S’S OR 2.0

IFor years, Absa has been choked by its partnership with its former British parent, Barclays Plc. Now Barclays has flown the coop, allowing CEO Maria Ramos a free hand to overhaul the bank’s culture and fix its biggest problem: a retail bank whose customers have dropped from 8.8m to just 5.9m. It’s a bold plan, but details are scarce . . .

What it means: Barclays Africa will rebrand as Absa across the continent, and focus on rebuilding its core strength in home loans

t’s strangely fitting that Barclays Africa’s big reveal of its new, post-barclays strategy last week was classic Absa: unconvincing and oddly familiar. There was a tangible sense of déjà vu, as if we’d seen this movie before — and it doesn’t end well.

To be fair to CEO Maria Ramos, the highly rated former director-general of treasury during Nelson Mandela’s administration, the divorce from British parent Barclays hasn’t been without its fair share of tears.

After all, it’s the biggest U-turn on a foreign direct investment transaction in SA corporate history: reversing the 2005 deal when Barclays bought 55% of Absa for R33bn. Barclays has now sold all but 14.9%. From May, the bank’s name will change back to Absa, from Barclays Africa.

But Ramos’s plan to revive the bank was unconvincing not just because it lacked crucial detail, but also because the announcement was bizarrely prerecorded the day before, to coincide with its 2017 results.

That Ramos figured it wise to deliver the most critical strategic shift since Absa was first formed in 1991 — through the merger of Volkskas, Bankorp, United and Allied — in a prerecorded webcast, rather than in person, speaks volumes about Absa’s record of overpromising and underdelivering.

It also underscored how Ramos, who became CEO in 2009, is technically adept, but often comes across as overly guarded.

But then perhaps caution was warranted. After all, sceptics might ask, why would this time be any different?

Consider, for example, the three-year strategy that Ramos unveiled with much fanfare in 2014. The aims were:

● To be in the top three by revenue in its five biggest markets — SA, Kenya, Ghana, Botswana and Zambia;

● A return on equity (ROE) of 18%-20%;

● A cost-to-income ratio in the low 50s; and

● The rest of Africa to account for 20%-25% of total revenue.

At the time, analysts criticised the goals as “too easily achievable”. Yet Barclays Africa missed the mark on all but the last one.

Last week’s results showed that for 2017, Barclays Africa’s ROE was 16.4%, while its cost-to-income ratio was 56.8%. Worryingly, the group posted what bankers call “negative jaws”, as operating expenses (up by 4%) increased ahead of revenue (up only 1%).

Only the final goal has been reached, with rest-of-africa revenue of R15.6bn accounting for about 21% of group revenue of R72.9bn.

This is why Ramos’s big reveal has been met with a big dose of scepticism.

None of the analysts has changed their rating: seven still say it’s a “buy”, six rate it a “hold” and one a “sell”, with a 12-month target price of R197.19 — 4% below its current level of R206. The market reaction has also been muted: Barclays Africa’s stock has risen 3.9% in recent days, marginally ahead of the 3% rise in the JSE’S banks index.

This illustrates the immensity of Ramos’s challenge: to finally convince the market that the new-look Absa can get back to being

SA’S premier retail bank, after a dire few years of shedding market share to its rivals.

This scepticism has meant that Barclays Africa’s shares trade at a deep discount to its much higher-rated peers, particularly Firstrand and Standard Bank.

Jpmorgan Cazenove analysts warned last week: “Longer term, the exit of Barclays as a controlling shareholder could create some disruption to the broader group, particularly with regard to Absa Capital [its investment bank] and the Rest of Africa franchise.”

Growth remains Absa’s biggest problem, and the reason its share — trading on a p:e of just 10.2 — is so much cheaper than the other big banks.

Ramos says this is about to change: “The banking group we are creating will put growth at the heart of all our being.”

Her new goal is to double Absa’s share of banking revenue from the continent to 12% — bold certainly, but characteristically, it doesn’t say by when this must happen.

In an interview with the Financial Mail, Ramos, who has obviously felt the pain of