How did Ramos fare?
NO BIG STRATEGY: BARCLAYS’ TEMPLATE IMPLEMENTED, THEN DISMANTLED
Did bank restrict lending, or was the constrained environment self-created?
Maria Ramos ended her decade as Absa Group chief executive at the end of February. She gets credit for implementing Barclays’s strategy, following its purchase of Barclays Plc’s African operations in 2013. But many remain divided on whether this was the right deal for Absa.
Corporate and investment banking did exceedingly well, but with the Barclays franchise and its associated client-deal-flow, it would have been hard to not to. Perhaps her biggest achievement was to negotiate the Barclays separation, following its 2016 decision to sell down its stake.
Under Ramos, Absa Group’s South African retail bank has struggled, losing customers and market share. Buying Edcon’s card portfolio for R10 billion in 2012 was nothing short of disastrous.
Risk appetite
The popular narrative holds that Ramos couldn’t grow advances under Barclays, as it had a lower risk appetite.
A comparison with Standard Bank Group over eight full reporting periods since Ramos took over at Absa Group (excluding 2018) is telling.
Between December 2009 and December 2017, the compound annual growth rate in headline earnings per share at Standard Bank was 53% higher than Absa’s. Absa however, kept up dividends.
Add in a 708c special dividend in 2013, and Barclays as major shareholder received a handsome flow while it owned the bank.
‘Pedestrian’ growth
Between December 2009 and December 2017, Absa grew total advances in its local retail bank just 13.7%. A decade ago, total advances in the segment stood at R337.25 billion. At end-2017, it was R383.5 billion. Describing the compound annual growth rate of 1.62% over eight years as “pedestrian” is charitable.
Standard Bank, however, grew advances in retail 55.8%. Its book grew from R344.24 billion to R536.49 billion. Its compound annual growth rate was 5.7% – three-and-a-half times higher than Absa’s.
The question is to what extent Barclays restricted lending. Or was this constrained environment a self-created one because of severe problems in the retail bank?
You cannot lose millions of customers across a number of years and still hope to grow the book.
Absa managed to grow earnings despite a barely growing lending book.
Expenses remained stubbornly high and there didn’t seem to be any attempt at addressing structural issues.
In truth, there was no “big bold” strategy because most of Ramos’s time was spent implementing Barclays’s template, then unimplementing it.
Hilton Tarrant works at YFM