Ramos dismounts after rough ride

Outgoing CEO’s reign at Absa focused largely on Barclays’ role

● Maria Ramos’s decade as Absa CEO will be defined by the marriage with Barclays, which she joined only after the honeymoon, and the eventual divorce settlement, in which she had a big hand.

Unlike her predecessor Steve Booysen, Ramos did not have the good fortune to be CEO during a banking boom. In March 2009, when she took office, SA was still in recession as the aftermath of the global financial crisis dragged on.

Absa had been pushing for growth in the final throes of the boom, which met with mixed success.

On top of that, Booysen lobbed her a hospital pass of nearly R1bn in losses from single-stock futures contracts. This dragged a feeble first set of results down even further.

“It is fair to say that the health of the franchise Ramos inherited was not ideal,” said Investec Asset Management portfolio manager Chris Steward. “Absa had been pushing for earnings for a couple of years and probably had less in the cupboard than some of its competitors when she became CEO.”

For Absa, home loans were a vital part of its machinery after a decade-long housing run and the lucrative business presented by a flood of first-time buyers in the South African market.

This is why the relationship with Barclays, which took over Absa in 2005, cast such a long shadow.

Battle-bruised Barclays

The British bank was hit hard by the financial crisis, in which sub-prime mortgages played a key role, and would remain skittish of mortgage lending for years to come.

“[Ramos’s] biggest challenge was the fact that parent Barclays was risk-averse post the global financial crisis and pulled back the risk appetite,” said Sanlam Investments portfolio manager Patrice Rassou.

Most of the other banks in the homeloans game started gnawing at Absa’s business and it lost about 10% of market share during Ramos’s tenure.

But Steward said not everything can be blamed on a miserly shareholder spoiling the party from afar.

Though the financial crisis made it tough in SA, Absa’s competitors had to deal with the same conditions. In truth, everyone lost their lunch to the most innovative in the pack — notably Capitec, which captured many first-time customers, and FirstRand, which made inroads into business accounts and well-to-do individuals.

But consumer banking was Absa’s “heartland”, according to Rassou — losing market share here too was a big blow.

And Absa had to toe the parent company line. It got out of businesses such as custodial and trust services at Barclays’ urging. And it took over most of the British bank’s African subsidiaries in 2013. Barclays had its sights set on big business in the US and to take full advantage it clearly wanted out of some of the African markets where the rewards were not justifying the risks.

The result was that Absa took all but two African businesses off its hands and Barclays’ stake in Absa increased to 62% as part of the deal.

Longer than planned

Ramos, who is now Absa’s longest-serving CEO, had wanted out three years ago.

But when Barclays indicated in 2016 that it was selling down its stake in Absa (which at the time bore the name Barclays Africa Group), Ramos stayed on to manage the separation.

Over the years Ramos managed to generate substantial pull at Barclays’ head office. It would have been very difficult for anyone else to get the same deal as she did, according to analysts.

“The negotiated divorce settlement with Barclays exceeded expectations — R12.6bn payment in cash and also R2bn for BEE,” said Rassou.

Absa can use the proceeds to upgrade systems and get a stronger foothold, under its own name, on the rest of the continent.

At the same time, Absa was being rejigged to go it alone.

The market, at first glance, seems to be happy to see her go. Absa shares spiked 7% on the day her departure was announced.

But her moves to restructure the bank — such as unveiling a new strategy to get the retail and business bank back on track and reinforcing the idea that the entire management team is ready for a new phase of growth — have given the share price a lift in recent months. Since October, Absa shares are up 30%.

However, the bank is still trading at a discount to its peers.

As with most divorce settlements, no-one knows how clean the break will be.

The management team is just settling into their roles and are to a large extent still untested, and who their CEO will be is still

The health of the franchise Ramos inherited was not ideal Chris Steward

Investec Asset Management

an unknown.

Succession success?

The fact that Ramos was looking for the exit sign in 2016 already raises questions about succession planning at the institution, which has appointed former banks registrar René van Wyk as interim CEO.

And Ramos’s announcement did catch commentators by surprise, though company insiders say investors were kept well abreast.

One of these investors would be Barclays, which by now, thanks to Ramos’s management of the divorce, is a minority shareholder.

The business that Ramos ran now has a very different look to the business that Barclays bought — it has a more diverse revenue stream, raking it in from other parts of Africa and generating more from corporate and investment banking.

“The cold reality is that Absa underperformed its peers for most of the decade, losing market share in its core retail franchise. However, in terms of capital, provisioning and geographic diversification, the group is in better shape now than when she took over,” said Steward.