A2B Strategy | Strategy Facilitation for Financial Services

Originally published on LinkedIn, February 2026

1. Rear-View Mirror

In 2005 the Glazers took over the Red Devils (aka Manchester United), and Barclays acquired a 56% stake in ABSA. This presaged the loss of their respective souls. And both have had their HBO Max run of “Succession” in the past 7 years: 7 managers for MU, 6 CEOs for ABSA. Man U fans and ABSA staff and customers have not been living their best lives.

Internal politics aside, an outsider looking at the ABSA tea leaves would be forgiven for speculating that the low point was reached when Arrie Rautenbach was thrown under the bus and the opportunity used to reset the financial base by aggressively writing off bad debt. Was it justified? The strategic decision to chase market share would be understood in Economics 101 to be the equivalent of writing a blank cheque for bad debts. And so it proved. BUT, the Board signed off on that strategy. Bad Strategy + Bad Governance = Disaster!

2. New Brooms

Has a turning point been reached on the only big bank whose cost of equity exceeds their return on said equity? The market thinks so. Since Kenny Fihla arrived, ABSA has been the strongest performing banking share by a healthy margin.

The appointment was a coup! ABSA have got themselves a three-for-one. First, they get an experienced, intelligent, proven Banker who exudes gravitas. Second, they get the man who oversaw the rise-and-rise of Standard Bank’s CIB (“eulogised” in my previous note). This matters because Corporate and Investment banking offers potentially the “easiest” route to materially moving the needle on earnings performance. Finally, he has in turn gone out and “recruited” further trusted and proven performers from Standard Bank.

Furthermore, additional up-front, and ongoing changes are all positive — new leaders are being appointed in personal and business banking, structural changes have been made to support strategy, and the Board composition has been revisited. Whew!

3. Back to the Future

In December, the 4 pillars of ABSA’s revised strategy were communicated in the public domain: pivoting to being customer-led, diversification, cost efficiency and focused capital allocation, and focused growth opportunities. Below is a brief discussion around some nuances of this.

I. Customer-Led Growth

Structure follows strategy and structural changes to be more customer/segment focused were initiated even before the new CEO landed. Some changes (elevating business, bringing personal banking and product houses under the same roof) bear significant similarities with those at Nedbank. Whilst I suspect the same Consulting firm may have informed both, the Pan-African nuance at ABSA looks like a deferential nod to Standard Bank.

Perhaps it is too glib to parrot “structure follows strategy”. It is worth unpacking; ABSA has been a case study in structural own goals. Too strong an assertion? Let’s use Consumer banking as an example. How do you win in this space?

A good starting point is to look at the Segment “winners”, FNB and Capitec. What do they have in common: the strategic primacy of the transactional account. If you are the main bank, you get “lazy balances” enhancing liability balances and net interest margins; retention benefits (who wants the hassle of switching debit orders); and transactional data for analysis and rich credit scoring. Unless you stuff up service this is effectively a lifetime annuity. AND, if you play smart you get first dibs on all other lifestage-appropriate product opportunities. By contrast, ABSA have had a legacy strength in Homeloans which sat in the Product Cluster. Transactional banking sat in the Everyday Banking cluster. Instead of leveraging strength, there appears to have been very little contingent- or cross-sell out of homeloans into transactional accounts. Faced with vexatious pressure from Capitec’s turbocharged growth in main banked customers, ABSA responded not by removing the obstruction, but by successfully pushing Young Adult accounts. The immediate value of these is close to zero, and the lifetime value is modest. This is not a criticism of ABSA per se, other banks have been “faking it” more obviously by pushing low and zero fee banking products. But it is a criticism of structure, which impeded an holistic deepening of customer relationships.

Second, not all customers are equally valuable. Private banking can be very lucrative. To bring this together coherently, ABSA needed to bring together Wealth from the Relationship Banking cluster, Home loans, Investments and Financial Advisory from the Product Cluster, and Transactional accounts and ABSA Rewards from Everyday Banking. And that is before one talks of Coverage. Nothing is impossible, but effective coordination is improbable with a structure that is antagonistic to customer centricity.

The same logic applies to Business Banking, with the added friction of being buried in Relationship Banking. So getting Retail and Business Banking into their own foxholes is a non-trivial win in the journey to being customer-led.

One might suggest that some nuance be added to the proposed strategic focus on customer experience “since most banking products are the same”. First, no-one is going to disagree that customer experience is tremendously important. The challenge with it is measurement. You can only “manage what you measure”. And there is an industry tendency to focus on “net promoter score”. The problem is that over time this has come to resemble an “Uber” rating. Every Uber I order has a rating of 4.9. What picks me up is an old jalopy, open windows letting in hot air, no aircon, and an overly cautious driver. The signalling device does not work!

