Banking giant Absa is pushing to attract young clients, as newly appointed Group CEO Kenny Fihla looks for growth opportunities in a competitive banking environment.
Fihla, who took the reins in June, is resetting the business and preparing a growth strategy to be presented to the market in a few months.
He told Business Times the bank has to start making inroads into the youth market, targeting especially young professionals. “Absa has a fair market share when it comes to your middle client segment, but we can’t stay being just the bank of the middle segment. We need to effectively work our way into the emerging set of clients, young professionals, young people, and make sure we continue to feed into our client base on an ongoing basis,” he said, after the release of the group’s results for the six months ended June.
Fihla, who was previously CEO of Standard Bank South Africa, said Absa was working on finalising its growth strategy for each of the business units to be consolidated in the next two months, after which it will be presented to the market. “That strategy will detail where we will be focusing, which client segment, which geographies, and how we think we will be able to execute on our ambition to win within those client segments to drive capital and resource allocation and to give meaning to the strategy,” he said.
Absa, which became a standalone business after Barclays exited Africa in 2005, was also refining its approach in Africa as part of an overarching strategy for the business, he said. “We should move to a more pan-African model of managing our business lines, be it corporate and investment banking (CIB), business banking or personal & private banking. We are in the process of executing on that one.”
He noted that while the corporate and investment segment was run on a Pan-African basis, the business banking division operated on a regional basis, in South Africa or in individual countries on the continent.
The same was true for the personal & private banking division, and Fihla intends to change this model. “There is nothing wrong with delegating as much as possible to the countries, but you have to have a sense of what the overarching strategy is for that business. We need to be able to leverage our investment spend appropriately, so we don’t have every country reinventing the wheel.”
He said Absa will focus on shifting the culture from being product-led to client-led. He believes the banking group has an exceptional set of people in many parts of the business, but because of leadership instability, even good people do not stick their necks out. “They tend to focus on their job and, therefore, you don’t get the best out of exceptional individuals purely because the environment does not allow for that.”
Fihla, who is the bank’s seventh CEO in six years, said he hoped Absa would have an opportunity to correct its past leadership challenges. “You may ask, ‘but what gives you confidence?’ It’s because I am not going anywhere,” he said.
Former group CEO Arie Rautenbach was forced into early retirement after losing the support of the board. He faced a revolt over the slow pace of transformation and plans to demote Saviour Chibiya, CEO of the group’s Africa regional operations, despite the division outperforming others in the group.
Rautenbach had been named CEO in 2022 to replace Daniel Mminele, who quit 16 months into his tenure, after clashes with executives over the bank’s strategic direction. At the time, Rautenbach was the CEO of the bank’s retail division.
On Monday, Absa reported a 5% year-on-year increase in revenue to R56.5bn, supported by a 10% rise in non-interest revenue, with trading income increasing 34%, while net interest income rose 3% despite margin pressure.
Commenting on the numbers, Anchor Capital investment analyst Keagan Higgins said the bank’s half-year results were in line with guidance, and provided a solid platform for the strategic reset under Fihla
Higgins said he expected Absa to focus on delivering its cost savings plan, diversifying its earnings mix, and revamping its personal & private banking segment with a customer focus that will translate into sustainable revenue growth rather than relying on credit tailwinds.
He described the group’s return on equity target of 16% in the next two years as credible, if it successfully executes on its plans. “Over the next 12–18 months, we expect cost discipline, stronger retail banking execution, and continued CIB and Africa momentum to drive performance. If execution is delivered, we see return on equity approaching 16% in the coming years, which should support a re-rating from the current 0.9x book multiple back toward its long-term average of 1.1x,” he said.
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