Absa loses nearly 300 000 retail customers

Barclays Africa Group has reported a decline of almost 300 000 customers with transactional accounts at its South African retail banking unit, Absa, over the past year. As at June 30 2017, it had 5.96 million ‘transactional’ customers from 6.25 million a year ago, a decline of 4.9%. This is the first time Barclays Africa has disclosed this metric along with its financial results. It said on Friday that this decline was “mainly driven by bank-initiated closures of dormant accounts in the entry-level segments”.

Overall, customer numbers in South Africa (retail and business banking) were down 3% to 9.286 million, despite what the bank termed “good growth in new-to-bank customers in [its] target segments”. Between 2011 and 2013, it lost nearly two million customers (see Absa is bleeding customers and Absa set on regaining top retail bank title). It took some big knocks with the loss of social grant related accounts, with 850 000 of those being shut in 2013.

It is under pressure on practically all fronts in the retail segment. Its market share in home loans (measured by assets) declined by one percentage point to 22%, while its card business underperformed in the store card portfolio (the Edcon book and Woolworths Financial Services joint venture). Its reduced risk appetite also saw its market share in personal loans disbursements decline to 7.9% as at December 31 2016, from 9.9% at the end of 2015 (as per the National Credit Regulator).

Jason Quinn, financial director at Barclays Africa Group said on Friday “We continue to lose share in mortgages, although we aim to increase our share of new business in the second half, without increasing our risk profile… Our retail customers fell 3% to 8.6 million in South Africa, largely due to continued dormancy”.

New account openings of the Pep Plus account, launched with Pepkor in 2014, were suspended earlier this year due to what the bank terms “elevated fraud levels”. It says excluding this offering, it did see an increase in new-to-bank customers. Quinn says this product will be relaunched in September.

Aside from this, continued Quinn, “new offerings such as MegaU for youth, a Gold Value Bundle and the Student Silver account showed positive initial results in the middle market and feeder streams. It was pleasing to see that our Private Bank and Affluent customer numbers grew 4% and 12% respectively.”

The ‘Affluent’ segment is defined as customers who earn more than R300 000 a year: effectively the Absa Premium Banking product. The salary requirement for its Private Banking packages is R750 000 a year.

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Total income in the Transactional and Deposits segment was up 4% to R6.144 billion, while non-interest income (i.e. fees) totaled R3.643 billion in the six months, from R3.558 billion a year ago (up 2%). While this segment includes deposit-only customers and accounts (although these are arguably minimal), it is still useful to follow the trend in the average non-interest income the bank is able to generate per customer per month.* Excluding Edcon and Woolworths Financial Services (the latter was at 1.8 million active accounts as at 31 December 2016)

Using the transactional numbers above, this equates to R102 per month (on average) in the January to June 2017 period, versus R95 per month (on average) in the January to June 2016 period, an increase of 7%.

The bank says “Transactional income remained under pressure due to the planned migration of customers from branches to self-service and digital channels, the simplification of the product offering as a well as a lower customer base. The financial impact of the product simplification and transaction migration was approximately 4%.”

Retail banking (SA) headline earnings – H1 2017

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Absa’s Business Banking customer base also declined by 4% to 352 000 from 366 000 in June 2016. This unit services two segments: Enterprises (via branches) with an annual turnover of up to R20 million, and Commercial (via dedicated relationship teams) with annual turnover between R20 million and R500 million. It said the decline in customer numbers was felt “mainly in the Enterprise segment”.

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