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Absa still losing customers

Entry-level segment leads the decline.
The number of those who use Absa as their main bank is also down. Image: Waldo Swiegers, Bloomberg

Absa lost approximately 200 000 (net) retail customers in 2020, after managing to stem the decline in the year prior.

It spent much of 2018 and 2019 fixing underlying issues in its retail and business banking (RBB) unit; this included a reorganisation under division CEO Arrie Rautenbach, which helped return the unit to overall customer growth for the first time in about a decade. (The group famously refused to disclose customer numbers for a period of time.)

The group says “customer numbers have declined to 9.5 million specifically in the entry level banking segment where the weakened economic environment has been felt the most, while the rest of the segments have reported growth”.

This suggests that the decline in the entry-level segment was significantly worse than the 200 000, as the drop would’ve been offset by other segments.

Entry-level competition

It is worth noting the entry level segment of the market is where the previous so-called ‘Big Four’ are facing the most intense competition from Capitec as well as newer entrants such as TymeBank and African Bank. (By comparison, Standard Bank reported a 1% drop in active customers to end 2020 on 9.347 million in its South African personal and business banking unit.)

Read: Absa freezes monthly fees, hikes cash charges (Feb 3)

Primary customers, in other words those who use the bank as their main bank, declined by a similar number to the headline drop.

Absa says: “Subdued transactional activity and lower customer income resulted in the primary customer numbers declining to 2.9 million from 3.1 million the year before.” It adds that primary customers in the “Core Middle Market was stable and Retail Affluent grew 2%”.

Shifting the conversation

Executives at the bank, including Rautenbach, have pushed to shift the conversation – and attention – away from headline customer numbers, preferring to focus on numbers in specific business units and segments.

It is not clear how Absa is managing to grow the number of customers in the retail affluent segment, as all banks are targeting this part of the market.

Read: Barclays tiptoes onto Absa’s turf (Jul 2020)

Absa says “digitally active customers grew by 23% to 1.9 million, primarily driven by increased app users”.

From ‘fix’ to ‘smart growth’ phase

Jason Quinn, group financial director, says: “RBB exited the ‘fix’ phase of its strategic journey with strong momentum, stability and operational resilience, as well as market share gains across all of its portfolios.

“It is now pivoting to the ‘smart growth’ phase of its journey, aimed at building confidence and regaining leadership in the market.”

The RBB South Africa unit reported headline earnings for the year of R4.27 billion, a decline of 55%.

The home loans business saw a 71% decline in earnings (to R453 million), while vehicle and asset finance reported a near R1 billion loss (R993 million).

Pre-provision profits grew by 6%, but results were impacted by increased expected credit losses. The credit loss ratio for RBB increased to 2.64%, from 1.18% in 2019.

Credit loss ratio 2019 2020
Home loans 0.08% 0.88%
Vehicle and asset finance 1.34% 3.45%
Everyday banking 5.50% 8.42%
Relationship banking 0.26% 1.59%
Retail and business banking South Africa 1.18% 2.64%

The group booked a credit impairment charge of R20.6 billion, significantly higher than the R7.6 billion in 2019.

It granted payment relief on “loans and advances to customers with a gross carrying value of R219 billion or 22% of the … total”.

And says: “The vast majority of payment relief has expired. Of the payment relief portfolios, 92% of RBB SA was up to date at 31 December 2020”.

Earnings

Headline earnings for Absa Regional Operations (the rest of Africa business) declined by a similar percentage to RBB, while the corporate and investment bank unit fared better with a decline of just 6%.

Diluted headline earnings per share for the group were down 51% to 946 cents for the year, while return on equity was at 7.2% (from 15.8%).

The group did not declare a dividend for 2020 and Quinn says it expects to “gradually resume paying dividends from interim 2021, starting with a dividend payout of 30% and increasing to 50% over the medium-term”.

“In the absence of appropriate loan growth, we would return excess capital to shareholders, as we have done in the past.”

COMMENTS   31

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”The golden rule in banking seems to be that there are no golden rules”, and if you really want to know the value of money, go borrow some!

I’m still waiting for my first ”you qualify for” – start borrowing some Bitcoins from us correspondence from the big 5 – funny how long after the ”sordid topic of coin”!

