Nov. 10 (Bloomberg) -- Absa Group Ltd., the South African bank controlled by Barclays Plc, was raised to “hold” from “sell” at Deutsche Bank AG, which increased its price estimates for all of the nation’s largest lenders.

FirstRand Ltd. remains Deutsche’s top pick among the nation’s top lenders and the only one with a “buy” rating out of Absa, Standard Bank Group Ltd. and Nedbank Group Ltd., which were maintained at “hold,” Johannesburg-based analysts Voyt Krzychylkiewicz and Nicole Penny wrote in a report today.

The analysts raised their 12-month price estimate on Absa to 125 rand from 110 rand and their target on FirstRand to 18 rand from 16.50 rand, according to the note. The price estimate on Standard Bank was raised to 100 rand from 90 rand and that of Nedbank, the smallest of the four, to 117 rand from 100 rand.

“As a result of our target price upgrade on Absa, as well as the stock under-performing FirstRand, our top pick, by 10 percent in the past quarter, we upgrade Absa from sell to hold,” Krzychylkiewicz and Penny said. “We continue to rank FirstRand ahead of its peers due to its stronger earnings recovery and greater expected return on equity.”

Absa, which opened a representative office in Namibia today, is the third-largest bank by assets in South Africa after Standard Bank and FirstRand. Like its peers, it has remained profitable with more money on hand than regulators require even as the global financial crisis caused lenders in the U.K. and the U.S. to seek government money to survive.

Earnings Rise

“Absa was the only bank to have grown non-interest revenue ahead of net interest income over the past two years, as Absa Capital began to make a notable difference to the group,” the Deutsche Bank report said, in reference to the lender’s investment banking unit. “Absa’s portfolio of businesses are relatively defensive, and, as such, earnings are likely to lag the peer group as we emerge from the credit cycle.”

A trading statement from Barclays today said Absa’s income for the nine months through September “was slightly ahead of the prior year,” which, when coupled with a reduction in costs, led to an improvement in the cost income ratio.

FirstRand, the worst performer in the five-member FTSE/JSE Africa Banks Index this year, added 2.1 percent to 17.54 rand as of 1:11 p.m. in Johannesburg today while Absa gained 1.5 percent to 124.39 rand. Standard Bank rose 1.2 percent to 97.05 rand and Nedbank, the top performing South African bank this year with a 24 percent gain, climbed 2 percent to 118 rand.

To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net

Last Updated: November 10, 2009 06:31 EST