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We ensure a balanced review of our performance by tracking progress through, among others, internal dashboards, regular management reporting and external measures.
Contributing to the Sustainability Development Goals
By providing financial services we enable individuals to enhance their financial stability and quality of life; we contribute to economic growth, job creation and access to capital markets. By conserving natural resources and driving inclusion we contribute to the societies in which we operate.
Our reward philosophy underpins our growth strategy, entrepreneurial culture and risk management approach. Its objective is to direct the efforts of our employees in delivering our strategy of creating sustainable value for all our stakeholders in a fair and responsible way.
The Board has mandated 10 committees, to assist in the execution of the Board’s duties and responsibilities. The terms of reference of each committee are reviewed annually.
To remain relevant, we offer innovative and cost-effective products and solutions. Customers provide not only revenue but are our main source of deposits that enable our lending activities.
|Key concerns and expectations|
|Our material focus areas|
|Understanding customer needs and delivering safe, cost-effective, reliable and convenient solutions.|
|Delivering enhanced customer experiences.|
|Effective management of information and technology.|
|Ensuring trust and safety.|
Understanding customer needs and delivering safe, cost-effective, reliable and convenient solutions.
We provide services to our customers through a multi-channel approach, providing a choice of platforms from digital solutions to call centres and face-to-face engagements in branches to customer suites with relationship managers. Our digital, design and data capabilities are essential for responding to our customers’ needs, enhancing their experience and reducing their dependency on physical branches.
Multi-functional, multi-language ATMs include bill payments, cardless withdrawals and the facility for customers to save their favourite transactions.
Absa Value Bundles are simple, transparent bundle transactions offering value added services, including funeral cover.
Absa Transact is a simple, lowest-cost bank account.
Absa Rewards offers cash back and bonuses, based on a customers’ product portfolio and the manner in which they transact.
Absa Premium Banking provides a single card for all banking with free online and mobile banking and easy access to wealth advisory, family, lifestyle and travel benefits.
MegaU Youth Account includes an interactive app that makes banking rewarding and educational for children. Absa app is a full-service banking app which includes home loans, foreign exchange and vehicle finance and account opening for new-to-bank customers.
CashSend allows cash remittance from our ATMs without a bank card and via a mobile phone.
Virtual Pay is a cardless payment solution for a single business account which allows businesses to monitor and control expenses by integrating with most procurement systems and travel booking tools.
Virtual Investor tool is a platform for Absa and non-Absa customers to buy unit trusts online.
Workplace Banking offers our wholesale customers banking, insurance and financial wellness education on-site, strengthening the customers’ employee value proposition.
Chatbanking was first on WhatsApp, Twitter and Facebook and the first to launch Samsung Pay in South Africa.
WIMI One View provides a single view of the customer, which improves data insights and our ability to serve customers better.
Hello Money provides mobile phone banking in Absa Regional Operations with online and ATM bill payments.
Prepaid cards, a cash management solution which enables customers to distribute cards to individuals who can spend funds locally or internationally.
Partnerships across Absa Regional Operations with various telecommunications providers deliver mobile payment solutions, in some instances for those without bank accounts.
Agency banking allows customers to perform basic transactions such as bill payments, balance inquiries as well as card and cardless cash deposits and withdrawals at third-party outlets.
Solutions such as Asorbia (fintech church app) and Atlas (savings based digital wallet) in Ghana, and Prepaid Vivo Energy EasyGo card (budgeting, tracking and rewards) in Tanzania extending financial access further.
Financial Markets Index, ranks the maturity, openness and accessibility of 17 financial markets in Africa for consideration in business decisions.
Timiza, Kenya’s first digital banking platform, offering loans, bill payments, airtime, insurance, foreign exchange and other transactional capabilities via mobile phone.
Shari’ah compliant Islamic banking for those seeking a different approach to financial services.
A partnership with Société Générale extends our corporate banking offering regionally and internationally.
Delivering enhanced customer experiences.
