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You can’t blame Ramos’s messy exit for everything

Absa’s failure to compete in the entry-level market has nothing to do with its former group CEO …

Blame for the dozens of considerable challenges being faced by Absa is increasingly being placed by analysts and commentators on Maria Ramos and her peculiar exit. An editorial in Business Day earlier this month titled ‘Rudderless Absa afloat in fiercely competitive market’ rather breathlessly declared that “Absa can ill-afford to be rudderless in such a highly competitive scene”.

That there was no clear successor and evidently no succession plan is an indictment of the board. This we know. In February, I argued that “To describe the succession plan at Absa Group as ‘botched’ would be kind. In truth, there wasn’t one.”

Read: Why doesn’t Absa have a successor to Ramos?

Chairperson Wendy Lucas-Bull can offer every excuse in the book, as she did at the group’s AGM at the start of June, but the board remains to blame.

Of course, philosophically – and technically – Ramos is to blame for many of Absa’s woes. Until the end of February, the buck stopped with her.

The disastrous deal in 2012 to purchase Edcon’s store card portfolio was hers. Customer numbers cratered in the decade she was in charge, a situation that became so awkward that the bank simply stopped disclosing them altogether.

An analysis by this author in March shows just how poorly Absa compares with Standard Bank when it comes to advances growth over eight years since Ramos was appointed CEO (2009 to 2017). Standard Bank grew its book three-and-a-half times higher more than Absa.

Read: How will Ramos be judged?

Its lending taps were practically shut; only a few will know the extent to which Barclays plc hindered Absa in the decade that it was majority (controlling) shareholder.

The bank wasn’t exactly in rude health when Ramos took over. One might argue that the culture is still somewhat problematic, but she inherited an organisation that was all but broken (to the point of being toxic). That there has been any improvement at all is some achievement.

‘Price war’ in perspective

The premise of the Business Day editorial, and other opinions floating around, is that because it has no group CEO, the “price war” currently underway in the ultra-competitive market will further damage Absa.

First, calling the move by rival banks to cut fees of entry-level accounts to the R5 level (or dropping them altogether) a “price war” is rather charitable (there have been no substantial price cuts in other segments, particularly the middle market). Two factors forced their hands: TymeBank entered the market with an account with no monthly fees, and Capitec cut its monthly fee to R5 (as a direct response to the former’s launch).

Nedbank, Standard Bank and FNB all jumped on the bandwagon in various ways. The Business Day editorial argues that “Absa is the only one of the big four banks yet to join a banking-fees price war that has seen the likes of Nedbank, FirstRand and Standard Bank promise consumers everything from zero-fee bank accounts to actually paying the man on the street to bank with them”.

Two heads may be better than one – but five or more?

The problem is that Absa has a large number of executives and senior managers responsible for precisely the unit that suddenly has a little more competition: the retail bank. These include Retail and Business Banking CEO Arrie Rautenbach, Everyday Banking head Cowyk Fox, Customer Value Management head Christine Wu, Physical Channels head Tshiwela Mhlantla, and Virtual Channels head Aupa Monyatsi.

If Rautenbach or Fox or any other leader in the organisation thinks it’s important to cut the monthly fee of its entry-level Transact account from R5.30 to under R5, they don’t need the blessing of Ramos (or interim CEO René van Wyk or whomever the new group CEO will be). Whether Rautenbach is the right man to lead its retail banking charge is another question entirely.

Right now, Absa has an awful lot more to worry about than sub-R5 bank accounts which are unprofitable for all major retail banks, barring Capitec.

Competing aggressively at this end of the market is not part of its strategy, as detailed in December – and growing customers in the entry-level segment is not going to help in the retail bank’s turnaround. (Never mind the fact that Absa has been struggling at the lower end of the market for a decade).

Eye on the prize

Absa’s target is, simply, the “core middle and affluent” market.

It has told the market which major problems it is focusing on fixing:

  • It has lagged the market on almost every measure
  • This (rather obviously) translated into “below market growth”
  • Its private banking client base is “misaligned to the market”
  • It has an ageing customer base
  • It has lost the number one spot in home loans (and its average age is 46, versus a market average of 39).

Read: Absa: Here’s what’s wrong with its retail bank

One need only look at four charts published by Nedbank in a recent roadshow presentation (based on SA Reserve Bank BA900 numbers) to see how Absa’s market share has slumped in its lending businesses.

