Don’t panic: Barclays Africa, Absa are here to stay

But Barclays’ exit doesn’t send a positive message to foreign investors.

JOHANNESBURG – Customers of Barclays Africa needn’t worry about the safety of their deposits following news that Barclays Plc will sell down its 62.3% interest in the African banking group to a non-controlling stake over the next two to three years. But while Barclays Africa is in safe hands, the message that Plc’s decision sends is not a positive one for investment on the continent.

Making the long anticipated announcement on Tuesday, Barclays Plc cited regulatory pressures associated with being a globally systemically important financial institution (GSIFI) as its primary reason for selling its stake in Barclays Africa. This follows similar decisions to reduce stakes in businesses in Asia, Russia and Brazil.

“Given the UK’s more onerous regulatory capital requirements for subsidiary investments, it makes sense that Barclays would want to reduce its African exposure,” said Chris Steward, head of financials at Investec Asset Management.

Having spent the lion’s share of profits over the last three years on taxes, fines and regulation, Barclays Plc has insufficient capital in an environment where regulators are requiring them to keep more of it, according to Jan Meintjes, portfolio manager at Denker Capital.

“But if this was a fantastic investment opportunity for them, it would’ve made that decision a lot harder. The fact that there is uncertainty in the country and volatility in the exchange rate, makes the decision a lot easier, which is sad to see,” Meintjes said.

In its results announcement for the 12 months to December, Barclays Plc CEO, Jes Staley, highlighted a renewed focus on developed markets. “At the heart of Barclays’ strategy is to build on our strength as a transatlantic consumer, corporate and investment bank anchored in the two financial centres of the world, London and New York,” he said.

Barclays Africa CEO, Maria Ramos told journalists on Tuesday, “Our strategy to build a pan-African business is not changing because Barclays is making a different decision on Barclays Africa Group”.

“We will now engage with Plc and regulators to find the most appropriate and satisfactory outcome for all stakeholders. I don’t know what that is going to look like,” Ramos said.

She said that decisions around what to do with the Barclays brand, which the group’s operations outside of South Africa have adopted, would form part of these engagements.

Ramos highlighted that the group’s banking operations remain firmly under the control of Barclays Africa Group Limited (BAGL), which was formed when Absa Group Limited bought Barclays’s interests in Africa for R18.3 billion and subsequently rebranded.

Screen Shot 2016-03-01 at 3.50.24 PM

Source: Barclays Africa

Absa, meanwhile, sent SMSes to its customers on Tuesday afternoon assuring them that they would not be impacted in any way by the sale. “Absa is here to stay,” the SMS said.

‘We’ve got to lift our game’

While that may be true, David Shapiro, deputy chairman at Sasfin Securities, has warned that the sale by Barclays Plc sends the wrong message to foreign investors. He highlighted issues around corruption, corporate governance and the productivity of labour, which may have prompted Barclays Plc to elect to deploy capital in countries where it is not facing these issues.

“That’s the harsh reality. That’s where we have to say, ‘hold on a sec, we’re not that cute anymore, we’ve got to lift our game’,” he told Moneyweb.

The weakness of the rand is another major deterrent to foreign investors, said Shapiro, who joined the stock market in 1972 after qualifying as a chartered accountant. “The rand has lost some 9% of its value per annum over the last 20 years. That means as a foreigner you’re losing purchasing power and have to make sure that whatever returns you get compensate for that,” he explained, adding that most foreigners would want a “20% plus” return on equity.

“Barclays Africa continues to deliver a solid return on equity, but the contribution it makes to the parent group is significantly diluted after additional costs, capital overlays and once it is converted into pounds,” noted Investec’s Steward.

“Barclays intends to conduct an orderly reduction in its stake over the next two to three years, and as such we are not concerned that it will create a big overhang in the local market,” he added.

Barclays Africa reported headline earnings growth of 10% to R14.3 billion, for the 12 months to December 2015. Return on equity improved to 17%, from 16.7% a year earlier.

The International Monetary Fund (IMF) predicts that sub-Saharan Africa will grow at 4% in 2016, rising to 4.7% in 2017. This is well ahead of advanced economies, which are expected to grow at 2.1% for the next two years.