We are on a journey to a more holistic approach towards customer health by integrating into a single approach all the elements of customer complaints management, customer service and experience measurement and other drivers of customer experience and health.
Across the Group, focus has been on creating focused customer value propositions, the enhancement of key customer processes, system stability, strengthening relationships with customers as well as sharpening knowledge of key sectors and of our competitors.
To deliver secure, convenient access and a great customer experience, we take the following into account:
- Strong customer relationships are essential for growth.
- Achieving great customer experience is increasingly complex.
- The competitive landscape is increasingly crowded with new entrants who may be more agile in attending to changing needs.
- Linking customer experience insights (complaints, voice of customer, voice of employees).
The issue of digital fraud is a pressing one and while fraud is an industry issue in South Africa, Absa has a high number of cases referred to the Ombudsman for Banking Services. In conjunction with increased fraud awareness messages across multiple platforms and increased security measures, additional attention is given to the customer experience with the implementation of revised fraud handling processes and improved turnaround times so to minimise customer detriment, and address this issue directly.
Effective management of information and technology.
Our data strategy is aimed at better understanding our customers to be able to offer them the right products and service within their affordability. This is being delivered by:
- Transforming and modernising our applications and innovating ways to deploy our technology infrastructure.
- Building advanced data solutions that will provide us with deeper insights and improve customer experience.
- Making financial services safer through significant investments in leading edge cyber capabilities.
- Leveraging strategic partnerships and collaborating with fintechs to drive innovation and increase market share.
Cloud services are faster, more versatile and have reduced support overheads. Hyper-converged technologies make our technology infrastructure more reliable, agile and scalable.
Robotics and artificial intelligence improve turnaround times and customer experience.
Resilience policies, procedures and training reduce the recovery time after an incident.
Data management capability enhances customer insights, improves delivery, facilitates high-quality regulatory reporting and delivers operational efficiencies.
Data and analytics capabilities improve risk management, using models to detect, predict and prevent financial crime. Innovations such as facial recognition assist in fraud detection.
Converged cyber security enables a unified view of the risks/threat landscape (physical or virtual) allowing for an integrated response to address risk at its source.
Our holistic security strategy uses local and global alliances to continuously share threat intelligence and best practices for detection and prevention. Because of these alliances, we proactively prevent customer and Group losses.
Ensuring trust and safety.
The financial services industry relies on trust, and good conduct is based on our daily behaviours, exhibited in our individual and collective actions and decisions. Our code of conduct fosters values-based decision-making and showing how our policies and practices align with our Values.
Financial crime risks include ATM and branch security, card fraud, and online/digital security risks. Threats from crime syndicates and cyber attackers grow exponentially and we invest in protecting our customers and the Group.
We have protective measures such as two-factor authentication (2FA) and device authentication. 2FA is a second layer of security, enabling customers to verify certain higher risk transactions on our online and mobile banking channels without relying on their SIM card. This prevent fraudsters from intercepting verification messages to customers’ SIM cards which is an often-exploited vulnerability. Verification messages are sent directly to the Absa app.
We remain concerned about debit order abuse and we continue to improve our controls relating to non-authenticated early debit orders.
Awareness and training.
To protect customers, their awareness is the key to avoid being a victim of fraud.
To safeguard our customers, employees and the Group, we issue regular communications regarding financial crime with topics including avoiding phishing attacks, online shopping and travel tips, card and app safety. Employees undertake mandatory annual training covering a range of topics including anti-money laundering, data privacy protection and anti-bribery and corruption.
Your rights are our first priority
We adhere strictly to the Code of Banking Practice and cooperate fully with Ombudsman of Banking Services.
Capable and engaged employees with access to value-creating customer solutions will drive our commercial success and advance our reputation. Creating a culture that inspires entrepreneurship and innovation is critical to the implementation of our strategy.
|Key concerns and expectations|
|Our material focus areas|
|Creating an entrepreneurial and innovative culture.|
|Attracting and retaining quality employees.|
|Distinctive development opportunities.|
|Ethical business conduct.|
Creating an entrepreneurial and innovative culture.
