The interim group CEO of Absa, Charles Russon, has admitted that strategic “missteps” over the past 18 months resulted in a loss of market share and placed the bank’s share price under pressure.
“I think we have to acknowledge where there have been some missteps. Let’s be frank, our share price has lagged some of our peers. That’s a clear message investors tell us. Let’s acknowledge where there have been some missteps.
“We’ve got to get that winning feeling in the organisation,” he said in an interview with Business Times in Sandton on Friday.
Financial director Deon Raju said Absa had set a target of a 17% return on equity (ROE) and was confident it could be achieved in the near future. The bank’s ROE in the first half of 2024 was 13.9%, the lowest among its peers. Raju blamed this on tough trading conditions and high credit impairments that battered performance.
“We are at a point in the cycle where our ROE is suboptimal. We acknowledge that, and we say that to our investors. We have a clear pathway over the next three years about how that will be addressed,” Raju said from New York, where he’s on a roadshow to convince investors that Absa is still value for money.
In a damning report, global corporate and investment bank HSBC pointed to four issues that were mainly responsible for Absa’s underperformance and lower ROE when compared with its peers.
HSBC said Absa had chased loan growth and market share gains without placing enough focus on economic profit. “We think it needs to cut its risk appetite in all retail lending so as to [its] lower credit loss ratio and generate economic profit.
“We think Absa needs to rein in its risk appetite, which would require a change in board-approved risk limits,” said the HSBC report.
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