After losing ground while under the control of UK lender Barclays, Absa says momentum has returned to its retail banking division.
“We started to regain market share in retail with a strong fourth quarter,” Jason Quinn, Absa’s group financial director, said on Monday as the company said it grew deposits in its home market 11% to R208bn in the year ended December.
“Regaining leadership in our largest franchise, retail and business banking in SA, is a group priority,” he said.
Absa lost market share in that segment under the watch of Barclays, which bought the lender in 2005 and then imposed operational constraints that ultimately cost the South African unit its market-leader position in home loans and credit cards.
Barclays, which has sold down its majority stake, had restricted its loan book in line with its own strategy to keep risk-weighted asset growth in check.
“We expect to be able to maintain our momentum in lending,” Quinn said.
This was despite the entrance of new players, such as TymeBank, Bank Zero and Discovery Bank, given Absa’s comprehensive offering, competitive digital platforms, and momentum in areas such as personal lending, where the group was “coming off a very low base”.
Despite reporting growth in the retail segment, Absa’s shares fell for the ninth consecutive day on Monday as full-year numbers fell short of the market’s expectations.
The stock was 2.7% down at R167.65 on Monday afternoon. It has lost 8.3% since February 27.
Absa said on Monday that its headline earnings rose 3% to R16.1bn in 2018 as revenues grew 4% to R75.7bn. Return on equity improved to 16.8%, from 16.5%, and the bank raised its dividend 4% to R11.10 a share.
Beyond Africa, Absa’s small London office was “gaining traction” and the group was setting up a similar operation in New York, Quinn said.
Meanwhile, Quinn said the R12.6bn divorce settlement from Barclays — to cover the costs associated with the ongoing separation process — would be sufficient.
“The expectation remains that the separation will be capital and cash flow neutral over time as spend is incurred.”
The lender had spent R7.6bn on “separation execution” and R1.5bn on transitional services agreement costs so far.
The group’s chair, Wendy Lucas-Bull, said recently former CEO Maria Ramos had led the "tough" settlement negotiations. Barclays initially sought to sell its shares in Absa without footing the associated costs.
Ramos stepped down at the end of February. René van Wyk has taken over in the interim.
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