Is ABSA’s Africa growth strategy the answer to better earnings?

ABSA, the red bank which recently separated from its UK Group Barclays, is navigating the competitive environment in South Africa to enhance its earnings. With a decrease in headline earnings per share, the company is looking towards Africa to drive future growth. CNBC Africa sat down with Peter Matlare, Deputy CEO of Absa Group, to delve into the bank's strategies for expansion and the challenges it faces across the continent. Matlare highlighted that ABSA sees long-term growth potential in the assets acquired from Barclays PLC outside of South Africa. By focusing on income and earnings growth over a five-year period, the bank has seen encouraging results. Despite the success in these regions, ABSA is still in the process of separating from Barclays PLC, a complex transition that involves numerous technical projects. The bank has until June 2020 to complete this separation, ensuring a seamless transition for customers and staff. As part of its growth strategy, ABSA operates in 12 African countries, excluding South Africa. This leaves ample room for expansion and development as the bank navigates the complexities of new markets. In particular, Nigeria stands out as a crucial market for ABSA, where the bank already has a strong presence in terms of advisory services and trade business. However, the absence of a retail and business bank presence poses a challenge, prompting ABSA to explore innovative solutions such as challenger banking models. Looking ahead, ABSA is considering opportunities in non-presence countries like Angola, where 'suitcase banking' may offer a pathway to expansion. By partnering with institutions like Société Générale, ABSA aims to strengthen its foothold in key African markets. Matlare emphasized the importance of delivering sustainable returns in each market, ensuring efficient use of resources and capital allocation. As ABSA devises its entry strategy into new territories, the focus remains on leveraging digitization and strategic partnerships to drive growth. The discussion also touched on potential opportunities in Ethiopia, a market of interest for ABSA given its unique challenges and opportunities. Matlare highlighted the importance of understanding local conditions and trends to effectively navigate diverse African markets. With a keen eye on trade, infrastructure, and consumer businesses, ABSA aims to capitalize on emerging opportunities across the continent. While there is no 'silver bullet' for success, ABSA's diversified approach positions the bank to thrive across multiple sectors. Amidst these strategic discussions, Matlare also shared his commitment to remaining at the bank for the foreseeable future, underscoring his confidence in the team and the board's vision. As ABSA continues its journey of growth and expansion, the bank's solid foundation and strategic outlook bode well for its future prospects.