Arrie Rautenbach bows out early after Absa appointments blunder

Arrie Rautenbach (59), has agreed “after engagements” with the Absa board, to take early retirement from the group, effective from 15 April 2025. Practically, this means the CEO will cease to be the group chief executive officer and an executive director of the Absa Group and Absa Bank with effect from 15 October this year, followed by a six-month contractual notice period which will be served as garden leave.

“The executive leadership change, though likely well received, comes as no surprise. However, it is unlikely to be enough to close the valuation gap between Absa and its peers, considering the series of executive changes the bank has had since 2019,” observed Tasneem Samodien, research analyst at Private Clients by Old Mutual Wealth.

She pointed out that the bank has faced significant challenges over recent years, losing market share to competitors. As just one example, Absa has struggled in the current credit cycle, reporting a credit loss ratio of 123bps – above its through-the-cycle target range of 75bps – 100bps – while peers have managed the credit stress more effectively. Just a few days ago, Standard Bank reported its credit loss ratio improved by 17bps to 92bps, within management’s through-the-cycle target range of 70bps to 100bps. A week before, Nedbank reported a credit loss ratio of 104 bps for the six months to the end of June.

Samodien says while competitors such as Standard Bank and Nedbank have successfully communicated and achieved their goals to increase return on equity, Absa’s performance has declined, with rising operating expenses and impairments. “While peers are able to maintain and grow dividends while investing for future growth, Absa’s constrained balance sheet makes this difficult. Overall, the bank has many challenges that contribute to its lower valuation relative to peers, and we remain cautious about its outlook,” she said.

A review of the big banks’ share price movements on ShareData from September 2021 to date shows Absa’s share price shifted just 4.92% over the period. This falls rather flat compared with its competitors which all showed double-digit growth. Over the same period, Standard Bank’s share price moved up 72%, Nedbank’s share price climbed 71% and First Rand’s share price was up 40%.

The Black Business Council of South Africa said it is “disappointed” to see the bank has not appointed a black interim chairman, instead opting to appoint Charles Russon – who will now be the sixth CEO of Absa (on an acting or permanent basis) since 2019.

“This demonstrates in clear terms that Absa does not have a proper succession strategy and plan that includes a pipeline of possible succession candidates. The revolving door of white CEOs at Absa is very worrying to the [Black Business Council] and other progressive institutions that embrace transformation. The [Black Business Council] urges the Absa board to find a better way of handling succession in a way that does not bring instability to Absa,” the council said on Monday.

The Black Business Council comments follow criticism in May this year when Rautenbach made an internal announcement (that was not well received) to the effect that he would replace Saviour Chibiya as head of regional operations in Africa with Ravin Dajee, who was head of operations in Mauritius. Other moves that were announced at the same time included Deon Raju’s appointment as group financial director, replacing Jason Quinn; Rajal Vaidya as interim group chief risk officer and Christine Wu as chief executive of the everyday banking business unit.

Absa told Business Live in May that the decisions were “meticulously crafted to propel our growth objectives and fortify our position in the market. Moreover, they align with our steadfast commitment to advancing diversity, equity and inclusion initiatives, succession planning, and our robust talent management framework. This is an area where we have made a lot of progress in the last few years.”

This was after the Public Investment Corporation (PIC), a 5% shareholder, had objected to Rautenbach’s appointment in 2022, saying it had expected the board to have placed the required focus on transformation in the process of recruiting a new CEO. Absa’s share price moved up 5% yesterday to close at R165.58. DM