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Staff pay doubles as bank CEO pay soars ahead

A look at median pay trends at banks….

Over the past decade, fixed remuneration plus short-term incentives for executives at the country’s largest banks has soared. Even excluding the value of long-term incentives such as share options, pay is up anything from 69% to 505%.

The recent Moneyweb analysis of bank executive remuneration highlighted the limitations of using just two arbitrary years as the basis for comparison (shifting the start/end dates would yield dramatically different results).

 

Bank CEO remuneration

Base pay plus short-term incentives

 

2009

2018

Change

Absa Group CEO

Maria Ramos1

R8.131m

Maria Ramos

R29.714m

265%

Absa Group CFO

Jacques Schindehütte

R9.177m

Jason Quinn

R17.622m

92%

Capitec2 CEO

Riaan Stassen

R8.947m

Gerrie Fourie

R16.327m

82%

Capitec2 CFO

André du Plessis

R3.918m

André du Plessis

R12.828m

227%

FirstRand3 CEO

Paul Harris

R11.497m

Johan Burger

R37.578m

227%

FirstRand3 CFO

Johan Burger

R7.09m

Harry Kellan

R16.921m

139%

Nedbank CEO

Tom Boardman

R14.551m

Mike Brown

R24.575m

69%

Nedbank CFO

Mike Brown

R7.651m

Raisibe Morathi

R14.325m

87%

Standard Bank CEO

Jacko Maree

R5.953m

Sim Tshabalala

R36.019m

505%

Standard Bank CFO

Simon Ridley4

R8.504m

Arno Daehnke

R23.155m

172%

1 Appointed March 1

2 For Capitec, the years to March 2010 to March 2019 are used

3 For FirstRand, the years to June 2009 and June 2018 are used

4 Appointed June 30

Read: Best-paid big five bank execs

While executive remuneration has sky-rocketed, over the same period, the median (read average) remuneration of employees at these five banks has mostly not kept up. Average remuneration at both Absa Group and FirstRand is up over 100% over the decade, while the increases at Nedbank and Standard Bank are 91% and 83%, respectively. Average remuneration at Capitec is 73% higher.

This means that average pay at each of the banks has roughly doubled over the past ten years.

The methodology used to calculate this is simple: total staff costs are divided by the total number of employees at each banking group (this includes staff in South Africa and in the banks’ international operations).

 

 

2009

2019

Change

(in median)

 

Staff costs

Median

Staff costs

Median

FirstRand1

R13.023bn

R304 396

R28.679bn

R619 631

104%

Absa Group

R10.806bn

R298 921

R24.761bn

R606 055

103%

Nedbank

R7.898bn

R292 118

R17.450bn

R557 918

91%

Standard Bank

R17.848bn

R347 163

R33.773bn

R635 093

83%

Capitec Bank2

R673m

R162 013

R3.871bn

R281 037

73%

1 For FirstRand, the years to June 2009 and June 2018 are used

2 For Capitec, the years to March 2010 to March 2019 are used

This only tells half the story, however. Over the same period (January 2009 to January 2019, used because substantial changes were made to the basket in January 2009), consumer price inflation is up 67%. This means growth in average remuneration at the banks has not outpaced inflation.

But not only are the increases over the past decade telling, the median salary at the four large ‘full service’ banks is approximately R50 000 a month. It must be noted that these four obviously have corporate and investment banking divisions, which will drag the average upwards. At Capitec, with a far greater proportion of front-line branch staff, the median is R23 000 a month. Included (to some extent) in these calculations are staff long-term incentive schemes, the costs of which are rolled up into the total remuneration numbers. Here, certain staff will benefit disproportionately to others, based on management level, duration of employment, and employment equity status (black staff will generally participate in staff BEE schemes).

Employees

2009

2019

Change

Standard Bank

51 411

53 178

16%

FirstRand

42 783

46 284

3%

Absa

36 150

40 856

8%

Nedbank

27 037

31 277

13%

Capitec Bank

4 154

13 774

232%

Staff numbers at the four full-service banks have grown over the past decade, but at a rate lower than inflation (plus GDP growth). Coupled with this has been the trend – particularly in recent years – for the four banks to cut their physical footprints, both in terms of the number of branches as well as the floor space these take up. This generally means fewer front-line bank service staff.

