In a frank assessment, Absa has acknowledged its shareholders were unhappy about the performance of its South African retail businesses and the depth of talent in its executive team.
The admission explains why new group CEO Kenny Fihla has moved with lightning speed to raid his former employer Standard Bank for top talent.
Absa’s retail business, historically its biggest strength, has been underperforming rivals for some years, losing its dominant position in the home loans market to Standard Bank.
The lender also used to have the biggest market share regarding deposits by individuals, a leadership position it has also lost.
A few years ago, in a strategic misstep, the retail business was split into “everyday banking”, “relationship banking” and “product solutions” clusters, a move that failed to yield the desired results.
Charles Russon recombined the businesses in 2024 during his interim CEO stint.
The group, in its annual report published last week, shed light on concerns raised by shareholders and how it had responded to them.
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Chief among these concerns was the bench strength of the group’s executive leadership, a concern Fihla has wasted little time in addressing since taking over the reins in June, after a decade of leadership instability.
“Aligned with the revised pan-African strategy and operating model, which are designed to materially shift the group’s competitiveness on the continent, he [Fihla] has made several key prescribed officer appointments to pan-African roles,” the group said.
“These senior executives have strong pan-African credentials with track records of performance in complex, multi-jurisdictional organisations, including within the group. The appointments position the group strongly for materially improved performance in the medium term.
“Further appointments have also been made to strengthen the management bench at different levels, with considerable focus on building succession pipelines to improve leadership capability and stability.”
Absa pulled off a coup a year ago when it prised Fihla away from Standard Bank, where he had held multiple roles. His enduring legacy at Standard Bank was growing its corporate and investment banking (CIB) business into a juggernaut, indispensable to deal-making on the continent.
Under his guardianship as CEO in 2017-24, Standard Bank’s CIB doubled its headline earnings to R20.5bn and achieved a compound annual growth rate of 8.6%.
Fihla has largely looked to Standard Bank, particularly its dominant CIB franchise, to beef up Absa’s top echelons with industry-respected talent.
Absa appointed Zaid Moola as the CEO of its CIB businesses. Moola spent much of his career at Standard Bank, rising to the role of head of its global markets business, an indispensable cog in Standard Bank’s CIB business.
Absa appointed Musa Motloung as group strategic risk officer, also joining from Standard Bank, where he was chief risk officer in the CIB business.
Avikaar Ramphal also joined Absa as its head of strategic risk from Standard Bank, where he was portfolio head, strategy enablement, in the CIB business.
Clive Potter, erstwhile head of client coverage in South Africa for Standard Bank CIB, has also joined Absa as the managing executive for client coverage in its CIB business.
Absa has also prised away the head of legal at Standard Bank’s CIB franchise, Francisco Khoza, as its deputy general group counsel.
To get the group’s personal and private banking performing optimally, Fihla appointed M-Pesa’s Sitoyo Lopokoiyit to head the business. The Kenyan-born executive assumed the role last week.
“These new leaders are expected to deliver improved performance, especially in the retail franchises,” Absa said, adding the process to appoint a new head for its business banking unit is under way.
Attracting the highly rated bankers from Standard Bank has not been a cheap exercise for Absa.
Rose Keanly, chair of the lender’s remuneration committee (remco), said in her statement to shareholders that the committee and the board agreed that the investment in key talent comes with an upfront acquisition cost in the short term.
She said it was necessary to set a sound foundation for materially improved performance over the medium to long term, as the group moves to appoint “high-calibre” candidates with strong pan-African capability.
“The remco and the board are confident that the contribution of these executives, together with the group executive committee (exco), will position the group to achieve a sustainable performance uplift over the medium term, while ensuring that efficiency gains enable the acquisition and appointment costs to be self-funded,” Keanly said.
“These investments in critical senior leadership talent are strongly aligned with the best interests of the group’s shareholders and other stakeholders.”
Last year, Fihla became the seventh Absa CEO, either on an acting or permanent basis, since 2019 after years of turmoil at the top.
Russon held the fort before Fihla assumed the role in June. Absa also revealed that Russon had endeared himself to shareholders after a solid run as interim CEO.
Shareholders “expressed appreciation for the key role” Russon played and requested that the board and incoming group CEO ensure his “continued contribution to the group”. Russon has “subsequently been appointed as group executive: Africa regions”.
In December, Fihla unveiled a new growth strategy for South Africa’s third-largest bank based on the following pillars: customer-led growth, building a diversified pan-African business, driving excellence and pursuing new growth opportunities.
At the heart of the strategy rejig is the lender’s need to wean itself off dependence on South Africa, Kenya and Ghana for earnings.
Absa also revealed that shareholders wanted Fihla to have the mandate and sufficient latitude regarding the group’s strategy and setting the appropriate performance objectives.
“The board has worked very closely with the new group CEO and the group exco on the revised pan-African strategy and operating model and on performance measures and metrics for the group,” the company said.
“The board has exercised oversight over these and has high confidence in the outcomes. The group CEO is fully mandated in this regard and has already made good progress with regard to implementation.”
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