Absa CEO takes early retirement

Absa’s CEO has agreed to take an early retirement, the bank announced today, before releasing its results for the first half of 2024.

Absa released its results for the first half of its 2024 financial year today, which revealed a decrease in earnings and profit for the bank.

The company’s headline earnings decreased 5% to R10.18 billion from R10.72 billion the year prior, and diluted headline earnings per share declined 5% to 1,227.7 cents from 1,289.1 cents in H1 2023. 

Absa’s return on equity declined to 14.0% from 15.7%, and its return on average assets was 1.04% from 1.16% the year prior.

Revenue grew 3% to R53.7 billion, as net interest income rose 7% to R35.31 billion and non-interest income decreased 2% to R18.4 billion.

The bank’s net interest margin on average interest-bearing assets improved to 4.69% from 4.62% in 2023, reflecting higher Absa Regional Operations (ARO) margins in a rising rate environment. 

Gross loans and advances grew 5% to R1.36 trillion, while deposits rose 5% to R1.40 trillion. 

Operating expenses increased 8% to R28.33 billion resulting in a cost-to-income ratio of 52.7% from 50.6%. Pre-provision profit decreased 1% to R25.38 billion.

Credit impairment charges were flat at R8 309m, producing a 1.23% credit loss ratio from 1.27%.

On a geographic basis, the bank’s South African headline earnings decreased 7% to R6.61 billion from R7.11 billion in the prior period.

Its Africa regions declined far less at 1% to R3.57 billion from R3.60 billion in 2023. The African regions contributed 31% of total revenue and 35% of group earnings. 

“The global, regional, and domestic environments entered 2024 on an uncertain footing,” the bank said. 

“The fall in global inflation has slowed as sticky services price inflation and relatively strong wage growth had, until very recently, restrained expectations on the timing and pace of interest rate normalisation and saw longer-term yields gradually rise.”

The bank explained that some recovery in global trade alongside better performances from the European economy and China narrowed divergence amongst large economies and the IMF projects global growth of 3.2% in 2024, only marginally lower than 2023.

In addition, South Africa’s economy shrank marginally in the first quarter, with broad-based weakness offset by agriculture. 

Absa said the abeyance of load-shedding and the continued gradual reduction in inflation were a welcome relief. 

“However, households continued to show signs of financial pressure, while business and consumer confidence looks to have reflected a cautious wait-and-see approach ahead of the provincial and national elections in May,” the bank said.

“The prime rate remained unchanged at 11.25% throughout the first half, and financial markets pricing of the policy rate varied throughout the period, ranging from expectations of between one and two 25 basis point cuts during the second half of 2024 to a small probability of a further rate increase.”

Across Absa’s ARO presence countries, generally tight financial conditions, a still high cost of living, and significant fiscal constraints continued to weigh on economic activity, as did El Nino weather conditions, which saw significant flooding in some parts of the continent and drought in others.

“Economic performance varied across the markets, although once again, East African economies generally fared best,” the bank said.

Absa declared a flat interim ordinary dividend per share (DPS) of 685 cents per share.

CEO retirement

Alongside its interim results, Absa also announced today that, following engagements between the board and its CEO, Arrie Rautenbach, the parties agreed that Rautenbach will take early retirement from the company, effective 15 April 2025.

Rautenbach will cease to be the Chief Executive Officer and an Executive Director of the Boards with effect from 15 October 2024, followed by a 6-month contractual notice period that will be served as garden leave.

The board, on behalf of the group, thanks Arrie for his commitment and extensive contribution to Absa over a career spanning more than 27 years and wishes him well in his retirement,” the bank said.

“Shareholders are also informed that Charles Russon will become Interim Chief Executive Officer of Absa Group and Absa Bank effective 15 October 2024, subject to regulatory approval. He will also become an Executive Director on the Boards.”

Russon has been Chief Executive of Absa’s Corporate and Investment Bank (CIB) since 2018 and a Group Executive Committee member since 2014.

He joined Absa Capital in 2006 as Chief Financial Officer and has held numerous senior roles in the group, including Regional Head of Finance for Absa Group, Chief Operating Officer for Absa Group and Chief Executive: Engineering Services for Absa Group.

Russon completed his articles with KPMG and then worked for Merrill Lynch in London and Deutsche Bank in London and Frankfurt.

He is a member of The South African Institute of Chartered Accountants and holds a Bachelor of Commerce degree from Rhodes University.

Subject to regulatory approval, Yasmin Masithela will become the Interim Chief Executive Officer of Absa’s CIB on 15 October 2024.

Masithela is currently Managing Executive Corporate Transactional Banking, CIB and has been in that role since May 2019.

She previously held positions on the Group Executive Committee as Chief Executive Strategic Services and Chief Compliance Officer, respectively.