PRETORIA – It’s been a tough year for both Absa Group (JSE:ASA) and parent company Barclays. On Tuesday, CEO of Absa Group Maria Ramos preceded new CEO of Barclays Anthony Jenkins in using the phrase “the Go-To bank” in her presentation to analysts and the media on the Group’s year-end results. Later in the day Jenkins also reiterated this goal when he shared the outcome of a strategic review of Britain’s third largest bank after Barclays was tainted by a scandal last year.
The dream might be of becoming the Go-To bank, but Ramos conceded in front of analysts and the media that Absa’s results were “disappointing” and that it reflected a “difficult year.” So much so, that she announced that she had informed the board not to take a cash incentive for 2012. According to Bloomberg, Ramos received R20.7m last year, which included a deferred award of R14m. Her last cash bonus was in 2010 at R2.28m. It’s not just Ramos who will forego some income this year - bonuses paid out to employees were also 23% down in the year.
Jenkins made it clear that the bank was changing and that things will never be done as they were in the past. He then promptly revealed that a total of 3 700 jobs were to be eliminated, with 1 800 in the investment bank and 1 900 in the European retail and business division. Only 200 of these will be in the UK.
Even though the results were disappointing Absa Group still declared a very healthy final dividend of 684c per share, the same as in 2011, which will probably sit well with majority shareholder Barclays. Through the proposed transaction to combine Absa and Barclays’ African operations, the UK-based bank will push Barclays’ stake in the South African listed banking group from 55.5% up to 62.3%. Shareholders will be voting on the transaction on February 25.
The disappointing Absa results were due mainly to higher impairment losses on loans and advances (up by 63%) to R8bn. In an interview with Hilton Tarrant on the SAfm Market Update with Moneyweb, Ramos said that the bank has now done a thorough review of its mortgage loan portfolios and that it is now well provisioned. Currently its Group Non Performing Loan Cover sits at 32%, up from 28%.
Absa is the biggest retail bank in South Africa with the results booklet on Tuesday putting its customer base at 10.9m. Its strategy in the last year was one of aggressive acquisitive customer growth: the Edcon deal gives access to 3.8m customers and the proposed Africa deal where Absa will buy most of Barclays’ Africa operations for R18.33bn could add another 2.2m customers.
Of the other major banks in South Africa, Nedbank and Standard Bank will also present results this month, with FirstRand (JSE:FSR) to follow later.