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Absa's new boss faces tough fight to win back business

Jan 07 2020 12:46
Phumi Ramalepe

The Reserve Bank’s former second-in-command, Daniel Mminele, will have his work cut out for him when he takes office as the new CEO of Absa on January 15. Absa is currently fighting to reclaim market share it lost to rivals over the years because of its conservative approach to lending under Barclays’ rule.

Statistics from Genesis Financial News & Data show that Absa’s market share in mortgage advances had shrunk to 21% in October 2019 from highs of around 31% a decade earlier in 2009.

Barclays took a controlling stake in Absa in 2005, but in 2017 reduced its majority stake from 62% to 15%.

Through the new strategy which Absa adopted after the “divorce” with its parent company, Barclays, the bank wants to restore its leadership in SA retail banking.

In 2018, the bank’s retail unit launched a strategy to increase loans, which had stagnated over the past two years, as well as deposits.

Bloomberg reported that retail and business banking were the first of Absa’s divisions to undergo a management restructuring in June 2018.

Analysts believe Mminele won’t bring drastic changes but continue with the strategy already in motion.

Gryphon Asset Management’s Casparus Treurnicht believes Mminele will, in fact, be well placed to help the bank reconstruct its retail and business division.

"He has no emotional relationships with existing structures and policies. Resetting (the retail unit) could be strengthened by getting rid of forces working against the strategy." In Treurnicht's view, the fact that Mminele's experience lies primarily outside of large corporate entities makes "more radical changes less likely".

According to Treurnicht, in addition to dealing with a shrinking mortgage book, the bank is also addressing market share loss which they have suffered in the last decade. "I am sceptical whether they will succeed. The times we live in will make it hard for the retail segment to recoup clients while Capitec, Tymebank and Discovery are fueling headwinds," said Treurnicht.

Harry Botha, banking analyst at Avior Capital Markets, said Mminele would probably take the next few months to acquaint himself with the business. After all, Absa is a big bank with operations in different jurisdictions, and is also in the middle of executing a new strategy - one in which divisional executives have more power to make their own decisions.

Thereafter, his measure of success will be how he steers Absa through its "Africanacity" strategy, which the bank adopted in 2018.

"His stepping into the role doesn’t disrupt things dramatically now…The key thing is that when the board hired Mminele, it made sure that he was comfortable with the strategy that’s in place so that there wouldn’t be too much disruption," said Botha.

Mminele's impact remains to be seen. "He comes with regulatory and commercial banking experience but lacks retail banking experience which is the division that requires the most turnaround. He is, however, a safe option," said Mergence Investment Managers analyst Nolwandle Mthombeni.

absa  |  daniel mminele


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