Source: Nedbank (based on SA Reserve Bank data)

The situation in the home loans unit is downright dire. Vehicle and asset finance has gone nowhere, the credit card business is slumping, and in personal loans it has about the same market share as laggard (and far smaller) Nedbank.

The only area where it has achieved real success recently is in attracting deposits.

None of this is the failure of Ramos (directly) or the board’s non-existent succession plan.

The problems run far deeper than that.

Hilton Tarrant works at YFM. He can still be contacted at hilton@moneyweb.co.za.

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While virtually impossible to operate with your hands tied behind your back(Barclays),Ramos contributed little if anything to the organisation.Lucas Bull probably passed her sell by date 10-15 years ago and the rest of senior management seem to be an unknown quantity.Some heavyweights such as Bond and Hodnett have been let go,realising that this is not what they jumped ship for.So where to now for ABSA-most clients who left wont want to come back,management teams are weak,pricing is out of line. a falling geniune private and business banking base means they are almost have run out of road(Jacko Marees words back in the day)

Ramos will be judged, leaving a big ship like this without a captain is very unprofessional.
What was looming in the background that made her jump so fast? Time will tell.

even worse is the incompetence on the board to have a succession plan. Mrs Wendy Lucas -Bull should really consider resigning in disgrace for managing a bank in such a thoroughly unprofessional manner. She has demonstrated colossal incompetence.

Look I think it is largely correct. Ramos was just a pc figurehead with about as much idea of running a bank as say; Transnet. Problem is she pretended to know, but didn’t have a clue, all just to feather her own nest. Rinse and repeat for thousands of ANC cadres.

Well put. Being female, politically connected or of the “correct” shade of cappuccino is no guarantee whatsoever of knowledge, experience or competence. Cyril Ramaphosa may be stinking rich, but has never built his own business, for example.

It has always been a mystery WHY Ramos was appointed. She had not suitable background or experience.

Hint: she is married to a former Minister of Finance.

question is: what did she actually do to improve the bank or eliminate problems that existed during her time as ceo – while earning a fat salary + perks? Putting on a pair of glasses does not make anybody an instant bank or rail transport expert or ceo. – At the end of the day it boils down to actual experience in a specific field over a long period of time – for the same reason i won’t walk into an hospital and offer my help with open heart surgery

It was just interesting – amusing almost – when, after Hadebe’s sudden resignation at Eskom, people quickly punted Ramos as a potential new Savior. (Oops, typo! That capital S should have been in lower case.)

Any further developments on the Ramos-Eskom-new-CEO-front anyone has perhaps heard of lately?

The ever shortening queues at their atms is all you need to see. Its crazy how it has fallen…just closed my account last month

ALL the attempts i have by a bank at phishing come from Absa and only Absa .
I do not bank with Absa have never banked with Absa and will never bank with them.
The attempts at defrauding my account do not surprise me when i see the company Ramos keeps and hear the ongoing complaints of previous clients.
When i tried to call them to look into this matter they do not answer.
Me thinks Barclays are doing the correct thing in exiting their connection.

Ramos was also handed a poisoned chalice when she took over Transnet which she was unable to fix too! I don’t think she is to blame for these failures ( at both Transnet and Absa) I’m more inclined to think that women are handed jobs that men know have no chance and thereby pass on the opportunity!
In both instances she took over entities whose failure was already preordained. Well done to her for having the courage to stick it out. I hope her next opportunity is considered with caution and serious due diligence.

You bring a tear to my eye. Poisoned chalice only because of ANC demands which she kowtowed to; for massive personal gain and less than zero improvement. If she wasn’t Dunning Kruger she’d have recognised her own incompetence and appointed someone capable (and qualified, honest and experienced). Never happens.

So why take the job; hint; for massive personal gain. She didn’t even have the ability to appoint someone competent; Dunning Kruger at work.

I banked with them years ago and moved my account to another bank. my friend still banks with ABSA but when we compare experiences, fees, staff attitude etc my bank wins hands down.
i was 100% loyal to them then one day the staff was so rude to me i closed my account. Not one person tried to persuade me otherwise. I recently closed an account at my new bankers and they tried to persuade me not to close it. THATS the difference.

Having worked in all big banks, all banks have their own fair share of challenges. Just starting to get concerned why the author keeps writing articles with the same facts as previous every few weeks on ABSA?

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