Diamond’s new kid may join up with Absa

Atlas Mara’s consortium bid to control Barclays Africa could reshape African banking, writes Hilary Joffe

ONE aims to be Africa’s leading financial services group. The other aspires to create subSaharan Africa’s premier financial services institution. In their current form, neither is much more than a couple of years old. And although the first, Barclays Africa, is much larger than newcomer Atlas Mara, an announcement from the latter last week raised the prospect that they could combine to pursue their African ambitions.

Atlas Mara is the new subSaharan Africa-focused banking group that was formed by former Barclays CEO Bob Diamond’s Atlas Merchant Capital in partnership with Ugandan billionaire Ashish Thakkar’s Mara Group in 2013.

Following a series of acquisitions in 2014, it had spent last year integrating its newly bought operations in seven countries into what it planned would be a banking group, said Mr Diamond, rather than just a group of banks, and it was seeking to become a regulated bankholding company.

Releasing its year-end results last week, Atlas Mara said Atlas Merchant Capital and Mara Group were part of a consortium bidding to buy the 62.3% stake in Barclays Africa that UK parent Barclays put on the market on March 1.

The consortium includes private equity group Carlyle, and although the other participants have not been identified, the Atlas Mara announcement made it clear the funding for a bid for the full 62.3% of Barclays Africa is in place.

Importantly, Mr Diamond and Atlas Mara CEO John Vitalo specified that this was permanent capital from strategic long-term investors.

That potentially attends to the criteria Barclays Africa CEO Maria Ramos spelled out in a recent Wall Street Journal interview, in which she said, “We are looking for a serious investor who would make a long-term commitment.”

While there had been speculation bidders might seek to buy the non-South African banking assets out of Barclays Africa, Ms Ramos said firmly this would not happen.

“We have no intention or interest in divesting our African banking operations (outside SA),” she said. As importantly, last week’s announcement disclosed that Atlas Mara was in talks to merge its own operations with those of the consortium if the bid succeeded.

So, potentially, this could be a case of Mr Diamond taking over Barclays Africa and injecting into the business the assets he has already bought, at least in countries in which there is little overlap.

Mr Diamond has assembled a team at Atlas Mara with strong Barclays and South African pedigrees including Mr Vitalo, a former Barclays Capital executive who headed Absa Capital in Johannesburg from 2005 to 2009, and former Standard Bank executive Arina McDonald, who is Atlas Mara’s chief financial officer. They knew Barclays Africa and Absa well — but never expected it would come up for sale, Mr Diamond said in an interview last week, in which he expressed confidence in the medium- to long-term prospects of SA and Africa, despite the continent’s slowdown and SA’s challenges.

He said that while previously, banks from the former colonial powers had long been primary sources of capital for the banking industry in Africa, the global financial crisis and the resultant regulations were reversing that.

“That opens new opportunities for new entrants like Atlas Mara,” he said. In bidding for control of Barclays Africa, the consortium will be buying a group that is still predominantly South African, despite the deal two years ago in which Absa bought Barclays’s banking operations in the rest of Africa excluding Egypt and Zimbabwe, bringing together 11 banks across the continent.

SA still accounts for just less than 80% of the group’s revenue, but earnings from outside SA are growing much faster. Headline earnings last year were up 10%, with SA up only 8%, while the rest of Africa delivered growth of 17%.

Mr Thakkar told investors last week that Atlas Mara still saw huge opportunities across Africa and would pursue these whether the deal with Barclays happened or not. One thing that had not gone well last year was the Atlas Mara share price, Mr Diamond told investors last week, but it was focusing on executing its strategy.

The firm has been broadening its investor base and raising capital and points to its ability to facilitate domestic investment in its operations.

Last year, it grew its loan book 15%, and revenue 24.5% in constant currency terms and shifted away from higher-cost wholesale deposits to lowercost retail and corporate deposits, with corporate funding now making up a third of its deposit base.

It is branding its various banks as “part of the Atlas Mara group”, as it seeks to integrate and consolidate the group.

Absa, which has invested a lot in the Barclays brand, will not be relishing a new brand and controlling shareholder — especially as Mr Diamond, once dubbed the “unacceptable face of banking” by a British politician, brings a powerful personality to the equation.

But where initially it seemed hard to spot who might buy Barclays’s stake, there now clearly is interest, and, according to Barclays, from a number of parties.

The effect on SA’s — and Africa’s — landscape is likely to be significant.

We have no intention or interest in divesting our African banking operations Atlas Mara would pursue opportunities whether the deal with Barclays happened or not