Brexit fallout may hit bank sale

CHANGES to the Barclays Africa sale and the Old Mutual unbundling programme could be among the immediate effects of the market turmoil that followed last week’s vote for the UK to leave the European Union.

“Barclays Africa has not found another buyer yet‚ which may lead to Barclays negotiating for a cheaper price‚” MyWealth Investments chief executive Devin Shutte said.

Shutte said Old Mutual’s plan to split into four businesses was far from complete and there could be some changes in the terms and financing of the programme.

Barclays Africa shares ended 4.6% lower on the JSE on Friday at R146.07. Old Mutual shed 7.5% to R38.40.

PSG Wealth portfolio manager Adrian Cloete said Old Mutual’s US asset management business‚ Omam‚ had become more valuable in rand due to the currency moves.

“But it is just 5%-10% of Old Mutual’s overall value.”

From a UK investor’s perspective‚ Old Mutual Emerging Markets and the stake in Nedbank were a bigger proportion of overall value than the UK Wealth business.

“If the UK Wealth business and Nedbank are unbundled to shareholders‚ there is no change in the overall impact from Brexit‚” Cloete said.

He said the price Barclays plc would receive for its Barclays Africa stake would depend on the price Barclays Africa was trading at the time the shares were placed with institutions‚ if it was done through a normal book-building process.

“The proceeds Barclays plc received in pounds for its Barclays Africa stake would depend on the rand/pound exchange rate at the time.”

The pound lost 8% against the dollar on Friday. The rand lost 5.1% against the dollar and firmed 4.2% against the pound.

Analysts said there was uncertainty about market volatility and the future of the EU in the longer term.

“The big risk is that the EU would implode‚” Inkunzi Investments senior trader Petri Redelinghuys said.

He said market volatility was guaranteed over the next two years.

“Even Germany may decide at one point that the future existence of the EU was in jeopardy‚” he said.

Momentum Investments macro research head Herman van Papendorp said more than 80 000 pages of agreements would have to be renegotiated in Britain’s attempt to dissolve its 43-year partnership with the EU.

“This could take between four and five years to finalise,” he said.

Novare research head Nosibusiso Ngqondoyi said that if Brexit weakened the EU‚ “potential contagion remains a risk for the global economy‚ already faced with problems ranging from weak growth and deflation to high debt and unemployment”.