Bruce Whitfield
Absa’s main focus in the year ahead is to lower its costs and become a more efficiently run business.
It has a cost to income ratio of 63%, substantially higher than its retail banking competitors, and CEO Nallie Bosman admits it is “totally unacceptable”.
It’s appointed a task team, headed by a former executive director, to figure out
ways of making Absa more efficient.
“We are aiming at 61% this year, but we would like to surprise the board. We
need to break 60% as soon as possible. Our challenge is to deliver our services
efficiently, and to sell our customers more products,” Bosman said.
Bosman says the directors have made a commitment to reduce costs, which he says
is the bank’s most important outstanding issue. Staff are increasingly being
driven by performance-related bonuses and the CEO argues it will push them to
cut expenses and achieve a substantially better cost to income ratio in the year
ahead.
“Our main objective till now has been to generate income. We’ve succeeded in
that. Now we are committed to lowering costs in 2002.”
Part of the group’s strategy includes using its newly launched e-commerce initiatives, designed not only to lure new customers but also to make it cheaper
for the bank to run its business.
Executive director Santie Botha, who heads up the e-business strategy, says another announcement is due in the next two weeks, and the new product will complement the latest cell phone banking venture and free Internet access.
Former executive director Alwyn Noeth, who retired earlier this year, will head
up the task team which has been instructed not only to find ways for the group
to cut costs but ways of making the group more efficient and realising Bosman’s
goal of surprising the board with a below 60% cost to income ratio in 2002.
The free Internet service has gone a long way to raise Absa’s electronic banking
profile. Since February, when the service was launched, Absa has seen a considerable increase in the number of clients using online banking facilities.
It’s not yet done the numbers on how many Absa freemail users have been converted to banking clients, but since February about 12 000 people a month
have started banking online. Prior to the launch of the free e-mail service,
about 6 000 people a month were registering for online banking.
The group has reduced the number of branches under its banner from 1250 in 1998
to its current level of 770 and more will be shut down if they fail to operate
profitably.