Barclays moves to reassure customers

JSE-listed Barclays Africa Group emphasised on Sunday that it was well capitalised and independent. This came as customers raised concern about its future after the Financial Times reported that London-based parent Barclays Bank wanted to exit its African operations.

 

The Financial Times newspaper, quoting unnamed people familiar with the matter, said on Saturday that Barclays had decided to refocus on its core UK and US markets after a review of its African business including SA’s Absa Group, and concluded that in principle, it made sense to withdraw from the continent.

Jes Staley, Barclays’s new CEO, was planning to make the announcement tomorrow, the newspaper said.

Barclays Africa said on Saturday the reports were "still speculation at the moment" as there had been no announcement by Barclays. "Barclays Africa is the holding company for Absa and we are strong and independently funded," the JSE-listed company said on Twitter on Sunday, responding to customers’ concerns about the future of Absa and whether their cash deposits were safe if Barclays was pulling out of Africa.

The Barclays board had delegated authority to a subcommittee to look into how and when its 62.3% stake in Barclays Africa, valued at about R76.5bn would be sold, the Financial Times reported. By delegating authority, Barclays avoided having to disclose the decision immediately. This meant a sale of its stake in its Johannesburg-based subsidiary would depend on numerous factors including market conditions and the response of regulators.

SA’s Public Investment Corporation (PIC), which manages about R1.5-trillion in assets on behalf of the Government Employees Pension Fund, told Business Day last month it was keen to increase its 5.4% stake in Barclays Africa if Barclays wanted to sell down its holding.

A Barclays sell-down is seen as an opportunity for domestic investors to reclaim the banking asset from British control. The PIC is the biggest South African investor in Barclays Africa, with its stake valued at about R6.5bn.

The talk of a sell-down comes less than three years after Barclays increased its stake in Barclays Africa Group to 62.3% from 55% in an R18bn deal. In that transaction, Absa bought eight of Barclays’s African operations to form the Barclays Africa Group.

Investment bankers said there were no obvious strategic buyers for the African business.

The value of the stake has fallen in recent months, making the option of steadily selling the stake to institutional investors less attractive.

Barclays declined to comment.

Several people who have met Mr Staley recently said he recognised Africa was one of Barclays’ few genuine growth areas, but he believed it was becoming a costly distraction as the rand devalued and the country’s economy slowed down. The bank also saw extra risks of corruption and misconduct in Africa.

One benefit of selling out of Africa is that it could attend to worries about Barclays’ capital. Analysts at Jefferies estimate that a sale could add as much as 0.8 percentage points to Barclays’s core capital ratio — taking it much closer to its 12% target.

"While we expect the process of selling Barclays Africa Group to prove more difficult than the market currently expects … a wholesale exit from Africa would seem to make sense," Joseph Dickerson, banks analyst at Jefferies, said in a note this month.

Barclays also owns operations in Egypt and Zimbabwe. An attempt to sell these operations to Barclays Africa failed last year.

Barclays was reported by Bloomberg earlier this month to be considering the sale of its Egyptian business, which was valued at $500m.