The correct culture is a key strategic enabler and our target culture is one that enables faster decision-making; is aligned and engaged at every level; is piloted by leaders who inspire the whole organisation to action with speed, boldness and focus, giving our people an emotional sense of belonging and commitment.
Our cultural journey has involved intense engagement with employees from brand immersion sessions with all employees and Umoja (unity) sessions where employees gave input to our Values (page 24) and target culture.
Our target culture is focused on the belief that Absa can be a force for good. We are committed to results and will learn by doing, taking decisions quickly and adjusting as required. We are committed to our employees and the customer is our obsession. We will be bold and agile. We are committed to Africa and the communities we serve. We believe in our energy and potential and wish to be a positive catalyst.
A holistic culture transformation framework, including new ways of working, redefined processes, new skills requirements and new leadership behaviours will deliver the desired culture shift.
Attracting and retaining quality employees.
Our improving employer brand and the distinct opportunities we offer underpin our ability to attract top employees.
We have 40 856 employees (2017: 41 703) of which 39 413 are permanent (2017: 39 988).
We filled 5 622 vacancies (2017: 7 376), in an average time to hire of 33 days (2017: 35 days). 60% of our vacancies were filled by existing employees (2017: 59%) of which 37% were promotions (2017: 49%) reflecting the strength of our internal talent pipeline.
Our employee turnover rate was 9.1% (2017: 8.9%) with voluntary attrition 6.1% (2017: 6.4%) and we retained 93.8% of high performers (2017: 95.4%).
Employee engagement is key to our employee retention with our 2018 Gallup survey showing improvement in the majority of areas.
|79% participation rate.|
|27% active engagement (2017: 23%).|
|Know the purpose and mission of the organisation.|
|Greater understanding of what is expected of them.|
|Opportunities for growth and personal learning for employees.|
A diverse workforce broadens perspectives and enhances performance. Diversity includes gender, race, age, disability, experience, religion, values and beliefs and sexual orientation. Gender parity is a global issue, while race is a focus in South Africa.
In terms of gender:
- 61.1% of employees are women (2017: 61.4%).
- 33.0% of our Executive Committee were women as at 31 December. This has since reduced to 25% following the retirement of Maria Ramos (2017: 36.4%).
- 34.9% of senior leadership are women (2017: 34.1%).
- 60.8% of promotions were women (2017: 59.0%).
We support workplace needs, including specialised facilities and technology for employees living with disabilities. 0.4% of our workforce have self-declared disabilities.
We have multiple networks that provide employees with support: Reach (disability), Spectrum (lesbian, gay, bisexual and transgender, intersex (LGBTi) and in South Africa, transformation committees.
In terms of age, 17.6% of our employees are younger than 30 years; 70.4% between 30 and 50 years old and 12.0% are over 50.
B-BBEE progress in South Africa
- 74.0% of employees in South Africa are Black (2017: 71.9%).
- 33% of our executive directors (2017: 25%) and 50% of other executive management (2017: 50%) are Black.
- 49.3% of senior management are Black (2017: 44.3%).
- 86.8% of promotions were Black (2017: 80.8%) and 95.0% of external hires were Black (2017: 90.1%).
- 2 072 learnerships were provided to Black people, of which 1 424 were employed by Absa and 648 were unemployed people.
Distinctive development opportunities.
Our fresh approach to talent and development opportunities is being developed. This is encompassing a refresh curriculum, delivery platforms and recognition to drive achievement of the Group strategy.
We invested R426m in direct training costs (2017: R487m) and employees can access a catalogue of 7 710 different learning programmes (2017: 3 847). We have a number of specialised academies for key skills, including finance, risk, technology and information security, compliance and internal audit. Highlights include the following:
- We launched in 2018, our Africa Converged Security Academy with Rhodes University enrolled 40 candidates specialising in information security.
- 477 employees graduated from our Compliance Career Academy run in partnership with Duke Corporate Education and the University of Cape Town (2017: 190).