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Would not be too sure of that……………………
Calming the waters while exit plans are frantically being drafted in a dark back room.

Hi pwgg, thanks for your comment. What are you not too sure of? Barclays Africa’s plans to expand on the continent? That this sends the wrong message to foreign investors? Barclays Africa’s earnings rise? The regulatory burden facing Plc? Slowed growth in SA? That we shouldn’t panic? 🙂

Hanna, Maria says one thing and Barclays Africa says another. There was a time when business was conducted with a handshake, now it is very different. A lot of smoke and mirrors are used to buy time to jump ship or make other plans. I am not so sure about any of your questions, we live in Africa things change overnight. Go back a few years, the FM front cover had a picture of a certain gentleman who headed up Nedbank, the caption read “The ultimate banker”. A year later Nedbank called in Tom Boardman to rescue it. We read often about a certain gentleman who had African bank under control, enough said. When the 62% share holder says they are getting out and the local boss says they are here to stay how cab all these other things still happen. The ship needs to be steadied before anything can be done. I say again not too sure of anything relating to Barclays Africa.

“Don’t panic, ABSA are here to stay”
Well, she would say that, wouldn’t she?

“Don’t panic, ABSA are here to stay”

What an idiotic statement. Well it was said by a true Ixiot.

@pwgg: A change in shareholding does not mean that a bank is exiting a country or continent. Maria Ramos is the CEO of Barclays Africa, so what her and Barclays Africa say are effectively one and the same thing. I agree that it’s not good news that Barclays Plc is reducing its stake over time, since it reflects poorly on SA and Africa’s economic prospects, but let’s also appreciate that company shareholders change all the time, it’s a function of markets. Let’s also appreciate that South African banks are better capitalised and less leveraged than their European/American counterparts.

What junk ‘……………company shareholders change all the time, it’s a function of markets.’ Please do not lecture us or try to teach grandma to suck eggs.

In Africa it is a function of Africans. Period. Failure after uhuru failure ad nauseum. Nothing in Africa works as well as it should. When Barclays exits money exits SA which is bad. Particularly when egghead says SA is open for business.

You may as well have put a smiley face emoticom in your article.

There is a big difference to ‘a change in shareholding’ and ‘disinvesting from South Africa’. While the CEO Cinderella Ramos means well with her statement, the reality is that if the shares get sold to local takers, then a huge pile of cash IS leaving out shores.

As for what to do with the “Barclays” brand name, it is very simple. Change the name to EFF ABSA and instantly you will satisfy the millions of hopefuls waiting in the handout queue, and you also instantly reduce or eliminate that threatened risk of the sit in by the red clad janitorial staff who made the threats.

Think about the fact that R14.3 billion in earnings translates to about GBP635 million. Five years ago that level of Rand earnings would have translated to GBP1.3 billion and this is only going to get worse. Add the GBP decline in the value of their investment and the local regulatory uncertainty plus various other negatives and there is no reason to stay.

This is a bad day for SA no matter how the ANC et al spin it. Barclays are telling them we are sick of your nonsense.

About 17 years ago Barclays sold the profitable little business in Swaziland to Standard. They will no doubt engineer piecemeal sales of their various africa outlets over the next three years. Some plum business. They have already announced their plans to exit Zimbabwe

There is no need to feel sorry for Barclays UK. The came out here to grab their slice of what was available, with all the flees, flies, mice, vultures and other vermin descending on our shores when we threw the doors open to all and sundry. The got Maria and thought that would give them Trevor who in turn they thought, would give them access to our Government contracts, but they didn’t realize that Maria and Trevor had their own private agendas. Suffer babies, suffer.

I think everybody knows what to do when a banks says not to panic.

This rather retarded government of ours has always said it wants a bank to run, here’s an ideal opportunity for government to buy out the bank, and run it like it runs all the other SoE’s – would highly recommend that the funds are put up by PIC and IDC so that all government employees can see where their future pension funds will be invested – in one hit you achieve all BEE and transformation objectives in one fell swoop
As they say in the sciences QED

End of comments.



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