Across this period, Capitec has aggressively expanded its footprint. At the end of its 2009 financial year, it had around 400 branches. This has more than doubled in the past decade, but the pace of this expansion has been slowing. It added just 14 outlets to a total of 840 in the year to end-February 2019.

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

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Interesting article

SA business world today – – – the CE and CFO anxious only to appoint the ‘right’ person(s) to the Remuneration committee.
Time for Ethics committee to be formed to judge, inter alia, the contribution made by these top earning fat-cats who should simply just do their job and earn a good salary.

Service – down, Value for Money products – down……….Salaries – up. All you need to know about SA Banking, a glorious watering hole for ineffective management posing as business leaders.

4 banking goliaths ……not exactly a competing group for the consumer

Well it’s actually 6 including Investec and Capitec.

Discovery is on route plus other smaller banks and internationals doing corporate banking in SA.

How many do you need to consider it competitive? I dont feel the need to have 100 banks and we dont have a bit enough marker to do that.

I was a dealer(forex) at std bank – my total package was R190k p/a – so not too sure about these figures – increases were around 5% p/a – but then again, according to trevor steensma I was earning 25% – 50% less than I should have been – Richard de roos said No to inceasing my pay(according to trevor)

And we have a bank strike looming……………..striking because it is fashionable or for a valid reason?

Shrinking middle class feeding the numbers of working poor.

Would be interesting to overlay the costs apportioned to computerisation in the big banks as they spend millions on reducing headcount but in reality never do as their programs are poorly structured. I still believe executive staff are overpaid and under perform – maybe their salaries should be set by shareholders (excluding fund managers)

Maybe this needs a little proofreading ?

CPI up 167% over that period ? up 67% is more like it. The increases are well above inflation in most cases.

When you say ‘median’ do you always mean ‘average’ ?

Thanks for the heads-up. Our apologies – the 167% was a typo and it is indeed 67%. Whenever Hilton refers to ‘median’ in the article, he means average.

Over a period of 10 years an average increase of just over 7% pa will double the figure you start with.
Employees, other than some executives, are then getting rather modest increases – in the order of 7% pa.

Is it not a bit sensationalist to say that pay has doubled in the headline, without stating that this is over a 10 year period? On a compound basis this works out to around 9% pa, which considering that inflation sits anywhere from 6 – 7% really does not seem that excessive. Really do believe journalists should stop looking for the most sensationalist, populists pick up on this and then shout from the rooftops that bankers are bleeding the world dry, with 100% salary increases.

I know the main thrust of the article is more towards contrasting exec pay, but really think journo’s must watch out with inflammotory headlines

A news article being sensationalist. Well I never in my whole life..

Correct from 1 Jan 2009 to 1 Jan 2019:

R 100.00 from January 2009 would be worth R 167.23 in January 2019.
R 100.00 in January 2019 is equivalent to R 59.80 from January 2009.
Total increase (10 years): 67.2%
Annual increase: 5.3%

So if they pay increased with 67.2% or there abouts over a ten year period you haven’t increased your value or earning power.

Unless your name is Mike Brown and Johan Burger who both made the jump from CFO to CEO.

Mike Brown
2009: R7.651m
2019: R24.575m
Increase: 221%

Johan Burger
2009: R7.09m
2019: R37.578m
Increase: 430%

Not to mention the two who stayed CEO’s for those 10 years, boy did they increase their earning power:

André du Plessis
2009: R3.918m
2019: R12.828m
Increase: 227%

Maria Ramos
2009: R8.131m
2019: R29.714m
Increase: 265%

I know companies grow and with that risk, responsibility etc. also increase, but at some point surely enough is enough? Do the staff also get an increase even vaguely close to that?

Just putting this down here…

‘Berkshire Hathaway pays Warren Buffett a $100,000 annual salary, technically speaking. For the past 25 years, his salary has remained the same, but his other benefits have fluctuated with the stock market, particularly with the value of Berkshire Hathaway.’

Numbers easily become irrelevant. For scale, the average CEO of the Big 4 are paid around R15,000 per hour if they work 8h a day Monday to Friday and never take leave.

So their lunch hour costs shareholders about R4m a year. Per CEO

Fortunately these are such rare and skilled persons that they steer their companies to reliable earnings increases, year after year. Oh wait, hang on…

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