- Our Digital Academy internship hosted 36 interns (2017: 38), of whom 11 have taken up permanent employment and 21 are external contractors. A further 59 interns are completing a specialised system developer qualification.
We continue to collaborate with BankSeta on the Africa Expansion Programme to develop leaders across Africa.
135 graduates from across the continent participated in our 2018 Rising Eagles Programme (2017: 85). They join over 1 078 young professionals who have started their careers with the Group since the programme’s inception in 2008. We hosted 2 284 learnerships and internships in total in South Africa (2017: 2 214).
106 employees were on an intra-Africa assignment (2017: 117). 49% were from South Africa and went to Absa Regional Operations, 36% from Absa Regional Operations came to South Africa and 15% moved between Absa Regional Operations countries. Barclays assignees are down to seven from 25.
Ethical business conduct.
The financial services industry relies on trust, and good conduct is based on our daily behaviours, exhibited in our individual and collective actions and decisions. We recognise the systemic importance of the financial services sector, and the need for our employees to aspire to the highest standards of culture and conduct.
We have a comprehensive approach that educates and empowers all employees in terms of their rights and responsibilities, defines the behaviours we reward and the behaviours we discourage. Our code of conduct guides our interactions with stakeholders across the business. All of which contributes to a culture of trust.
Performance management and reward decisions emphasise behaviour and commercial objectives, encouraging the appropriate conduct, and making the consequences of misconduct clear.
Our training and awareness programmes, underpinned by clear policies, ensures that our employees:
- Are aware of the Values and behaviours expected of them.
- Develop a sensitivity to situations of real or perceived conflict of interest and learn how to deal with them when they arise.
- Put Treating Customers Fairly at the forefront of what we do.
- Are aware of the tools available to them to raise their concerns of unethical behaviour or suspected fraud through our whistleblowing programme.
Misconduct matters were 5.2% of headcount (2017: 5.4%) with a small percentage of these related to matters such as dishonesty/misrepresentation and resulted in dismissal. Misconduct matters excludes theft and fraud as these are not dealt with through the internal disciplinary process.
Grievances were 2.0% of headcount (2017: 1.1%) and are mostly due to dissatisfaction with annual performance ratings.
Our success is interlinked with the wellbeing of the societies in which we operate. We aim to amplify the positive impact of the Group by contributing to solutions that address a number of socio-economic and environmental challenges.
|Key concerns and expectations|
|Our material focus areas|
|Supporting the education ecosystem holistically.|
|Supporting initiatives that drive entrepreneurship and socioeconomic growth.|
|Improving access to financial services.|
|Environmental stewardship in our operations and lending.|
Supporting the education ecosystem holistically.
We achieve this by providing:
- financial support to individuals pursuing tertiary studies;
- strategic funding, training and infrastructure support to educational institutions and government agencies; and
- workplace exposure, job-shadowing and job placements.
We invested R266m in education disbursements (2017: R261m) of which R181m was invested in scholarships to 4 142 students across 100 universities in Africa (2017: R154m; 3 568; 21).
Our technical and vocational education training (TVET) college programme reached 50 TVETs, with 1 112 students completing their workplace exposure with Absa (2017: 36; 1 236).
We trained a further 2 107 governing body members from 656 schools in South Africa in financial management and governance (2017: 2 636; 669).
9 298 young people in South Africa and 4 223 in Absa Regional markets received work exposure, internships or placement opportunities.
Supporting initiatives that drive entrepreneurship and socio-economic growth.
To encourage socio-economic growth, we:
- support small and medium enterprises (SMEs) by making procurement opportunities available;
- provide training and business development support to suppliers and entrepreneurs; and
- provide access to finance.
Successful, competitive, and sustainable entrepreneurs need access to business skills, information, networks and markets. Over 9 550 SMEs and aspiring entrepreneurs benefited from one or more business development support interventions. These include training activities, strategic events, partnerships with non-profits, global development organisations, government and access to corporate customers and their value chains.
