The Amalgamated Banks of SA was born out of two complicated multiway mergers in 1991 and 1992. They were complicated because they involved multiple building societies and banks, at least one of which had a troubled history, and because of the cultural tensions between Afrikaans and English partners.
Then it was Afrikaners versus English bankers. Now it’s race and transformation. In some ways it feels as if the banking group we now know as Absa never really amalgamated properly. And the underlying problem is not race or language: it is something about the group’s culture and governance that in recent years has kept it constantly in the headlines, often for all the wrong reasons.
The most recent headline was last week’s announcement that Absa had shed yet another CEO, the third permanent one in eight years. But the list is long. A would-be chairman who took the group and its regulator to court. A populist public protector who went after it for alleged 1980s wrongs. A board that reportedly interfered to halt an internal appointment by CEO Arrie Rautenbach. Leaked details of an internal meeting of the group’s top 250 executives at which some black managers reportedly attacked him for being anti-transformation. Leaked details on the allegedly dodgy tax affairs of one of Absa’s most senior executives.
The apparently endless drama cannot simply be bad luck. It surely says something about the failure of the group’s leadership to manage the delicate internal politics of transition and transformation, as well as the complex external politics any of SA’s big banks must manage carefully.
Rautenbach, Absa’s latest CEO, has lasted almost twice as long as his predecessor, Daniel Mminele, who was in the job for just 15 months before the board parted ways with him. One of the ironies of Rautenbach’s departure is that he is said to have had a hand in the ousting of both of his permanent predecessors, Mminele and Maria Ramos, who suddenly announced her retirement in early 2019 after a decade at Absa.
More divisive
As head of Absa’s retail and business bank Rautenbach was in charge of almost 60% of the group’s business at the time Mminele took over. He is also said to have been closer to former Absa chair Wendy Lucas-Bull than either of her CEOs. Indeed, it was Lucas-Bull who appointed him as CEO just a month before she stepped down as chair in April 2022.
At the time some fund managers welcomed the appointment simply because they believed the group’s leadership would never be stable unless Rautenbach got the CEO post he had so long sought. As it turned out, he proved even more divisive. And it’s not clear that current chair Sello Moloko has done much better on managing the transition or containing the divides.
It’s hard to assess Mminele’s brief legacy — he took over on the eve of Covid-19, a central banker without the experience of leading a commercial bank, with a board that seems not have provided the support he needed and in an environment some described as toxic. The board cited differences over strategy and culture as the reason for his departure. But there clearly was a backstory.
UK-based Barclays, which had bought control of Absa in 2005, unceremoniously dumped it in 2016, with Ramos negotiating a R12.6bn divorce settlement to cover the costs of the complex separation that was required. Ramos and her team then put a new strategy in place for the newly independent Absa in 2018. When Mminele sought to “refresh” it amid the Covid-19 pandemic, he faced pushback.
But the strategy dispute appeared to be code for at least two issues. One was how decentralised it should be. Not surprisingly perhaps, the then head of retail and business banking resisted efforts to bring divisions under more centralised control. And the combination of long stretches under interim CEOs and transition at board level may have further entrenched the fiefdoms and factions within the bank.
Another issue was around market share. Thanks to its history Absa dominated the retail market, particularly the home loans market, before Barclays took over. But in the years in which London set the risk appetite and called the shots it lost significant market share. It was determined to get that back. That wasn’t going to happen during Covid-19 and Mminele’s tenure. But with all of that out the way Absa went aggressively after market share — with the inevitable result that bad debt provisions in its SA retail business had to be hiked a year ago.
No match
The group would have done even worse without its fast-growing operations in the rest of Africa, but even those are no match for Standard Bank’s far larger and more profitable African business, nor has the market liked the executive chopping and changing. Absa and its share price have underperformed their big bank rivals by a wide margin in the past few years.
Fortunately there are some good signs at Absa. There is a core of committed, experienced people who keep going regardless of ructions at the top. The latest interim results aren’t spectacular but point to progress in key areas. The group reined in its risk appetite 18 months ago and retail bad debts have normalised, with the SA business returning to earnings growth after earnings fell last year.
Absa has regained what it regards as its natural SA market share of about 22%. And its mix of profits has changed markedly. Where five years ago retail was the bulk of its earnings, now just more than half come from corporate and investment banking, especially from the rest of Africa. It has used the Barclays divorce settlement well to retool and rebrand its African operations and has moved into a corporate banking space Barclays (and other international banks) once occupied. It is positioned to grow.
But it faces another interregnum, with CIB head Charles Russo becoming the third interim CEO in eight years and the board again heading to the headhunters for a new one. It would do well to look over at the board of rival Nedbank. It chose Absa’s Jason Quinn as Nedbank’s new CEO after a rigorous process and seems to have managed the politics of the appointment astutely enough not to cause waves outside or inside the bank.
It could look over at rivals First Rand and Standard too, not because they have black CEOs but because succession and indeed transformation have been seamless. At Absa, by contrast, any potential CEO candidate will wonder how robust the board’s support will be and how soon it will do the same again, paying her or him to go away at the first sign of internal dissent.
Update: August 28 2024
This article has been amended after it was first published by the deletion of the words “with a sexual harassment rep”, used in relation to Mr Sipho Pityana. Mr Pityana has publicly denied the 2021 allegation of sexual harassment against him, which remains unproven.
• Joffe is editor-at-large.
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