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Barclays Africa over the years

A look at the banking group’s history, earnings and customer profile.

JOHANNESBURG – With origins dating back to 1991, Barclays Africa Group Limited (BAGL) – whose South African business is branded Absa – has a long history on the continent it calls home and remains one of Africa’s largest banking groups. As talk of a sale by its UK parent, Barclays Plc looms large over the bank’s future, with confirmation expected in its results announcement on Tuesday, Moneyweb has compiled a short history of the banking group.

Founded in 1991, Absa was an amalgamation of United Bank, the Allied Bank, the Volkskas Bank Group, and certain interests of the Sage Group. In 1998 these individual brands were merged under the Absa brand.

As part of its drive to expand into untapped markets beyond the UK, Barclays Bank Plc purchased a 55.5% stake in Absa in May 2005 for $5.5 billion, making it the largest purchase of a local bank by a foreign bank at the time.

In 2007, then Reserve Bank Governor, Tito Mboweni complained to the Financial Times (FT) that he had “yet to see the benefits of Barclays’ management of Absa”, describing the UK bank’s stewardship of its local charge as “discouraging”.

The FT quoted Barclays as expressing surprise at Mboweni’s remarks: “Absa has seen customer numbers and staff morale increase and we believe it has delivered a great deal of value to all its stakeholders,” it told the newspaper.

In November 2010, the FT reported that Barclays would place the “booming African market firmly at the centre of its growth strategy over the coming years”.

The Barclays Africa regional office was officially opened in December 2011 in Johannesburg. During the year, the Absa Group established an Africa Executive Committee to manage the combined African business, which included five Absa and two Barclays executives.

In 2012, Barclays Africa and Absa operations were consolidated into a single management structure in Johannesburg.

Barclays Africa Group was formed on July 31 2013 when Absa and Barclays’s African operations were combined.

As part of the merger, Absa bought Barclays’s interests in its African operations through the issue of ordinary shares to Barclays at a value of R18.3 billion. As a result, Barclays Plc’s stake in Absa Group, rebranded Barclays Africa Group, increased to 62.3% from 55.5%

The group has majority stakes in banks in Botswana, Ghana, Kenya, Mauritius, Mozambique, Seychelles, South Africa, Tanzania, Uganda and Zambia. The group has representative offices in Namibia and Nigeria, where it has submitted licence applications, as well as insurance operations in Botswana, Mozambique, South Africa and Zambia.

BAGL is the majority, and often sole, shareholder in all of the Group’s African banking operations. It owns 100% of Absa Bank.

Barclays Plc has operations in Egypt and Zimbabwe.

BAGL has consistently grown headline earnings over the past six years, despite global and local economic headwinds.

Year

Headline earnings

Year-on-year change

Return on equity (%)

Market capitalisation

Group customer numbers

2010

R8 billion

+6%

15.1

R100.5 billion

11.8 million

2011

R9.7 billion

+21%

16.4

R101.3 billion

12.1 million

2012

R10.4 billion

+7%

13.6

R117.8 billion

10.9 million*

2013*

R11.8 billion

+14%

15.5

R112.1 billion

11.96 million*

2014

R13 billion

+10%

16.7

R112.1 billion

12 million

2015 (half-year)

R6.8 billion

+11% from previous half-year

16.4

R155.1 billion

12 million

 Source: Barclays Africa annual reports and financial statements

*The massive changes in BAGL’s customer numbers can in part be attributed to the closure of dormant accounts and the loss, in 2012, of its contract with the SA Social Services Agency, which damaged its exposure to the new-to-bank market and dragged down its total number of entry-level customers.

Absa’s consistent loss of customers has been widely reported by various media over the years, with the bank then surprising on the upside when it announced that it had grown active banking customers in South Africa (those with cheque accounts, savings accounts and loans) from 8.6 million in June 2014 to 9.2 million in December 2014.

The bank has successfully turned its home loan business from loss making to profit making, while its vehicle finance and unsecured lending businesses continue delivering profits.

A state bank?

As at June 30 2015, these were the ten major shareholders in BAGL: 

Shareholder

June 30 2015 (%)

December 31 2014 (%)

June 30 2014 (%)

Barclays Bank Plc (UK)

62.32

62.32

62.32

Public Investment Corporation (SA)

5.44

5.58

5.22

Sanlam Investment Management (SA)

2.30

2.55

2.75

Stanlib Asset Management

2.18

2.31

2.18

Dimensional Fund Advisors (USA, UK, AU)

1.51

1.60

1.61

Allan Gray Investment Council (SA)

1.36

1.70

2.15

BlackRock Inc (USA, UK)

1.24

1.22

1.27

The Vanguard Group Incorporated (SA, AU)

1.23

1.18

1.14

Prudential Portfolio Managers (SA)

1.23

1.30

1.21

Investec Asset Management (SA)

1.00

0.67

0.91

Other

20.19

19.57

19.24

 Source: Barclays Africa Group

The PIC has expressed interest in increasing its stake in BAGL, while other of the group’s large domestic shareholders declined to comment or did not respond to requests for comment.

Mboweni has previously called for the creation of a state bank – and the state buying one of the existing banks to achieve that – which he argued could boost access to finance for citizens and business.

While competition authorities are unlikely to allow a local bank to buy Barclays Africa, a distinct lack of interest in emerging markets on the part of US and European banks would seem to rule them out. Some analysts have suggested that banks in China or India might be keen on the Africa exposure, but have cautioned that even they are short on capital with problems of their own.

One of the largest commercial banks in the State of Qatar, Doha Bank, last year established a representative office in South Africa. “At this stage, Doha Bank will not be showing any interest to buy a stake in Barclays Africa but it is not excluded that it may do so at a later stage,” it said in an emailed comment.

A local insurance or industrial concern might have the capacity to buy Barclays Africa, according to Wayne McCurrie, head of wealth portfolio management at Momentum Wealth. McCurrie believes that the pressure is on global players to get rid of emerging market exposure.

Barclays Plc’s announcement is expected on Tuesday. After plummeting in early morning trade, BAGL ended the day 6.10% lower at R136 a share. The JSE’s Banks Index gave up 2.04% on Monday, with BAGL’s ‘Big Four’ banking peers also weaker, though not by nearly as much as Barclays Africa.

The below graph reflects BAGL’s share price movement (in orange) over five years, with its peers reflected in blue (Standard Bank), red (FirstRand) and green (Nedbank). 

Screen Shot 2016-02-29 at 5.30.05 PM

Source: Bloomberg

COMMENTS   4

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No mention of Barclays Bank which had branches throughout SA and Nambia for many years before divesting in the 80s. It was superceded by FNB whose branding kept the same light blue colour of Barclays.

Thanks for the comment Palaboran. Fair point! The article was focusing specifically on Barclays Africa, rather than Barclays Bank, but I agree it’s interesting to note how far back the UK bank’s ties with Africa go.

So i played golf with the then Head of African Development 10 years ago and i asked him why on earth they would buy into a South African bank. His answer was: We will milk the excellent dividend for 10 year and sell it!
It is now 11 years but his word seem to be very true!

Best possible move for ABSA in the long term. Barclays contributed very little to the domestic banking landscape and they lost significant market share in the retail space,affluent markets,business banking and commercial property ,to name just a few.They have among the most dour, untalented people in the industry, with many of the more skilled individuals taking their services elsewhere.Little wonder with a parent only intersrested in exploiting the business ,they lost identity over the last 10 years.Better times ahead for ABSA staff and customers.Maybe a left field prediction but you heard it here first.Hopefully the out of depth Maria will also exit the scene.

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