We have a number of high-impact, high-value business solutions which are tailored to each entity such as the Absa Enterprise Development Programme and the Absa Accelerator. The Accelerator is a four-month programme for Absa-banked SMEs (with a turnover between R0.5m and R1m) and incubated 974 SMEs. An additional 550 Absa-banked businesses that generate turnover above R1m participated in the six-month one-on-one mentorship and coaching programme.
Our structured approach to value chain financing blends our commercial funding with more affordable funds and/or guarantees from third parties to provide more affordable financing rates for emerging businesses that would not otherwise qualify for traditional finance.
We provided R156m in supplier development contributions for SMEs in our supply chain (2017: R108m) of which R88.3m was lending at preferential rates including zero-rated loans (2017: R89m). We lent R371m in development funds to SMEs in corporate value chains across our African markets (2017: R107.4m).
In Ghana, 748 SMEs and aspiring entrepreneurs were upskilled in partnership with the British Council through customised trade and forex clinics conducted by RBB.
In Tanzania, 612 SMEs were trained in partnership with the Tanzania Revenue Authority, the Tanzania Investment Centre and the Tanzania Chamber of Commerce, Industries and Agriculture.
In Zambia, 78 SMEs were trained in partnership with the Zambia Development Agency.
In Botswana, 210 SMEs and young farmers were upskilled with business training. This included 45 who were supported via EntBanc MySME Toolbox (an online business planner that helps start-up and existing entrepreneurs to create their own business. It includes samples and templates, business planning resources and ‘how-to’ articles).
B-BBEE progress in South Africa
We are increasing our spend with accredited Black-owned and Black women-owned suppliers in our focus areas, being corporate support services, technology, banking operations and professional services, through supplier development initiatives. These initiatives increase Black SMEs’ capacity and their ability to meet our needs. We divide contracts into smaller pieces of work and include small suppliers in our database to develop qualifying small enterprises and exempted micro enterprises.
- R18.4bn total weighted spend with 2 244 B-BBEE- accredited suppliers (2017: R17.9bn; 2 347)
- 1 747 exempted micro-enterprises and qualifying small enterprises were supported with R2.9bn procurement spend (2017: R2.9bn; 1747)
- R8.6bn total weighted spend with 50% Black-owned suppliers (2017: R6.5bn)
- R6.4bn total weighted spend with 30% Black women-owned suppliers (2017: R5.5bn)
Improving access to financial services.
We contribute to a more inclusive economy and the financial wellness of our communities by developing affordable needs-based financial products and innovative convenient delivery channels, supported by consumer education and financial literacy training. We aim to use various communication channels to educate customers on managing the costs of everyday banking products.
A range of products serves the needs of the entry market, and we have sought ways to better meet customer needs and increase accessibility, such as Group Savings and PEP Money (South Africa), Atlas (Ghana) and Motshelo (Botswana).
Affordable housing home loans reach single or joint households earning less than R23 300 per month. We made R1 140m available to 3 519 customers. This approach includes loans through a government-led, finance linked, individual subsidy programme for individuals earning less than R22 000. We also provided 47 150 customers with R1 697m of micro and personal loans for building. 4 308 customers benefited from our borrower education programme covering key aspects of home ownership, home maintenance and personal financial matters.
In support of the South African government’s affordable housing development projects, we increased our loans to R12.8bn (2017: R11.6bn).
Our consumer financial education interventions empower individuals to make informed choices and improve their lives through responsible personal financial management. 100 746 South African beneficiaries received consumer financial education (2017: 76 917). Financial literacy training was provided to 7 168 individuals across Absa Regional Operations.
Environmental stewardship in our operations and lending.
Our environmental impacts are (i) indirect via our lending and investment practices; and (ii) in managing our direct environmental footprint.
As signatories to the Equator Principles, we expect project sponsors of large corporate deals to undertake environmentally and socially responsible developments.
A total of 13 Equator Principle projects reached financial close in 2018, of which 12 were project finance related (2017: 0) and 1 was a project-related corporate loan (2017: 2). Environmental and social risk guidance was provided on a further 103 transactions (2017: 98).
