Barclays Africa duo deliver gains
Ramos and Hodnett boost interim profit 10%
“WE have done such a good job,” Maria Ramos, the chief executive of Barclays Africa Group, said to her deputy, David Hodnett, after a presentation of the lender’s halfyear results on Wednesday.
The duo then waited patiently to answer questions from a room full of shareholders and analysts, who have generally been critical of their leadership of the bank.
Only two queries were raised and neither of the interrogators lambasted them, as the two have recently become accustomed to.
Barclays Africa, which operates Absa, has been the worst-performing stock of the country’s big four banks in the recent past, seems to be making its way out of the woods. The share price of Barclays Africa more than 25% this year, beating rival FirstRand’s 20% advance, Standard Bank’s 11% gain and Nedbank’s rise of just over 10%.
The group’s first-half profit rose 10% to R6.1-billion while credit impairments fell 7% to R3.6-billion after a significant push to reduce bad loans, which plagued most of the local banks following their overindulgence in the unsecured loans sector. Revenue grew 7% to R30.7-billion as net interest income rose 10% to R17.5-billion.
After burning its fingers with microlender Unifer, Absa had the sense not to play in that market even though it meant losing retail customers and market share. Shareholders and analysts were not happy. But the subsequent fallout from excessive unsecured lending by other banks has perhaps proved the bank’s wisdom.
Another strategic move was the group’s push into the rest of Africa through a deal with its UK parent.
The interim results included, for the first time, earnings from its operations outside South Africa — which were also under scrutiny after the R18.3-billion deal. Some experts still think Ramos paid too much for the operations.
The wholly owned African operations, which include markets such as Ghana, Nigeria, Mauritius, Kenya and Uganda, accounted for 20% of the group’s profit.
The volatile Egyptian and Zimbabwean operations are still owned by the British parent company, Barclays, but are managed by Ramos’s team.
The deal is seen as one of Ramos’s highlights since taking over from Steve Booysen in 2009, according to Hodnett. “I’m still surprised at how [the market] underestimated the impact of that deal that completely transformed this operation,” Hodnett said.
Hodnett, who stood by Ramos when the bank was going through a rough patch, lauds her for turning the energy within the bank around. The group had been losing an increasing number of key executives after Ramos took over, the latest being Kennedy Bungane, the chief executive of regional management and head of strategy for the group.
But now executives seem to be
She is closer to the Barclays team than to South Africa
rallying behind Ramos more than ever before. “The mood is so different to 12 months ago,” said a visibly jubilant Hodnett.
A year ago, some analysts were expecting Ramos to step down. And when Hodnett was appointed in December as deputy chief executive, in addition to being the financial director, some saw it as her telegraphing her intent to the market. But Ramos still sees herself very much in the bank’s future. In fact, she has recommitted herself and her team to seeing the bank become one of the top three banks by revenue in five of the large markets — South Africa, Botswana, Kenya, Ghana and Zambia — it operates in.
She has pledged to bring down the cost-to-income ratio to the low 50% range and lift return on equity to 18%-20% by 2016.
However, some analysts still have reservations about her leadership. They regard Ramos as distant from the South African operations, and see Hodnett as in charge of the local business. “She is closer to the Barclays team than to South Africa,” one analyst said.
Vestact portfolio manager Byron Lotter said Ramos’s performance had been below par, but that if Barclays did not have confidence in her she would not still be in charge of the group.