Sanlam: H1 profit up 29.1% even as revenue fell 11.8%

Sanlam's H1 2026 results showed a divergence: revenue fell 11.8% year-on-year, but net profit rose 29.1%. Over the trailing twelve months, net profit reached ZAR 18,914 million, with return on equity at 24.5%. At the current price (P/E 9.0, dividend yield 6.0%), the stock looks attractive: the portal's model estimates 16% upside.

Key takeaways

— Revenue in H1 2026 fell 11.8% year-on-year, but profit rose 29.1% – the divergence is explained by the income structure, not operating leverage.

— Net profit over the trailing twelve months was ZAR 18,914 million, with return on equity at 24.5%, indicating efficient use of capital.

— Net profit as a share of net interest income in H1 2026 was 13.2% versus 9.0% a year earlier – this is not a margin but a ratio reflecting profit growth relative to interest income.

— The trailing twelve-month dividend yield is 6.0%, above the key rate, but the payout depends on profit sustainability.

— The trailing P/E is 9.0, below historical levels, and the portal's model gives 16% upside.

— Operating cash flow over the trailing twelve months was ZAR 2,400 million, but for a bank this reflects client fund movements, not a result.

Attractiveness

Key figures, ZAR bn

Revenue in H1 2026 fell 11.8% year-on-year, but profit rose 29.1% – the divergence is explained by the income structure, not operating leverage.

Sanlam's revenue in H1 2026 declined by 11.8% compared to the same period last year. This drop could be due to lower fee income or insurance premiums, but the exact reason is not specified in the provided data. Importantly, the revenue decline did not lead to a profit decline.

Net profit for the same period rose 29.1% year-on-year. Such growth against falling revenue suggests the company either cut costs, received one-off income, or improved its business mix. Without detailed reporting, the exact cause cannot be identified, but the divergence itself warrants attention.

For an investor, this means current profitability may be unsustainable if not supported by revenue growth. However, 29.1% profit growth is a strong signal if it is repeated year after year.

Net profit over the trailing twelve months was ZAR 18,914 million, with return on equity at 24.5%, indicating efficient use of capital.

For the trailing twelve months ended 30 June 2026, Sanlam's net profit was ZAR 18,914 million. This is the sum of two half-years, not the result of the reporting period. Return on equity (ROE) for the same period was 24.5%, a high figure for a financial company.

High ROE means the company efficiently generates profit on invested capital. At the same time, the trailing P/E is 9.0, which may indicate undervaluation if profit is sustainable.

However, ROE of 24.5% could be due to one-off factors or high leverage, which is natural for a bank. It is important to monitor the stability of this metric in future reports.

Net profit as a share of net interest income in H1 2026 was 13.2% versus 9.0% a year earlier – this is not a margin but a ratio reflecting profit growth relative to interest income.

In H1 2026, net profit was 13.2% of net interest income, compared to 9.0% a year earlier. This is not a margin or profitability ratio, but a ratio showing what share of interest income converts into net profit.

The increase from 9.0% to 13.2% means profit grew faster than interest income. This could be due to cost cuts or higher non-interest income. For a bank, this is a positive signal, but it needs confirmation in subsequent periods.

It is important not to confuse this ratio with the net interest margin (NIM), which is not provided in the data. An investor should request NIM from the company's report for a more accurate assessment.

The trailing twelve-month dividend yield is 6.0%, above the key rate, but the payout depends on profit sustainability.

Sanlam's trailing twelve-month dividend yield is 6.0%. This is above the current key rate, making the stock attractive for income-oriented investors.

However, dividend sustainability depends on the company's ability to generate profit. Trailing twelve-month profit was ZAR 18,914 million, but if it falls, the dividend could be cut.

Our dividend forecast for the current year assumes the payout ratio and profit remain at the trailing twelve-month level. If profit stays stable, the dividend yield will remain around 6.0%. The risk of a cut is linked to falling profit or a change in dividend policy.

The trailing P/E is 9.0, below historical levels, and the portal's model gives 16% upside.

Sanlam's trailing P/E is 9.0. This is below the historical average, which may indicate undervaluation. For comparison, the portal's model estimates upside to fair value at 16%.

The company's market capitalisation is ZAR 170,602 million. With ROE of 24.5% and P/E of 9.0, the stock looks cheap relative to its ability to generate profit.

However, a low P/E may reflect risks related to falling revenue or profit instability. If profit holds at the current level, the multiple could expand, providing additional price upside.

Operating cash flow over the trailing twelve months was ZAR 2,400 million, but for a bank this reflects client fund movements, not a result.

Sanlam's operating cash flow over the trailing twelve months was ZAR 2,400 million. For a bank or broker, this metric is not an indicator of financial performance, as it depends on changes in client balances and central counterparty positions.

Therefore, we do not use operating cash flow to assess profitability or business sustainability. Instead, one should focus on net profit and return on equity.

Investors should not interpret positive or negative operating cash flow as a signal of problems or successes. It merely reflects client fund movements.

Valuation on the latest reported figures

Bottom line

Sanlam delivered strong 29.1% profit growth in H1 2026 despite an 11.8% revenue decline. ROE of 24.5% and P/E of 9.0 make the stock attractive, while the 6.0% dividend yield exceeds the key rate. However, profit sustainability is questionable as it is not supported by revenue growth. The portal's model estimates 16% upside, confirming attractiveness, but risks of lower profit and dividends remain.