South Africa is the continent’s largest renewable energy market. To date, the Department of Energy has approved 92 long-term projects, with a total capacity of 6 322MW, under the South African Renewable Energy Independent Power Producer Programme. We closed debt financing of R22bn for 12 renewable energy projects as part of the latest bidding round. In total, we have financed 33 long-term projects with a combined value of R80bn and 2 916MW across solar photovoltaic, wind, concentrated solar technologies and biomass.
In terms of our operations, we strive to reduce our natural resource consumption and pollution. Total energy consumption increased by 2.7% (2017: 8.6% reduction), and carbon emissions decreased 2.8% (2017: 0.5% increase). In South Africa, we have Green star ratings for five buildings; we maintain 1.4MW of solar photovoltaics and saved 42m litres of water (2017: 14.0m).
In 2018, we launched our #BeatPlasticPollution campaign by piloting the replacement of single-use plastic with biodegradable materials in four large offices in South Africa for three months. Following on the success of the pilot, single-use plastic will be replaced with biodegradable material in our main campuses housing more than 22 000 employees.
Regulators and governments provide the legal and regulatory frameworks that guide the way we do business. Industry bodies (and organised business interest groups) are an important channel through which we engage with regulators and government.
|Key concerns and expectations|
|Our material focus areas|
|Complying with all laws and regulatory requirements.|
|Supporting consumer protection and preventing financial crimes.|
|Driving an ethical culture.|
Complying with all laws and regulatory requirements.
Laws, regulations and codes define how we conduct business. These cover many aspects within our business, from Know Your Customer requirements to the protection and processing of information, through to how we design and sell our products and services.
Regulations continue to evolve and, while this places additional requirements on the Group, we support efforts to ensure a stable financial services sector and a safe and fair operating environment. We seek to balance the requirements and the cost of compliance to minimise the impact on customers and on shareholder returns.
In South Africa, we are primarily regulated by the Prudential Authority within the South African Reserve Bank (stability of the financial system), the Financial Sector Conduct Authority (overall market conduct), the Financial Services Board (non-banking financial services, including insurance and investments), and the National Credit Regulator (consumer credit). Ancillary regulators include the Competition Commission of South Africa, the Financial Intelligence Centre, National Consumer Commission, South African Revenue Service and the JSE.
In Absa Regional Operations, we are primarily supervised and regulated by the central banks and, in some instances, also by financial market authorities.
Effective compliance with local and international banking regulations is critical for a competitive and sound banking system which enjoys good international standing. We follow a structured approach to ensure that business processes, policies or system changes necessary for regulatory change are implemented.
The regulatory landscape has a wide-reaching impact on our business, and we provide a summary of the key regulatory themes currently in focus with key achievements to date:
- Exceeded Basel III capital requirements, with a core tier 1 equity ratio of 12.0% (above the South African Reserve Bank requirement of 7.375%).
- Achieved a liquidity coverage ratio of 116.7%, above the 2018 SARB minimum target requirement of 90%.
- Achieved a net stable funding ratio of 110.1% above the minimum regulatory requirement of 100%.
- Progressed the implementation of Board approved tactical processes and procedures within our Risk Data Aggregation and Risk Reporting (BCBS239) programme with a strategic automation solution to be planned by 2021.
- Completed a complex programme to implement the requirements of IFRS 9.
- Balanced processing efficiencies with local requirements as we focus on ensuring the protection of our customer data. In South Africa, we have embedded our approach to the draft Protection of Personal Information Act.
- Maintained a level 2 B-BBEE contributor status under the Amended Financial Sector Code in South Africa.
Attention is increasingly on environmental, social and governance performance. We comply with King IV, we have adopted the UN Principles for Responsible Investing and the Code for Responsible Investing in South Africa and we are monitoring other guidelines such as the Task Force on Climate-related Financial Disclosures. Our tax philosophy ensures we pay the appropriate amount of taxes in the jurisdictions where we operate.
