(Bloomberg) -- Absa Group Ltd., South Africa’s third-biggest bank by assets, surged after it named Charles Russon as interim chief executive officer to replace incumbent Arrie Rautenbach, who requested early retirement.
The shares jumped as much as 5.4% in Johannesburg as of 12:30 p.m., the biggest advance in two months. Russon, the head of the lender’s commercial and investment banking unit, will take over as interim CEO on Oct. 15, while Rautenbach will retire on April 15, 2025, according to a regulatory filing. Credit losses that were lower than forecasts also lured investors.
Absa’s shares have dropped 18% since Rautenbach was named head of the lender in March 2022, and on Monday the firm reported its biggest profit decline in about four years. Rautenbach’s appointment also riled South Africa’s state-run fund manager for choosing a White man as leader after Daniel Mminele, the bank’s first Black CEO, quit unexpectedly.
“The positive market reaction obviously suggests that the market wasn’t really backing Arrie and his strategy,” said Adrienne Damant, an analyst at Avior Capital Markets Pty Ltd. Still, the frequent management changes at the lender have made it difficult to implement strategy, which contributed to Absa’s under-performance relative to peers, she said.
There have been a string of CEOs, in an interim or permanent basis, at the bank since Maria Ramos retired in 2019.
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Ramos was replaced by René van Wyk, who was followed by Mminele, whose exit saw Jason Quinn step into the position as interim CEO before Rautenbach’s appointment.
Russon’s position at CIB will be taken over by Yasmin Masithela on an interim basis effective Oct. 15.
Profit Drops
Absa on Monday also reported that net profit in the six months to June fell 8.8% to 9.85 billion rand ($553 million). Revenue rose 3.4% to 53.71 billion.
“The weaker currency in the regions against the rand does mean that the translation into the rand is less,” Deon Raju, financial director at the bank said. “The regional operations continue to face fiscal challenges and debt sustainability issues, so the backdrop there does remain challenging.”
Still, Absa took credit impairment charges of 8.3 billion rand, beating RMB Morgan Stanley’s forecasts, analyst James Starke wrote in a note to clients.
The lender said it was optimistic that performance will improve in the second half, buoyed by optimism in South Africa, and as macroeconomic conditions in the rest of the continent improves.
The bank proposed a dividend of 6.85 rand per share for the period.
(Updates to add analyst’s comment in fourth paragraph.)
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