How Kenny Fihla plans to revive Absa

Absa’s new chief executive officer wants to stabilise the leadership at South Africa’s third-biggest lender and unlock growth in its primary market and across the continent, as he takes the reins at a bank that’s been beset by leadership changes over the past six years. 

“In my engagements with clients, regulators, investors, including people within the organisation, I have been amazed at the strength and some of the competitiveness that Absa still has,” Kenny Fihla told Bloomberg Television’s Jennifer Zabasajja on Monday.

“But what has effectively undermined the ability of the organisation to capitalise on that is leadership instability.”

Fihla, 57, was poached from larger rival Standard Bank and began his tenure on June 17. He’s looking to “put some wins on the scoreboard” as he works to change the organisational culture and focus on meeting client needs, with plans to unveil a strategy in the next couple of months.

“Whether it is South Africa, retail business banking or corporate and investment banking, or whether it is in the African regions, the bulk of the failure of this organisation has been as a result of some strategic moves that were not appropriate, as well as leadership instability,” Fihla said.

“Those are issues that we can attend to, and we’ve started to attend to.”

His remarks came after the lender posted an increase in first-half profit as cost-cutting and an organisational restructure delivered dividends.

The lender’s shares retreated 0.23%, in line with peers on the FTSE/JSE Banks Index at 13:30 in Johannesburg. 

Absa has been beset by changes at the top since Maria Ramos retired in 2019 after a decade in charge. That churn has weighed on the bank’s profitability, making it one of the worst performers out of the continent’s nine largest lenders.

Fihla said management stability will help its 37,272 employees focus on clients and boost return on equity to 16% by 2026, from 14.8% in the six months through June, though that still lags 29% at rival Capitec. Absa sees its ROE at 15% by the end of 2025.

‘Here to stay’

“I am here to stay and I want to create a leadership that is committed to ensuring that we can take this organisation from where it is to the next level, leveraging what it has internally as well as bringing what it does not have,” he said.

“Ultimately, investors would want to see runs on the scoreboard, and I think we will deliver and should be judged on what we deliver.”

In South Africa, the lender is turning its focus to boosting its newly formed retail unit and its business bank to stem market share losses and increase customer numbers.

The lender is also eyeing the “massive” opportunity to increase scale in East Africa and strengthen its West Africa operations. In Tanzania, where the lender currently operates two banks, it’s considering streamlining its businesses.

“There is no doubt that the opportunity to create scale, as well as to diversify our revenue stream, is massive,” he said. “Over a period of time, we will see the relative contribution of African regions increasing at a faster pace than that of South Africa.”

The focus on East Africa will pit Absa against its peers, Standard Bank, FirstRand, and Nedbank, which have all expressed interest in growing their footprint, particularly targeting Kenya.

Absa completed a revamp of some of its units in May, which resulted in the reintroduction of a focused retail-lending business. That division reported a 23% increase in earnings, while its corporate and investment banking unit saw income rise 10%, thanks to strong trading revenue.

The lender said it was optimistic that its performance would improve slightly in the second half, buoyed by continued growth in non-interest income, as well as mid- to high single-digit customer loan growth and customer deposits.

The bank declared an interim dividend of R7.85 per share, surpassing the median analyst estimates of R7.02.