Absa's under fire, but there are still opportunities there
Suddenly being owned by Barclays, in the news for all the wrong reasons, does not seem such a good thing for Absa. First South Africa’s biggest retail bank was downgraded to A3 from A2 by Moody’s as a direct consequence of its UK parent’s downgrade. Barclays was one of 15 of the world’s biggest banks that were downgraded by the rating agency last week, and now in a knock-on effect Absa has lost the advantage it had over its SA rivals when raising capital thanks to its UK parent’s strong credit rating.
Then this week Absa shocked the market by issuing a profit warning, saying its first-half earnings may be up t0 10% lower because of the increase in bad debt costs related to mortgages. The surprise announcement – Absa had reported a 21% rise in annual earnings in February – has led to a collapse in the share price and a large-scale re-assessment of the bank’s future prospects.
All this comes after 18 months of a difficult cost-cutting exercise which has led to tensions with the unions. Absa executives prefer to call it a “lifestyle change” for the bank: “Rather than talking about cost cuts, we prefer to talk about efficiencies and effectiveness and how we can streamline our business to be ready for the challenges of tomorrow,” says deputy Ceo Louis von Zeuner.
In this context job losses are “unavoidable”, Absa says, but “there is no mass retrenchment being undertaken”. The IT department has been centralised, while some functions such as payroll activities are being brought back to Johannesburg from India. 500 staff have been asked to reapply for their jobs in a restructuring exercise and of these over half are expected to be laid off. In 2010 the bank had 43,000 employees and now it has under 40,000, Fergus Marupen, Absa’s HR director, says: “We are trying to manage our turnover and headcount very prudently. Our staff numbers will not increase to 43,000 again because we have collapsed departments.”
But all these difficulties should not deter aspiring young bankers from wanting to work for Absa. The bank still offers great opportunities and now is the time to go for them. Young people with a post-graduate degree have until the end of August to apply for the Absa Graduate Development Programme. Successful applicants from across Africa will be able to train in different divisions from financial engineering to actuarial services, from strategy and planning to IT as well as banking and financial management. “We run a number of graduate programmes and hire people from a diverse range of backgrounds,” Absa says, “so don’t think you can only apply if you are planning on going into Finance as an accountant or financial adviser. We employ graduates from various disciplines.”
Despite everything Absa is still hiring, as Marupen says. In a significant coup, it has just poached Kennedy Bungane, Ceo of arch-rival Standard Bank’s corporate and investment banking division, to be CE of Barclays Africa from July 1st. He will drive expansion into the continent - a crucial role, as beleaguered Barclays Ceo Bob Diamond has promised shareholders that the earnings contribution from African operations will increase from 16% to 25%.
