Absa issued a shock profit warning yesterday, saying first-half earnings could fall by as much as 10%. This will put pressure on CEO Maria Ramos to implement additional, drastic measures to improve performance at the Barclays-owned group.

SA’s big four banks saw about R16-billion of their market capitalisation wiped out yesterday, after the Absa update sparked a frantic sell-off across the banking sector. Absa closed 8,3% down, amounting to almost R8-billion of its capitalisation.

Faced with the departure of experienced executives and staff disquiet about a major restructuring exercise, analysts say Ms Ramos’s leadership will be tested as she tries to restore earnings growth while fending off rivals clawing into Absa’s market position as SA’s largest retail bank.

Ms Ramos also has to replace her long-serving deputy, Louis von Zeuner, who has been a key executive driving growth.

Options available to sustain revenue growth include deeper cuts to expenses; raising interest income from the unsecured loans business; and reviving the performance of units such as Absa Capital, which reported reduced earnings in the year to December, analysts said yesterday.

Absa has lost lucrative government business to First National Bank, and mortgage market share to Standard, the largest banking group by market capitalisation.

Absa yesterday said headline earnings for the six months to June could be lower by as much as 10% below the R4,6-billion achieved in the comparative period last year.

This is the second time since the six-month reporting period to June 2008 that Absa has reported lower earnings.

Nervous investors spooked by Absa’s trading update, who had in recent weeks pushed banking shares to 52-week highs, decided it was time to sell yesterday, said Kokkie Kooyman, head of Sanlam Investment Management Global.

Absa blamed its reduced earnings on soaring impairments due to higher cover required on its mortgage legal book.

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