be peace.

And I can’t help wondering if Iran isn’t thinking: you know what? Brent is trading at $90.87, or in the aftermarket at $91.50. It was at what, $60 at the beginning of the year, and trending lower. Iran was under sanction. They’re suddenly getting 50% more for their oil, and they’re suddenly a whole lot less sanctioned than they were before. This isn’t the worst place for them.

Iran can ride it out. You know how long Iran can ride it out? Forget the midterms on the third of November. No, no, no. How about 20 January 2029? Iran can just say: one day President Trump stops being president, there’ll be a new person in office, and we will talk to them.

In other words, we could have two years of this.

We’re looking at petrol up around 60 to 70 cents in September. We’re looking at diesel up around R2.20 or so. All of this is a direct result — and a lot can change, absolutely, a lot can change.

We do have a very strong rand at this point in time. It blew out initially on the lack of a rate cut from the SARB, but it’s back at R16.24. And where did it get to last week? It got as low as R16.07 last week. I didn’t notice that — I was feeling poorly, and it was very, very cold. Exceedingly cold.

So the peace in our time is done. Trump threatened to attack Oman last night, and bomb them to something or other. Oman is a proper partner here, and anyway — it is, as they say in the classics, an utter and complete mess.

Global bond yields at 2008 levels (14:25)

Something else that is a mess — and I have spoken about this before, this is not a new mess — global bond yields.

Global bond yields are looking what I think we can call fairly ugly. We’ve got the US 10-year at 4.735%, which is a horror number. That is as high as it was in the global financial crisis in 2008. We’ve got the five-year at 4.387%. Sorry — it’s the 30-year which is back at 2008 levels.

But all of these: the UK 10-year at 5.079%, China at 1.67%. All the long-dated ones are in a panic.

Now, why are we seeing the impact at the long end? Because if you’re going to lock yourself in for 10 years — what happens if inflation averages 4% over that period? You’re only going to make 0.735%. It’s not nothing, but it’s not much of a return.

It’s worried about inflation, it’s worried about all sorts of things. Debt continues to — what’s the word I’m looking for? Skyrocket is probably a fair choice. We are seeing significant challenges with debt. It is not coming back in a hurry, and it’s not getting pretty in a hurry. The debt story is not going away, and that is the problem. And that is what’s been driving these bonds higher.

US interest payments now cost more than anything else in their budget — more than the military.

And here’s the thing. You’ve got a bond that the US government took out 10 years ago, and they got, I don’t know, 2%. That expires, they need to roll it. The new one comes in at 4.7% or whatever it might be. It suddenly comes in a whole lot more expensive. And that is the challenge: as they’re rolling that debt and issuing new debt, the interest costs more.

You’re getting a primary budget deficit. So before paying interest on debt — South Africa has a surplus. In other words, we have more money coming in than going out before paying interest on debt. The US does not. Neither does anywhere in Europe. Neither does Japan.

These are real and significant challenges, and there’s no particularly easy and quick answer at this point in time. It’s just going to hurt. And at some point, as I’ve said before, the piper needs to get paid, right? This can’t go on forever. That said, it can go on for a long time.

Stocks on the move (17:14)

So, some stocks on the move.

Let’s start with Mr Price. It’s come down again. I’m still holding Mr Price. Remember, I did Mr Price versus Clicks two weeks ago. And there is something here, a bit of action. What we are seeing is lower highs — however, it needs to hold those previous lows. But looking good.

We look to Nedbank. That’s looking good.

And then Shoprite. That was a strong trading update from Shoprite — no surprises, a lot of it Sixty60. A break higher. And this is what Shoprite does: years of consolidation, breaks higher, nice bit of a run. At this point it does look like Shoprite wants to run again. If we zoom that out, you can see the consolidation, then it moves up to the next leg, moves up to the next level there as well. I own Shoprite. It is not cheap, but it is the best retailer in South Africa.

On the downside — Clicks. So I own some Clicks and I picked up some more, because this thing is just cheap. It’s back at 2023 levels. It’s back at pandemic levels. This is not looking great. But at this level, say what you will.

When we delved into it two weeks ago — and you’ll find it at justonelap.com/wwm for WorldWide Markets, look for the Clicks and Mr Price comparison — the thing with it is they’re getting some real competition. I’m not so stressed about Shoprite, Medirite and Sixty60. What we’re seeing with Dis-Chem, for example, is that Dis-Chem is essentially buying market share. That’s cool, but Dis-Chem can’t always be buying market share. At some point they stop.

And Clicks has got the loyalty. Keith McLachlan also pointed out that Clicks’ rewards programme gives you money for next time — so you’ve got to come back to get it. What they do at Dis-Chem is they give it to you on the day, as I understand it. I am not a Dis-Chem shopper.

The other one on the move, and it’s heading lower, is good old Woolworths. I used to hold the stock. It is back at 2021, 2022 levels — back at pre-pandemic. It is cheap by all accounts, but: food, we’re seeing pressure at the top end. I spoke about that when we did the Pick n Pay review last week. We’re seeing pressure on high-end households. And to add to that, their fashion, beauty and health continues to struggle. Nothing has changed in that regard. Tough space.

I hold Shoprite. That’s the one I’m interested in. You can always go and find my holdings and the like at SimonBrown.co.za, my vanity website.

Wrap (20:03)

WorldWide Markets is powered by Standard Bank Global Markets Retail, and by Shyft, the global money app that puts travel, shopping, payments and investments in the palm of your hand. Enjoy the cheapest forex rates anytime, anywhere. Shyft, powered by Standard Bank.

So, next week I am standing in for Michael Avery on Fine Music Radio in Cape Town. If you are in Cape Town, I will be on your wireless Monday, Tuesday, Thursday and Friday — not Wednesday.

And the week after that, 1 September, I am going to be at LeaderEx. Go to Moneyweb, you can find all the details there. And then the Wednesday, we’ve got the event with Nerina Visser.

But for now, let’s leave it there. Ladies and gents, my name is Simon. You have a great week. Look after yourself and, as always, if you can, look after somebody else. And we will chat again next week.

Cheers, all.