As long as Absa say’s – ”Bank you very much” – I will bank with them – I have never banked with any other Bank in my life, as nothing else appealed to me – but, don’t borrow too much money and don’t use your credit card up to its limits!

I got tagged by our man Jan S Marais – when he famously said – ”Banking will never be the same again” – and it wasn’t! Absa also reminds me of the Nespresso ad – ”what else”?
”I am staying”!

Unfortunately SA banks in general are far behind international banks. The only thing that keeps them afloat (in my humble opinion) is the fact that the “regulations protect them” to a certain point.

International transactions/ transfers from international banks happens almost instantly, while in SA you wait 3days, or you pay extra to pay/ clear now, and you still wait a couple of hours.

@eudonhickey. Exactly like the local vehicle manufacturing industry. Protected in so many ways, yet if protection is removed….SA won’t be able to compete. It is us as citizens that pay the price in local goods’s sticker price.

Just love the heading… “Losing”

Ever since i cleared my overdraft, i haven’t heard from my Absa relationship manager in at least 5 years, and when i did, he was shockingly useless

Yet they never default on debiting my account with their monthly fees.. Still keep the account for dr orders, thats all they good for..

Moved most of my banking to FNB and believe it or not Capitec..(well done to Gerrie and his team for being the best ito service

As they damn well should be!

My business tried doing some forex with them. What a bunch of narcissistic clowns.

Could not happen to nicer guys. Absa is the most useless bank in the country. True to their maxim.

Well they have effectively killed our small software development business. Requested assistance via the Govt backed Loan Assistance scheme and they politely told us to go and jump through a window – despite a 25 year clean business account.
Sadly we were caught out with COVID as a clients project was abandoned due as they are a group of Gyms. Lost all the development income and future support in one day – 27th March 2020.

I have no sympathy for ABSA and their own self inflicted wounds – thanks Maria once again for a turd pile you have left behind.

She is pretty good at the turd pile trick.

Depends on what level you interacted with, and the size of your business – bucket shops get bucket shop rates?

ABSA has forex??

“International transactions” supposedly

But any other big SA bank is better

I just dealt with card division on the phone and their service was a JOKE. You pay peanuts you get unqualified people who answer a phone. Don’t forget 13 minutes on hold.

Here is the sad sordid irony of this is that ABSA actually pays its “certain fast tracked cretons” much more than the average H_I_P. The only reason I can make that comment is because we have inside knowledge of how absa treats their members.
They have deliberately purged the bank of institutional memory and now sit with the rot.

Always will, worst bank ever.

I see you don’t Approve of my Absa comments – what’s wrong this time, or has somebody got his/her knickers in a knot again?

It’s the truth that bothers them.

I asked them to quote me on a bond in 2004….still waiting.

Have to pay R 40 for a debit order reversal……though it was ABSA brokers fault!!

I know its not a SOC, however, i’m glad its following the same trend as Telkom after they’ve treated their customers like feces for years.

It has had SOC management.

I was not aware of this, thank you, and it explains a lot regarding their culture they’ve cultivated over the years.

THe Older banks (so called Big 4) are carrying the dead weight legacy people and systems….. over time the digital banks with lower cost infrastructure will eat away ….

We will see more branch closures…. more automation to keep afloat …and less jobs ( Banking is not a great career, pretty boring field)

Tried finding out details about one of their products. The required details weren’t on their website.

Phoned the advertised number and followed the IVR prompts judiciously.

Spoke to the first person after about 5 min and they told me I phoned the wrong number.

Go pound sand.

Asked for a bond that costs R200K less than my gross salary and they offered only 70% of the bond. What a joke.

ABSA Bank has named their vision: “Africanacity”.

Capitec Bank look at it as say: “Now let us embrace this vision down to the perfect tee…”

Not surprised, worst bank ever. Absolutely worst.

While we see absa loosing clients, I can assure you they will continue loosing until they fix the manner in which they treat their customers specially the black community.

I am leaving Absa this upcoming may and transfering all my funds to the competition,their charges are just unrealistic,they have monthly charges and charges every week nxa

This is the last mont absa is gonna see my salary in their bank

About to cancel my 9 year olds youth savings card ,i was told there will be no fees at all as he is a youth ,the 1st 2 transfers he made to EasyEquities R40 gone,i think i can get a better deal for him at some other bank.

End of comments.

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