Money and Markets

Absa exec - who earned R26 million last year - probably quit over strategy disagreement, says an analyst

Business Insider SA
Outgoing deputy CE of Absa, David Hodnett. Photo: Barclays
  • The deputy head of Absa has resigned midway through a two-month sabbatical.
  • David Hodnett saw his position as head of SA banking basically disappear as part of a restructuring.
  • The market did not like his resignation, which one analyst blamed on a disagreement about strategic direction.
  • The resignation confirms that Absa management is not 'functioning optimally', says Denker Capital's Kokkie Kooyman.
  • Hodnett earned R26.5 million last year, but according to one report, received millions more in long-term share allocations - which he now stands to lose. 

When Absa announced a major business restructuring in April, the bank announced that deputy CEO David Hodnett (48) would be taking a sabbatical of two months. Hodnett was previously head of all of Absa's South African operations.

But on Tuesday morning, a month before he was supposed to return, Hodnett's resignation was announced in a rather curt SENS notice, which said he would with "immediate effect cease to be executive director and deputy chief executive". Hodnett will help with a handover until August.

Harry Botha, banking analyst with the research and investment firm Avior Capital Markets, says Hodnett’s resignation is disappointing. Absa's share price lost more than 3% on the news, trading at R175.12 before midday. "His performance was highly regarded by the board. I think it could indicate that he did not agree with the group's strategic direction," said Botha.

CEO Maria Ramos announced the new strategy in March. The main focus will be to double Absa's market share of African banking revenues to 12%. The group plans to expand in new African markets. 

An Absa spokesperson told Business Insider SA that Hodnett resigned due to "personal reasons".

“There are visible signs that the Absa management is not functioning optimally, and the resignation of David Hodnett this morning confirms that,” says Kokkie Kooyman, CEO of Denker Capital.

Absa is by far the cheapest of the SA banks, and it is also trading at its lowest price to net book value level since 2002. However, the Nedgroup Investments Financials Fund, which Denker Capital manages, does not hold a big investment in Absa.

“This is simply because we don’t have the same confidence in the experience and expertise of management as we do with other banks,” says Kooyman.

The bank has managed to deliver good growth in shareholder value over the past five years, but the market’s valuation shows that investors do not have confidence in Absa’s ability to grow value at the same rate as some of the other banks, he adds.

Absa shake-up

Hodnett has been with Absa for a decade, and was named financial director in 2010. Three years later he was appointed as deputy CEO and in 2016 took charge of all of the bank's South African operations, including retail, business and investment banking.

This role effectively disappeared last month, after Ramos announced a shake-up of the group as part of its new strategic direction and following the exit of its former UK parent, Barclays. Absa will take back its name (after being called Barclays Africa) and the group has been divided into four core businesses, each headed up by its own CEO.

These are retail and business banking in SA (RBB SA); corporate and investment banking (CIB); wealth, investment management and insurance (WIMI) and the 'rest of Africa' business. Arrie Rautenbach will head up RBB SA. Temi Ofong and Mike Harvey remain co-CEs of CIB and Nomkhita Nqweni stays WIMI's CEO. Hodnett's co-deputy CE, Peter Matlare, keeps his position as head of 'rest of Africa'. 

The group's annual report shows that Hodnett received R26.5 million in salary and bonuses last year. But if long-term share awards made during the year were added, he was allocated R54.5 million, according to a report in the Citizen. His resignation should cost him some of these long-term share allocations.   

Receive a single WhatsApp message every morning with all our latest news: Sign up here.

Also see: 

Rand - Dollar
Rand - Pound
Rand - Euro
Rand - Aus dollar
Rand - Yen
Brent Crude
Top 40
All Share
Resource 10
Industrial 25
Financial 15
All JSE data delayed by at least 15 minutes Iress logo