PIC brushes off Barclays buzz

IS A consortium going to buy 10% of Barclays Africa?

Bloomberg reports that a group of South African investors plans to make an offer, according to someone familiar with the matter.

But the CE of the Public Investment Corporation (PIC) Dan Matjila — who is believed to be heading the consortium — told Business Times that the socalled consortium was “just individuals talking”. He hinted that this group of individuals would ideally have a black economic empowerment flavour “if they can bring money to the table”.

The sale is the first part of the divestment from Africa initiated by new Barclays CEO Jes Staley. Barclays is pulling out of Africa to focus on its main markets. It has the option of selling Barclays Africa shares on the market or via a bookbuild. Barclays Africa shares rose on Friday as much as 4.3%, the most in more than three weeks, to close at R135.75.

Andrew Vintcent, a portfolio manager at ClucasGray, said any attempt to sell shares in Barclays Africa would be well received.

“It is undoubtedly cheap on a dividend yield of 7.5%, even though the return on equity is a still respectable 17%.”

Chris Botha, manager of Imara Equity Fund, said all banking stocks were cheap, which was to be expected in a rising interest rate cycle. But he argued that there might be only one more rate hike, as the economy was weak. “Absa, the main unit in Barclays Africa, has the potential of growing bad debts as the economy stagnates, but it does not justify this discount.”

The potential sovereign downgrade of SA is contributing to the low prices.

It will be no surprise if the PIC turns out to be the biggest single buyer of Barclays Africa shares. The asset manager, which handles the Government Employees Pension Fund’s assets of R1.8-trillion, expressed an interest in increasing its holding in the bank in January and it has plenty of firepower.

Steve Meintjes of Momentum SP Reid said it would not be negative for anyone if the PIC increased its holding to 10%.