Compliance reviews either affirm the effectiveness of controls or identify deficiencies where we adopt appropriate remedial and/or mitigating steps. In the normal course of business, regulators conduct reviews of our controls and progress in meeting regulatory requirements. At times, however, remedial action is required, and administrative penalties and fines may be levied on the Group.
Supporting consumer protection and preventing financial crimes.
We continue to see an increasing emphasis on regulations relating to responsible investing and financing initiatives.
Responsible credit and insurance are topical regulatory matters. We continue to respond to the limitation of fees and interest rates, maximum costs of credit life and engage with regulators on mechanisms for resolving over-indebtedness/debt relief.
In South Africa, our largest market, we successfully responded to:
- the Financial Sector Regulation Act, which includes the Twin Peaks regulatory framework;
- Retail Distribution Review;
- Financial Intelligence Centre Amendment Bill; and
- Amendments in the Financial Advisory and Intermediaries Services Act.
We continue to monitor various developments, including the Financial Sector Laws Amendment Bill, the National Credit Amendments Bill, the Conduct of Financial Institutions Bill and the South African Retail Banking Diagnostic.
There has been a wide economic impact on society as a result of corruption, leading to an increased need for business, in particular, to maintain financial discipline, ensure appropriate conduct, and to increase contributions to society at large.
We have a zero-tolerance approach in combating money laundering, corruption and terrorist financing, and constantly enhance our control environment to reduce the risk of our employees or customers breaching legislation when dealing with the Group.
98.2% (2017: 98.6%) of our employees have completed fighting financial crime training that includes anti-bribery and corruption, anti-money laundering and sanctions.
Driving an ethical culture.
We are committed to ensuring we conduct ourselves in accordance with both the law and our Values; that we act in the right way and treat our customers fairly and that we apply a conduct lens to our corporate activities, the entities with which we do business, and those to whom we donate. We remain vigilant in terms of our suppliers, customers and other business associations and take the necessary steps should allegations regarding corrupt practices come to light.
Our conduct risk framework is embedded within the Enterprise Risk Management Framework and brings together all our risk activities and helps us to focus on:
- providing appropriate products and services at the right prices to our customers;
- upholding market integrity;
- rewarding the right activities and behaviours; and
- mitigating potential risks.
99.9% (2017: 98.8%) of our employees have completed Conduct Risk training while 99.9% (2017: 99.4%) have attested to our code of conduct.
Our Treating Customers Fairly Outcome score is based on the measurement of the experience of customers on the perceived performance of the Group against our conduct risk, as well as the expected outcomes of Treating Customers Fairly. The score decreased marginally to 60% (2017: 61%)
We remain focused on driving innovation, system stability and increasing employees’ product knowledge and skills.
Whistleblowing provides a safe platform for employees to confidentially and anonymously raise concerns of unethical behaviour and/or fraud. Tip-offs are the most common detector of fraud. 458 tip-offs were received in 2018 with 198 being employee conduct-related. 27% of these were substantiated.
Our ten target conduct outcomes
- Our culture places customer interests at the heart of our strategy, planning, decision-making and judgments.
- We do not disadvantage or exploit customers, customer segments, or markets. We do not distort market competition.
- We proactively identify conduct risks and intervene before they crystallise by managing, escalating and mitigating them promptly.
- Our strategy is to develop long-term banking relationships with our customers by providing products and services that meet their needs and do not cause detriment.
- We provide banking products and services that meet our customers’ expectations and perform as represented. Our representations are accurate and comprehensible, so our customers understand the products and services they are purchasing.
- Our products, services and distribution channels are designed, monitored and managed to provide value, accessibility, transparency, and to meet the needs of our customers.
- We safeguard the privacy of our customers’ and employees’ personal data.
- We address any customer detriment and dissatisfaction in a timely and fair manner.
- We facilitate market integrity.
- We uphold the reputation of Absa.
