Maria Ramos: Looking to revitalise retail banking. Picture: Sunday Times/Alon Skuy
Maria Ramos: Looking to revitalise retail banking. Picture: Sunday Times/Alon Skuy

In its first outing back as an independent, Absa must be wondering if the 14 years under Barclays’ rule was worth it. But at the least it did help the bank transform from an Afrikaans-dominated former building society into a more rounded bank.

Current CEO and Barclays favourite Maria Ramos certainly has a more cosmopolitan image and background than her predecessor Steve Booysen, though she is no career banker.

Not everyone would have guessed it but the new Absa logo inside a circle is meant to symbolise the bank’s ambitions to be seen as digitally led and digitally capable, Ramos says.

With Absa’s notorious turnover of top management, Ramos must be longing for the day when she only has to keep the bots happy.

Rather than the basics of banking she likes to focus on initiatives such as the launch of Whats-App banking and Samsung Pay.

Not that these initiatives are all gimmicks. Its app-based personal loan platform in Kenya, called Timiza, has 2 million clients.

It would have been nice to celebrate independence from Barclays with spectacular results, but with the subdued economic climate it was not to be. "Normalised headline earnings", which is Absa’s calculation of profit after stripping out the financial impact of separating from Barclays, increased by 3% to R8.04bn.

Using the old IFRS accounting standards, which include these "one-off" profits items, Absa’s earnings fell 4% to R7.32bn.

Jaap Meijer, an analyst at Arqaam Capital, expects this to be the lowest growth of all the SA banks. Costs increased faster (4%) than revenue (3%), leading to what bank analysts call negative Jaws.

Before Barclays arrived in 2005, Absa’s corporate and merchant bank was a standing joke in the banking sector. Today, after training from Barclays, this unit is much stronger — providing about 20% of Absa’s headline earnings.

But it was not the best year for the Corporate & Investment Bank (CIB) as it is now branded, with earnings down 6% to R1.68bn as credit impairments were up 79%.

The African operations which Absa bought from Barclays also contribute about 20% of earnings. It will be quite a struggle to rebrand the African businesses from Barclays to Absa, which must be completed by June 2020.

At least in SA, the British bank’s name was only used in a number of specialised corporate services and not at all in the retail market.

Finance director Jason Quinn says Ghana is now the largest subsidiary in the rest of Africa. It has overtaken Kenya, on the back of a strong investment banking business.

The Barclays business in Mauritius is also a good contributor, while Botswana and Zambia have good franchises.

Ultimately, investors are most concerned about the retail and business banking unit, where Absa has been losing market share for some years.

Ramos says the bank was unable to set its own risk appetite under Barclays’s rule.

Its competitors took full advantage of this. Standard Bank, in particular, feasted on home loans that Absa rejected. Finally there is some sign that Absa is back in the game.

This half-year Absa’s retail mortgage book was up just 1% to R229bn, but new home loans were up 14%. Instalment sales were up 10% to R81bn and personal loans by 9% to R23bn.

Retail deposits were up 7% to R193bn.

Ramos strongly defends her new management structure even though it has led to the departure of some key managers, such as former head of retail banking Craig Bond. She says the individual units now have full autonomy and are entirely accountable for what they do.

Perhaps the group CEO will then become a purely ceremonial role. Ramos says the new structure will bring more energy, intensity and urgency to the retail bank, in particular.

That the bank is no longer subject to UK or EU regulations gives Ramos the latitude to bring in a new "Africa-centric" pay policy. It will give Absa the opportunity to be more aggressive in employment equity policies, and to rid itself of the restrictions of Barclays’s pay grades.

About 8% of earnings are provided by the wealth, investment management and insurance cluster (Wimi). Absa has historically had stronger in-house insurance operations than its competitors.

But under Nomkhita Nqweni (the bookies’ choice to be the next head of Absa) Wimi has shed some noncore businesses, such as Consultants & Actuaries and short-term insurance distribution.

Arqaam’s Meijer describes Absa as cheap for valid reasons, though at the current price of R171 he calls it a buy up to R194.