southafricaAbsa Group Limited

All data are collected in the Fiscal Year of 2008-2009.

Company Profile and History

Absa Group Limited is one of South Africa's largest financial services organisations, serving personal, commercial and corporate customers in South Africa. The Absa Group Limited (Absa) is listed on the JSE Limited. Absa's business is conducted primarily in South Africa. In addition to this, the Group has equity holdings in banks in Mozambique and Tanzania.

At 30 June 2009, the Group had 718, 2 million shares in issue and a market capitalisation of R79 billion. The Group had assets of R754, 3 billion, 11, 3 million customers and 9 211 automated teller machines.

Absa is a subsidiary of Barclays Bank PLC, which holds a stake of 55,4% in the Group. Barclays is a major global financial service provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management services with an extensive international presence in Europe, the USA, Africa and Asia.

Amalgamated Banks of South Africa Limited (Absa) was formed in 1991 through the merger of UBS Holdings, the Allied and Volkskas Groups, and certain interests of the Sage Group. In 1992 Absa acquired the entire shareholding of the Bankorp Group (which included TrustBank, Senbank and Bankfin), thereby extending its asset base even further. In 1997 the name of the holding company, Amalgamated Banks of South Africa Limited was changed to Absa Group Limited, consisting of three main operating divisions. In 1998 the United, Volkskas, Allied and TrustBank brands were consolidated into a single brand, and Absa adopted a new corporate identity.

In 2004 Absa issued 73.2 million new redeemable preference shares worth R2 each to new black firm Batho Bonke, led by Mvelaphanda chair Tokyo Sexwale (currently Minister of Human Settlements), effectively giving Batho Bonke 10% of Absa's direct ownership and making Absa the first of South Africa's big four banks to sell a direct stake to a BEE consortium.

In Country Location

160 Main Street, Johannesburg, South Africa; Tel: +27 11 350 4000

Services and Products

The Group interacts with its customers through a combination of physical and electronic channels, offering a comprehensive range of banking services, (from basic products and services for the low-income personal market to customised solutions for the commercial and corporate markets), and wealth management products and services.

Absa’s business operations is segmented into four key clusters which provide banking and financial services products and services to the personal, commercial and corporate market segments, primarily in South Africa: Retail banking , Corporate and commercial banking , Investment banking , and Bancassurance (it provides life and short-term insurance, investment and fiduciary services and products to all segments in South Africa).

Number of Employees

36,920 employees

Financial Information

Absa Group recorded an increase of 10.4% in attributable earnings for the year ended 31 December 2008 from R9 595 million to R10 592 million. Headline earnings increased by 5.3% from R9 413 million to R9 908 million.

Revenue growth was 20.4% to R42 910 million.

Financial performance Retail banking Corporate and commercial banking Investment banking Bancassurance
For the year ended 31 December 2008 2007 2008 2007 2008 2007 2008 2007
Attributableearnings(Rm) 3,706 4,943 2,806 2,167 2,249 1,733 1,597 1,502
RoEC (%) 19,5 n/a 24,8 n/a 21,3 n/a n/a n/a
RoE (%) n/a 28,3 n/a 29,5 n/a 33,3 39,5 37,8
Cost-to-income ratio (%) 54,3 54,7 49,8 51,8 41,0 35,4 38,5 35,9
Impairment ratio (%) 1,68 0,74 0,28 0,37 0,00 0,00 n/a n/a

Market Share

Absa now has the biggest market share in respect of deposits by individuals with a market share of 27,5% as at 31 December 2008. With a market share of more than 30%, Absa is one of the largest players in the home loan market.

Business Objective

“To entrench market leadership, enhance its competitiveness, further diversify the Group's earnings mix, continuously improve operational excellence and reduce risk across the organization”

Business Model

Absa strategies include:

Deliver market leadership and enhance Absa's competitiveness: Key to this will be protecting and entrenching Absa's leadership position in the South African retail banking market. Attention will be given to: retaining longer-dated anchor products; further enhancing service levels; and promoting customer loyalty.

Absa also aims to grow customer numbers and assets through: further expansion of the Group’s distribution footprint; enhancing the value proposition of anchor products; and leveraging the Absa brand to grow the customer base and sell products.

Diversify earnings mix: To reduce cyclicality and volatility of earnings and enhance earnings predictability, Absa aims to: change the mix between lower and higher yielding retail assets by increasing focus on the emerging middle class market through micro-lending, credit cards & retailer finance products; change the mix between retail and non-retail earnings by positioning Absa as a top-two player in investment, corporate and business banking by 2010; change the mix between bank and non-bank earnings by entrenching Absa's position as a leading bancassurer (This will be achieved by expanding Absa's bancassurance distribution network, improving product usage, growing assets under management and expanding into the non-traditional customer base.); and change the mix between South African and non-South African earnings by pursuing opportunities beyond South Africa's borders where Absa can achieve acceptable returns.

