New Barclays chief mulls African scale-down

December 17, 2015, 4:50am

By Martin Arnold and Andrew England, the Financial Times on Business Day Live
Picture: REUTERS/YURI GRIPAS

BARCLAYS is considering breaking with almost 100 years of history by selling some or all of its banking operations in Africa as part of a review led by new CE Jes Staley.

Mr Staley has raised questions about the strategic fit of the UK-based bank’s large African business with the rest of the group, but no decision has been taken yet, according to people familiar with the matter. Barclays declined to comment.

The Barclays review comes after investor confidence in SA was shaken by President Jacob Zuma’s decision to change his finance minister twice in less than a week at a time that the economy is under severe stress.

Mr Staley took charge of Barclays at the start of this month. The former JPMorgan Chase executive is examining the bank’s overall strategy and is expected to present his plans to investors around the time of its annual results on March 1. He is also expected to announce several thousand job cuts in its investment bank, particularly in Asia.

Barclays has had operations in parts of Africa for almost a century. But the recent contribution of the African business to the overall group’s profits has been hit by the devaluation of the rand against the British pound.

The African unit’s return on equity was 9.3% last year — below the bank’s target of 11%.

The rand crashed to record lows against leading currencies last week. While it partly recovered this week, it is still down 25% against the pound over the past year.

Mr Staley, who plans to visit Africa in his first trip outside the US and UK, is unlikely to pull out of the continent, people familiar with the matter said.

But Barclays could decide to sell its retail banking operations in much of Africa including SA, Kenya, Mauritius, Botswana and Zambia, while keeping some corporate and investment banking activities in the region.

The UK bank owns 62% of Barclays Africa Group Ltd (BAGL), which is listed on the JSE and controls the group’s main operations on the continent including Absa.

Investment bankers said if Barclays did decide to retreat from Africa, it could sell BAGL shares into the market or trigger domestic consolidation by selling the stake to a domestic rival, such as Standard Bank, Nedbank or FirstRand.

One potentially interested party is Atlas Mara, the acquisition vehicle set up by former Barclays chief executive Bob Diamond to buy African lenders.

But Barclays’ stake in its African offshoot is worth about £3.2bn — potentially putting it beyond the reach of Atlas Mara, which has a market value below £400m.

Barclays had planned to rebrand the Absa branch network under its own colours after increasing its stake in the Johannesburg-listed entity from 55.5% to 62.3% by merging its African activities three years ago. But the rebranding was recently shelved.

Talks broke down recently over a deal for Barclays to sell its Egyptian and Zimbabwean operations to its South African-listed subsidiary, raising questions about the future of its operations in those two countries. The economic outlook for Africa has deteriorated this year as oil and commodity prices have fallen sharply and China’s economy has slowed.

The International Monetary Fund forecasts 3.75% growth for sub-Saharan Africa this year, the lowest level since 2009.

Financial Times