Why Bar­clays is re­duc­ing its Absa stake

Financial Mail - - FRONT PAGE - Moyagabo Maake maakem@bdlive.co.za

The piece­meal sale of Bar­clays Africa may be an op­por­tu­nity for pan-African fi­nan­cial ser­vices group At­las Mara, founded by for­mer Bar­clays CE Bob Di­a­mond and en­tre­pre­neur Ashish Thakkar, to carve out its African bank­ing em­pire.

Bar­clays on Tues­day con­firmed its plans to sell its hold­ing in Bar­clays Africa over a pe­riod of two to three years. It wants to con­sol­i­date its busi­ness in Europe and the US.

At­las Mara, which has stated in­ten­tions to grow by ac­qui­si­tion, raised $625m from an ini­tial pub­lic of­fer­ing and pri­vate place­ment of its shares. On its own, this is too lit­tle to take Bar­clays’ stake, val­ued at about $4.9bn, off its hands.

At­las Mara has made no se­cret of its in­ten­tions to build a premier fi­nan­cial in­sti­tu­tion in sub­Sa­ha­ran Africa. The Fi­nan­cial Mail is in­formed that it is of­ten ap­proached by ven­dors about deals, but there hasn’t been a sub­stan­tive ap­proach from Bar­clays yet.

At­las Mara was un­able to com­ment on what it says is spec­u­la­tion about a deal.

The Black Busi­ness Coun­cil, which has re­peat­edly called for a ma­jor­ity black-owned SA bank, says it would not en­cour­age black in­vestors to “over­pay for such an as­set”.

“While we be­lieve the Bar­clays win­dow pro­vides an op­por­tu­nity, it makes more sense for African Bank to re­vert to its ori­gins in terms of its found­ing fa­thers,” says sec­re­tary-gen­eral Xolani Qubeka. He is re­fer­ring to in­vestors led by Sam Mot­suenyane, who founded the bank, which later col­lapsed un­der the lead­er­ship of Leon Kirki­nis.

But the in­vest­ment may have prom­ise.

Bar­clays is beat­ing a re­treat from a com­pany that has de­liv­ered bet­ter re­turns than two of its four core units over the past three years. Only Bar­clay­card, its credit card busi­ness, has out­per­formed Bar­clays Africa on a stand­alone ba­sis.

Bar­clays is one of 30 banks the Fi­nan­cial Sta­bil­ity Board and Basel Com­mit­tee on Bank­ing Su­per­vi­sion have des­ig­nated as too big to fail.

Th­ese banks have to col­lec­tively raise nearly $1.19 tril­lion in cap­i­tal to ab­sorb losses and avoid tax­payer bailouts, as hap­pened dur­ing the 2008 global fi­nan­cial cri­sis.

Nico Smuts, an an­a­lyst at 36One As­set Man­age­ment, says the rea­sons Bar­clays gave for the pro­posed sale do not re­flect neg­a­tively on Bar­clays Africa.

“Due to a tsunami of new reg­u­la­tions that has hit Euro­pean banks in re­cent years, Bar­clays Plc has be­come a dis­ad­van­taged owner of Bar­clays Africa,” he says. Puni­tive cap­i­tal re­quire­ments mean that Bar­clays, as a con­trol­ling share­holder, re­ceives less on its in­vest­ment than smaller share­hold­ers.

“It makes fi­nan­cial sense for Bar­clays Plc to re­duce its stake to a level where most of th­ese puni­tive cap­i­tal re­quire­ments no longer ap­ply.”

In its an­nual re­port, Bar­clays CE Jes Sta­ley says: “We face a reg­u­la­tory en­vi­ron­ment where we carry 100% of the fi­nan­cial re­spon­si­bil­ity for Bar­clays Africa, and re­ceive only 62% of the ben­e­fits.”

Bob Di­a­mond Op­por­tu­nity to build African em­pire

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