Absa says its headcount declined by 1,200 amid Covid-19 fallout and digital push

Financial services company Absa has noted that its headcount declined by 1,200 in the first nine months of the year, as it continues to deal with the economic fallout from the Covid-19 pandemic.

The lender said in a trading update on Thursday (19 November), that it’s unlikely to pay an ordinary dividend this year in an effort to conserve cash, Bloomberg reported. It’s withholding payouts despite having strong buffers and forecasting “improved second-half capital generation.”

Absa said that it expects headline earnings per share to decline by more than 40% for the year ending December 2020.

“The number refers to permanent and temporary Absa employees,” the group said in an emailed statement.

“Much of the reduction stemmed from natural attrition as Absa instituted a hiring freeze in light of Covid-19. The continuing global and local progression towards digital banking has contributed to the reduction.

“The reduction relates to Absa operations across the African countries in which we have a presence,” it said.

The lender has seen its employee numbers decline in recent years, to 38,472 in 14 countries. The group’s staff count in South Africa is 28,296.

Data published by PwC showed the number of employees gained and lost by the country’s major banks in recent years, including Absa.

Lenders are cutting jobs as they seek ways to lower costs and contend with slow economic growth and fresh competition in the industry from branchless, digital entrants such as TymeBank and insurer Discovery, PwC said.

Standard Bank chief executive Sim Tshabalala said in April, that customer needs and competitive pressures has forced the group to rapidly digitise its business – resulting in job losses and branch closures.

“Standard Bank Group has no choice but to become a digital company. An overwhelming majority of our clients prefer to do almost all of their transactions online,” he said.

“Our competition is increasingly digital and often does not bear the costs of a large and long-established incumbent. If we fail to digitise urgently, efficiently and successfully, our clients will leave us, and our shareholders will shift their investments to more competitive alternatives. Both clients and shareholders would be quite right to do so.”

GDP Growth

Looking ahead, Absa Group expects South Africa’s real GDP to fall 8.7% in 2020, with muted growth of 2.6% forecast for next year amid significant uncertainty caused by the Covid-19 pandemic.

On Thursday, the Monetary Policy Committee (MPC) decided to leave the repo rate unchanged at 3.5%. Three members of the committee preferred to leave rates unchanged, while two members preferred a 25 basis point reduction to the repo rate.

“This serves as a guide to the expectation that rates are more likely to decline than increase under current economic conditions,” said Luigi Marinus, portfolio manager at PPS Investments.

The South African Reserve Bank (SARB) moderated its expectation of GDP growth for 2020 from -8.2% to -8.0%, and GDP growth is now expected to increase by 3.5% in 2021 and 2.4% in 2022.

“This is notably lower than global GDP growth expectations of a 4.4% decline in 2020 and an increase of 5.2% in 2021 according to the latest International Monetary Fund (IMF) forecasts,” Marinus said.

He said that the MPC has acted assertively since the start of the lockdown by reducing the repo rate to the current level of 3.5%. However, with the current available economic statistics, it is difficult to see why this has stopped.

“South African GDP growth is expected to disappoint relative to global levels and inflation is expected to remain below the midpoint of the target band over the next two years. While monetary policy alone cannot reverse the difficulties many South Africans are facing, any further reduction to short term rates will have a stimulatory effect to the economy.”


Read: Absa sees muted recovery for South Africa in 2021

 

 

Must Read

Partner Content

Show comments

Trending Now

Follow Us

Absa says its headcount declined by 1,200 amid Covid-19 fallout and digital push