Focus on Absa’s new identity

CEO says she hopes Barclays Africa will be considered a modern, agile bank that harnesses artificial intelligence

To give Barclays Africa some credit, it has been the first bank to release its interim results to June. It did so less than a month after the

June half year. Nedbank needs a few more days, but the accounting boffins at Standard Bank need almost three more weeks to put out the results. And Firstrand, for all its boasting about superior technology, needs a further month after that. Perhaps they need a few new calculators.

Barclays Africa must have been tempted to delay these results, however. They can’t be

Barclays Africa

called disappointing, as market expectations are low. The dividend yield is a generous 7.2%, so you are paid more as a shareholder than you would be as a client. Total income was down 1% to R36bn, though it would have been up 2% on a constant currency basis. A strong rand led to a 6% fall in the income from the rest of Africa. Finance director Jason Quinn says the introduction of caps on consumer finance interest rates in Kenya dampened loan growth, as did similar, though less extreme, caps in SA.

A lowlight was a 9% fall in the headline earnings of the core SA retail and business banking to R4.2bn. At least this was offset by a 76% increase in SA corporate and investment banking (CIB) profit to R1.76bn, the main driver being an 81% drop in impairments. But Quinn points out that it is no one-off, as CIB has experienced double-digit earnings growth every

CEO Maria Ramos now has an eye on her legacy at the bank. She made it clear at a press conference that succession talk was off the table until the separation from Barclays Plc has been completed. Her main focus will be on making sure the R12.6bn given by Barclays Plc as a divorce present is spent wisely. The main spending will be on new systems to replace the Barclays systems used by CIB, as well as on marketing while the Barclays brand is phased out across Africa over the next three years.

Ramos hopes that Barclays Africa will be considered a modern, agile bank that harnesses artificial intelligence. It has already launched Chat banking. She promises further developments on Facebook Messenger and aims to be first through the gates with Blockchain. And, more prosaically, Quinn says the membership of the Absa rewards programme has increased by 14%. All of which is code for “we are ready for the arrival of Discovery Bank”. Let’s see.

Ramos says the separation with Barclays is a dream come true, as she will have only one reporting line, to chair Wendy Lucas-bull and the board.

So long as she has to rely on human beings, Ramos believes she has a strong senior management team, with two deputy CEOS — David Hodnett running SA and Peter Matlare running the rest of Africa — while on the nonbanking side, wealth, investment management and insurance is run by Nomkhita Nqweni, who could also be a contender for the top job.

In Africa the markets that move the needle most are Mozambique, Ghana, Kenya and Botswana. The African operations continue to grow faster than SA, with headline earnings up 19% to R1.51bn. Quinn says Absa bought a predominantly retail franchise from Barclays Plc in 2013.

Now it is driven by the corporate bank. The headline earnings from the core retail branch business in Africa are R336m, not even as much as Absa earns from vehicle finance in SA, but CIB Africa earns R1.2bn. Standard Bank does more corporate business in the rest of Africa than in SA. Will Barclays Africa do the same? Cutting ties with Barclays Plc will make it tougher, but the race is on.

One advantage over its competitors is that Absa has the largest network of short-term and long-term bank brokers in SA and generates substantial insurance revenue within the wealth, investment management and insurance cluster. Though earnings were down 6% they still represent 7% of Absa returns — about the same as the proportion of Standard Bank’s earnings generated by Liberty.

Absa Asset Management has grown steadily to R295m, though it is isn’t clear what will be the impact of the departure of its star manager, Errol Shear, to Sasfin. But Absa’s expertise in insurance and investment is useful in Africa, where composite financial institutions are common. And in SA Absa still has room to be seen as a genuine wealth management brand instead of a superior post office.