Second, I would be very, very wary of saying “all banking products are the same”, even if it is functionally true! There are two primary ways of competing, via commoditisation or by differentiation. If you play the former game, even if you have a great customer experience you HAVE to be the lowest cost product provider to be the winner in the long term. And ABSA is NEVER going to beat Capitec! Differentiating your products, be it real or perceived, allows for winning in niches and charging premium prices. ABSA Rewards has already proven itself as a great tool to drive desired activity and behaviour. An opportunity exists to lean into both this and product/service continuums.

II. Diversification

The strategy to diversify is based on 3 issues: increase the relative contribution of Africa, whilst at the same time reducing the concentration risk of being overweight in Ghana and Kenya, and as an extension of being more customer-centric, have Personal and Business Banking pull their weight.

The first two factors unsurprisingly reflect a keen understanding of why Standard Bank CIB has been so successful. In the short term though, concentration risk runs both ways. With the stabilisation and rebound of Ghana, and higher trajectory of Kenya, these may provide a surprise tailwind, buying time to bulk up further in East Africa and SADC.

Geography aside, it is also crucial that functional gaps — in Structuring and Advising — have been identified and are being closed. One can reasonably say that with the ex-Standard Bank CIB Global Markets CEO, and central appointees working with Charles Russon in Africa, there is a proper A-team on the job. That said, with the People box ticked at the Executive level, I suspect that the Process and Technology boxes may provide “frictional impediments to execution”.

To extend the preceding discussion on being customer-led, long term success is going to be hugely dependent on Personal and Business Banking. These once-great businesses are trending to subscale and if past trends were to continue into the future would point to “extinction”. The leadership appointees here are going to be crucial to achieving escape velocity from the supermassive black hole gravity of competition.

III. Revenues Are Written in Pencil, Costs Are Written in Pen

I almost “choked on my Cornflakes” when I read that ABSA had “closed the taps on outsourcing thinking to Consultants”. This was repeated when I read they were to “change the culture and mindset away from the culture of abundance”. These are damning statements. But there’s no rocket science here. If you looked at the 2024 Income Statement there is a R3b unallocated charge at the centre. If you don’t have a P&L you are not being held to account. Similarly, there was a R3b charge for Professional Fees (read Consulting and Contracting fees). No doubt there is overlap. Nonetheless, these are huge numbers. And across the board, one of the levers the legacy Big 4 banks have to pull in the face of competitive top-line pressure is that of cost control to stay proximal to a 50% Cost-Income ratio.

(Full disclosure: having sat on both sides of the Consulting fence in my youth, I believe MBB consultants can add considerable value. The longer they stay though, the more Executive agency diminishes. My intuition is that ABSA have been seriously compromised in this regard)

IV. New Growth Initiatives

Notwithstanding my speculative concerns around IT, a partial offset is the strategic commitment to look at partnerships and small acquisitions, with a special focus on accelerating digitization and digital capabilities. In this regard, the near 50% run in the share price will be very helpful. Paper acquisitions have an effective one-third discount built-in relative to 7 months ago. This pathway is prospective for future growth.

Two other growth initiatives were raised. Neither of these are as exciting. The first was to extend the Wealth offering, especially in Africa. Not that this isn’t doable, but the competition will be fierce. Both Standard Bank and FNB have prioritised Private Banking in Africa. This is likely to be “table stakes” rather than something that moves the needle. Similarly, the same might be said of the desire to push value added services, especially insurance and launching a MVNO. My question here is whether it is even worth putting up said “table stakes”. If one looks at the competition, how much money in particular do they earn on their MVNOs? It requires a lot of effort and I do not see it moving the needle for anyone.

4. Back to the Champions League?

It would be unsurprising to see ABSA deliver double digit earnings growth in 2026, outperforming their own and Analyst guidance. Unwinding base effects in business banking write offs and the Ghanaian economy, quick wins in CIB and cost containment are likely to combine with a significant economic tailwind (stronger growth, stronger ZAR, lower inflation and interest rates, higher exports with better precious metal prices, lower imports with cheaper oil) to accelerate ABSA’s turnaround momentum. But this should not be seen as definitive. The systemic enablers of performance — culture, platform and processes will probably require change and will be tricky to manage. But if we see growth momentum in retail and commercial “real” customer numbers and profitability in 2027 and 2028 (CIB should be a gimme), the CEO will have proved himself to be a cut above!