Our shareholders and debt investors provide capital and funding, and have a vested interest in the performance of the Group. We require a sound relationship to ensure a shared expectation around our strategy and future performance. We present a snapshot of our normalised performance against our material focus areas and this should be read in conjunction with the Financial Directors’ report that follows on page 41.
|Key concerns and expectations|
|Our material focus areas|
|Sustainably grow revenue with the turnaround of RBB South Africa being a priority.|
|Execute the Separation.|
|Effectively manage risks.|
|Improve efficiency while enabling strategic investments.|
|Deliver appropriate shareholder returns.|
This section should be read in conjunction with the following documents that provide detailed information on financial performance and risk management:
Sustainably grow revenue with the turnaround of RBB South Africa being a priority.
Revenue growth of 4% has improved slightly, despite the adverse impact of IFRS 9 and lower prevailing interest rates across our ARO presence countries. We seek to grow our revenue faster, on average, than the South African banking sector from 2019 to 2021 with an improving trend over time and within appropriate risk appetite parameters. Key to this, are our 2019 priorities outlined on page 25. Most notably, RRB SA is progressing its restructuring and will focus on building momentum towards its targets.
Execute the Separation.
The Separation remains on track and within budget with 103 of the 198 services provided by Barclays were terminated in line with the Transitional Services Agreement. 140 of the 266 projects have been completed, including five of the 24 largest most complex projects (platinum projects).
Effectively manage risks.
We maintained a strong capital adequacy position with capital buffers sufficient to be able to withstand stressed conditions. Our liquidity position remained healthy within liquidity risk appetite. We continued to invest in infrastructure, process re-engineering, people and technology in order to deliver improved operational resilience.
Overall growth in loans and advances to customers of 12% reflects positive momentum during the year. This growth was achieved without a material change in risk appetite, which together with the prolonged period of a low interest rate environment, writing quality new business and restructuring our collections, all resulted in an improved credit loss rate.
Improve efficiency while enabling strategic investments.
Negative Jaws of 1.7% reflects operating cost growth which is faster than income growth. Normalised cost-to-income ratio has increased to 57.7% from 56.7% with a target of low 50s by 2021. Our structural cost programme continues to deliver efficiencies as we remain focused on discretionary costs and continue to plan for further savings opportunities in operations, in the Absa Regional Operations’ cost base and technology.
Deliver appropriate shareholder returns.
Normalised return on equity increased slightly to 16.8% from 16.5% in 2017. Our medium-term target is to achieve a return on equity of 18-20% by 2021 while maintaining an unchanged dividend policy. We declared a 4% higher full-year dividend per share.
Contributing to the United Nations Sustainable Development Goals
By providing financial services:
- to individuals, we enable them to enhance their financial stability and quality of life;
- to businesses, we contribute to economic growth, job creation and access to capital markets; and
- to sovereigns we contribute to the funding opportunities and operations of the country.
By conserving natural resources and driving diversity, financial inclusion, education, and enterprise development, we contribute to the societies and natural environment in which we operate. Our sustainability, and that of the communities around us, depends on our ability to effectively use and manage the resources in our value chain.
The United Nations Sustainable Development Goals (SDGs) are 17 global sustainable development priorities and aspirations agreed by member countries (including South Africa) at the United Nations in 2015, and were developed with input from business, civil society and other stakeholders.
We believe we deliver positive impacts by:
- developing accessible products and services, reducing barriers and driving innovation to achieve wider financial inclusion;
- providing financing solutions including those to address environmental and social challenges;
- supporting the transition to a more sustainable economy and managing our impacts on the environment;
- supporting entrepreneurs with financial services and procurement opportunities in order to drive economic growth and job creation;
- helping people gain access to quality education as well as skills development through employability initiatives;
- contributing to the stability of the financial services system though sound governance, ethical conduct, fraud and data security and the prevention of money laundering and terrorism financing;
- providing employment free from discrimination underpinned by fair labour practices and employee wellbeing; and
- delivering on diversity goals across race and gender.
Where relevant, we will pursue these activities in partnership with other stakeholders.
In the stakeholder scorecard section, we provide reference to the specific Sustainable Development Goals where we create value. These links have been determined by an analysis of the underlying 169 targets.