What seemed like a never-lending story for Absa is now coming to an end.
The bank wants to grow its personal loans business and can do so without tinkering with its risk criteria, Cowyk Fox, Absa's managing executive for everyday banking, told Business Times.
Personal loans are low-hanging fruit for Absa as it attempts to claw back market share after more than a decade of restraints imposed on it by former British parent Barclays.
Absa was one of the biggest granters of personal loans before Barclays took control in 2005, but the bank started pulling back during the financial crisis of 2008, the recession that followed it and most of the years since.
The timing was unfortunate as it coincided with a multiyear boom in unsecured lending. African Bank, before its collapse in 2014, and Capitec grew its loan books rapidly in the first half of the decade, while the other banks also benefited. Absa lost out.
11%
Absa's market share in personal loans
"Our market share in personal loans is 11% but in most of the rest of retail banking our market share is more than double that," Fox said.
The idea is to have personal loans catch up to the rest, and quickly.
"If you run on 20%-30% market share on all your retail products, then it follows that personal loans need to be closer to those levels."
And the first stop is existing clients.
"Because we closed the taps a few years ago, the awareness among clients about our loan offering is lower," Fox said.
Apart from advertising and regular marketing channels, the bank is also using its 30,000 employees to spread the word.
But growing its book does not mean Absa is throwing caution to the wind.
SA's banks have learnt much from observing the growth of African Bank and its eventual collapse.
African Bank, which was owned by African Bank Investments Ltd, was placed under curatorship in 2014 after a slowing economy and a disastrous acquisition of furniture retailer Ellerines bled the company and the bank dry.The Reserve Bank and SA's other big banks bailed out African Bank and the lender was restructured into a "good bank", which survived, and a "bad one", which now only rakes in old debts.But in the wake of the implosion of its biggest competitor in unsecured lending, Capitec entered a new growth phase.It also pushed into the territory of the traditional banks with a new focus on transactional banking. In the process, it lured millions of clients from the likes of Absa, Nedbank, Standard Bank and FNB.Absa wants to fight back. But responsibly so, said Fox. In a distressed economy that is hardly growing and shedding jobs in several sectors, lending needs to be watched closely.But the core middle market, in the sweet spot of R15,000 or more per loan, is where Fox sees the most opportunity."We now have end-to-end control of our value chain and we are working on the processes to enhance the client experience," he said.Under Barclays, the bank had a centralised operating model, which meant the different business units were not free to go after lucrative opportunities."We have now revised our strategy. And our risk appetite, as it is, is adequate to gain market share."strydomt@sundaytimes.co.za..