Absa to claw back lost ground
New identity, new share code
THE ABSA Group, formerly Barclays Africa, yesterday admitted to making mistakes in its retail banking business (RBB) that saw it lose market share.
The admission came as the group rebranded its identity following its separation from Barclays plc, with Absa now aiming to unleash its digital strategy as it goes full throttle to claw back lost ground.
Absa chief executive Maria Ramos said the group’s loss of its previously dominant market position was due to numerous factors, but that the new strategy would ensure it made the right investments.
“We were the biggest player in the mortgage market. We had mortgages sitting in our books worth a 100 percent or more loan-to-value and eventually we had to clean up that mortgage book,” Ramos said.
“When we came out of cleaning that mortgage book we made some decisions that in hindsight were not the right decisions and cost us market share. It took too long to get the rhythm back in the mortgage business.”
Absa, which at one stage had about a third of the home-loans market, has recently made changes in the leadership of its RBB unit as it looks to regain market share and revive its home loans book.
The group also aims to double its share of revenue in Africa from 6 percent to 12 percent.
Geoff Lee took the helm of home loans, Faisal Mkhize was appointed the head of vehicle and asset finance and Punki Modise is now in charge of finance.
Tshiwela Mhlantla was appointed head of physical channels, while Aupa Monyatsi took over virtual channels and Cowyk Fox is now head of unsecured lending. The group’s home loans contributed 26.2 percent or R1.7 billion to profits in RBB in the year ended December.
Absa said it had and would continue to invest in building a “scalable digital” business as that was what its RBB unit required to grow its market share.
Aeon Investment Management chief investment officer Asief Mohamed said the return on equity metrics of the big four banks over the past couple of years indicated that Absa had lagged the other three big banks.
“Capitec has taken market share from the big four banks over many years. The long-awaited Discovery Bank is expected to be a formidable competitor for all the banks in South Africa. Absa will find it difficult to be a digitally led bank,” said Mohamed.
Barclays in 2016 announced that it would be selling its stake in Barclays Africa to focus more on the US and Britain.
The digital banking space is set to be a hotly contested terrain, with the emergence of tech-savvy entrants including Discovery.
Bank Zero, an app-driven bank led by former FNB chief Michael Jordaan, has been granted a provisional licence after an evaluation process by the South African Reserve Bank.
Tyme Digital, backed by billionaire Patrice Motsepe’s African Rainbow Capital, said last year it had been granted a licence by the central bank.
Ramos said that its loss of market share was also because of choice and not dictated to by external factors.
She referred to the group’s decision to not be an “aggressive participant” in the personal loans business as one instance where the loss of market share was a business decision.
“We only lent to our own client base and as a consequence of that we lost market share in that segment.”
The group’s personal loans contributed just 6.7 percent of profits of retail banking in the year ended December, fetching just R436 million in the period.
Absa shares closed 2 percent lower on the JSE yesterday at R162.