Improve operational excellence: By enhancing operational efficiency, the Group aims to achieve a cost-to-income ratio of 49, 5% by 2009. This will be achieved through the adoption of the Lean approach, which will further enhance process automation and streamlining.

Reduce risk: Collections and risk management will remain key focus areas. It is going to become increasingly important to invest in resources and technology to ensure that the Group has the right collections capability and optimal scorecards to ensure the correct balance between risk and reward.

Ownership of Business

Absa's Major Shareholders
Major ordinary shareholders (top 10)* 30 June
2009
31 December
2008
30 June
2008
% % %
Barclays Bank PLC 55.4 58.6 58.8
Public Investment Corporation 5.9 8.5 5.5
Batho Bonke Capital (Proprietary) Limited 5.1 - -
Old Mutual Asset Managers 3.5 2.6 4.0
Investec Asset Management 2.1 1.6 n/a
StanLibAsset Management 1.9 2.0 1.5
Sanlam Investment Management 1.8 1.1 1.0
AXA Financial SA (Bernstein and Alliance) 1.3 0.9 n/a
Allan Gray Limited 1.0 4.1 7.9
Foord Asset Management 1.0 1.1 1.1
Other 21.0 19.5 20.3
Total 100 100 100
Geographical holding (by owner)
England and Wales 56.0 59.1 59.1
South Africa 33.2 31.0 33.7
United States 4.6 4.1 2.7
Other countries 4.2 3.9 2.4
Below threshold 2.0 1.9 2.1

Benefits Offered and Relations with Government

The South African Reserve Bank (the Bank) is the central bank of the Republic of South Africa (RSA). The Bank Supervision Department licences banks. Legally, no person may accept deposits from the public or operate as a bank without the express authorisation of the Department, also known as the Office of the Registrar of Banks. Such authorisation follows only after a rigorous application process, in which the Registrar has been satisfied that the four main criteria for the licensing of banks have been and will be met. These criteria are as follows: capital is adequate, given the nature and risks of the intended business, to serve as a buffer in order to protect depositors against losses; management is fit and proper in terms of competence and integrity; the proposed bank's business plans are viable and the bank is likely to be sustainable; and the bank's existence is deemed to be in the public interest.

Gill Marcus, chairperson of the Boards of Directors of Absa Group Limited and Absa Bank Limited was named as governor of the South African Reserve Bank to succeed Tito Mboweni effective November 2009. Marcus left the South African Reserve Bank in 2004, and was appointed chairwoman of Absa, in March 2007. Gill Marcus is a senior member of the African National Congress (ANC) and sat on the National Executive Committee, the party’s top decision-making body, between 1991 and 1999, before moving to the South African Reserve Bank.

Dave Brink, currently the Deputy Chairperson of Absa will assume the role of Chairperson of both Boards in the interim. The Absa Board will follow the necessary governance process to appoint a Chairperson and shareholders will be advised accordingly of the decision. This appointment will, as per the Articles of Association of Absa, be confirmed at the Annual General Meeting of shareholders in 2010.

Maria Ramos, the Group CE for Absa, is married to Trevor Manuel, the former minister of Finance and currently the Minister in the Presidency in charge of the National Planning Commission. Ramos also served as the Director General of Finance for a time while Manuel was Minister of Finance. Ramos was part of the ANC team responsible for drafting and negotiating chapters on finance and inter-governmental fiscal arrangements during Constitutional Negotiations in 1993.

Product Development

In 2008 Absa acquired a 50% + 1 share in Woolworths Financial Services (Proprietary) Limited, the pension fund administration portfolio from Glenrand MIB Benefit Services (Proprietary) Limited and an additional 50,3% in Meeg Bank Limited. Absa Wealth was also established during the year.

In September 2009 the International Finance Corporation, a member of the World Bank Group, announced that it is to provide US$150-million (about R1.15-billion) to Absa Bank to provide funding for infrastructure projects in sub-Saharan Africa. The IFC's financing will consist of a $30-million loan and $120-million standby credit facility, which Absa will use to finance projects that will promote economic development in some of the poorest countries in sub-Saharan Africa. The IFC's investment would enable Absa to continue lending to commercially viable African infrastructure projects.

In June 2009, Absa Capital, the investment banking division of Absa Bank Ltd (Absa), and Barclays Capital, the investment banking division of Barclays PLC, announced the relaunch of their South Africa Government Inflation-Linked Bond Index as the Barclays Capital/Absa South Africa Government Inflation-Linked Bond Index. The product is part of the Barclays Capital Emerging Markets Government Inflation-Linked Bond Index (EMGILB) which measures the total return performance of inflation-linked bonds from the major emerging market countries. The Barclays Capital/Absa South Africa Government Inflation-Linked Bond Index consists of four bonds which make up 7% of the Barclays Capital Emerging Markets Government Inflation-Linked Bond Index and 1% of the Universal Government Inflation-Linked Bond Index. Pricing for the bonds will be provided by Absa Capital.