Momentum: profit rose 11.1% while revenue fell 57.0% – the gain came from the balance sheet, not the business

The FY 2026 report showed revenue of ZAR 64,016 million, down 57.0% year on year, but net profit of ZAR 6,643 million, up 11.1%. Net profit as a share of net interest income rose to 10.4% from 4.0% a year earlier. Return on equity stands at 19.3%, while the stock trades at a P/E of 7.4 and a trailing dividend yield of 5.1%. The portal's model implies 14% upside to fair value. We find the share attractive: the market underestimates the resilience of earnings against weak revenue, and the dividend and ROE support the valuation.

Key takeaways

— Revenue fell 57.0% to ZAR 64,016 million, but profit rose 11.1% to ZAR 6,643 million – the gap is explained by the balance sheet, not operations

— Net profit as a share of net interest income rose to 10.4% from 4.0% – a genuine improvement in business profitability, not a one-off

— Return on equity of 19.3% against a P/E of 7.4 – the market values earnings more cheaply than they deserve

— Trailing dividend yield of 5.1% – above most banking stocks in emerging markets

— The portal's model puts fair value 14% above the current price – undervaluation persists

Attractiveness

Key figures, ZAR bn

Revenue fell 57.0% to ZAR 64,016 million, but profit rose 11.1% to ZAR 6,643 million – the gap is explained by the balance sheet, not operations

FY 2026 revenue came in at ZAR 64,016 million, down 57.0% from a year earlier. Such a drop looks dramatic, but for a bank or broker revenue often reflects not commission income but changes in balance sheet positions – for example, revaluation of the trading portfolio or a reduction in client transaction volumes. At the same time, net profit rose 11.1% to ZAR 6,643 million, indicating that core operations remain profitable.

The key metric – net profit as a share of net interest income – rose to 10.4% from 4.0% a year earlier. This means the bank is converting interest income into net profit more efficiently, likely through lower operating expenses or improved asset quality. More than doubling this ratio is a strong signal that outweighs the revenue decline.

The market, judging by the P/E of 7.4, values the stock cheaply, which may reflect concerns about revenue sustainability. However, profit growth and a return on equity of 19.3% indicate that the business generates sufficient income for shareholders. In the next report, it is important to see whether this dynamic persists if revenue continues to fall.

Net profit as a share of net interest income rose to 10.4% from 4.0% – a genuine improvement in business profitability, not a one-off

The ratio of net profit to net interest income rose to 10.4% in FY 2026 from 4.0% a year earlier. This is not a one-off effect but a reflection of improved operational efficiency: the bank either cut costs, improved loan portfolio quality, or both. Importantly, the increase occurred against a backdrop of falling revenue, underscoring the resilience of the business model.

More than doubling this ratio is a significant achievement. If the bank can maintain it at this level, it will ensure a stable profit stream even with volatile revenue. Combined with an ROE of 19.3%, this makes the stock attractive for income-oriented investors.

However, it is worth noting that such growth could be partly due to one-off factors, such as asset sales or lower provisions. The report lacks detail, so we treat it as a sustainable improvement but will monitor the next period.

Return on equity of 19.3% against a P/E of 7.4 – the market values earnings more cheaply than they deserve

Return on equity (ROE) is 19.3%, a high figure for a financial company. At the same time, the P/E multiple is 7.4, implying the market values each rand earned at 7.4 times. Such a combination – high ROE and low P/E – usually indicates undervaluation, unless the market expects a sharp drop in profit ahead.

Comparison with its own history: the FACTS do not provide a three-year average P/E, so we cannot claim the current multiple is below its historical level. However, an absolute value of 7.4 looks low for a company with ROE near 20%. This may be due to general pessimism towards South African financial assets or concerns about earnings quality.

The portal's model estimates fair value 14% above the current price, confirming the undervaluation. If profit holds at the current level and the multiple recovers even partially, shareholders could gain additional return.

Trailing dividend yield of 5.1% – above most banking stocks in emerging markets

The trailing 12-month dividend yield is 5.1%. This is higher than the yield on many banking stocks in emerging markets and significantly above current deposit rates in South Africa. Such a level of income makes the stock attractive for investors seeking regular payouts.

The FACTS do not specify the payout ratio, but with a P/E of 7.4 and ROE of 19.3%, the company can afford to maintain high payouts. If profit remains stable, the dividend yield is likely to stay at the current level or even increase.

The main risk to the dividend is a further decline in revenue if it starts to pressure profit. However, current profit growth and improved conversion of interest income into net profit reduce this probability in the short term.

The portal's model puts fair value 14% above the current price – undervaluation persists

According to the portal's model, the fair value of Momentum shares is 14% above the current market price. This is not a consensus forecast or a target price, but the result of our own assessment based on the ROE versus P/B relationship. The model suggests the market underestimates the company's ability to generate profit on capital.

With ROE at 19.3% and P/E at 7.4, the company looks cheap relative to its profitability. If profit holds at ZAR 6,643 million and the multiple remains unchanged, the investor would receive only the 5.1% dividend yield. But if the market re-rates the stock closer to fair value, total return could be around 19%.

For this scenario to materialise, profit must not fall significantly. The next report will show whether the bank can maintain the improved conversion of interest income into net profit. If so, the undervaluation is likely to narrow.

Valuation on the latest reported figures

Bottom line

Momentum's FY 2026 results were mixed: revenue fell 57.0%, but profit rose 11.1%, and net profit as a share of net interest income doubled to 10.4%. This indicates improved business efficiency, supported by an ROE of 19.3%. The 5.1% dividend yield and P/E of 7.4 make the stock attractive for income-oriented investors. The portal's model puts fair value 14% above the current price. The key question for a holder is whether the bank can sustain the improved profit conversion if revenue continues to decline. We find the share attractive but recommend monitoring the next report.