Big four bank Absa spent R5 billion on IT last year, as it improved its electronic platforms and geared up for new regulations that will affect the sector.
The bank yesterday published its results for the year to December and said total income grew 2%, to R42.8 billion. Net earnings improved 6%, to R8 billion. This is the first year that Absa has disclosed its total IT spend.
“As expected, 2010 was a difficult operating environment given the slow, uneven economic recovery both globally and domestically,” says CEO Maria Ramos. However, she says the bank continues to “invest significantly in our strategic growth initiatives”.
Absa spent R5 billion on IT during the year, which was a 14% increase on the previous year. Of this amount, R833 million went into depreciation. Staff costs accounted for R1 billion, and the bank spent R1.1 billion on “other” items and R2 billion on IT.
Deputy group CEO Louis von Zeuner says the company's large infrastructure investments went into its foreign exchange platform expansions into Africa. The investment in Tanzania and Mozambique was completed towards the end of the year, he adds.
Absa also revamped its short-term and life insurance platforms and invested in risk modelling, says Von Zeuner. The bank replaced branch and contact centre front-ends and improved its online and electronic banking platforms.
Investing for growth
In business banking, electronic facilities aided a market share gain of 4%, notes Von Zeuner. He says this gain would not have been possible without the investments in technology.
Von Zeuner says Absa will have to spend more on its systems as new regulations, such as King III, come into effect. The updated governance codes specifically tackle ICT governance.
In the coming year, the bank will also invest in data centres, although this could take the form of a partnership and may not necessarily be an infrastructure investment, says Von Zeuner. He adds that the bank wants to improve its information management to get to the point where it has a single view of the customer.
Absa could spend at the same level again next year, says Von Zeuner, if it sees top line growth coming through from its investments. However, this will depend on the business case, he adds.
Last year, the bank spent a total R4.5 billion on IT. However, this amount also included non-capital items, such as operational expenses and depreciation of assets. At half-year, Absa had expected to spend between R5.5 billion and R6 billion, of which R2.6 billion was spent during the first half.
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