What impending Barclays Africa sale means for its customers

UK’s Barclays Bank Tuesday confirmed its long coming intention to sell its 62.3 per cent stake in Barclays Africa — removing the uncertainty that has clouded the company’s Africa operations since late last year.

Jes Staley, the Barclays chief executive, said in an interview with the American financial television channel CNBC that the group would “subject to shareholder and regulatory approval…reduce our interest in Barclays Africa to a non-controlling, non-consolidated position over the next two to three years”.

Barclays Africa, is the entity that in turn holds a 68.5 per cent stake in Barclays Bank Kenya (BBK).

Staley, who took office in December, has hinted that the lender would be looking to concentrate on its core operations in the United States and the United Kingdom, thus putting its African operations on the sale block.

The UK-based company said in a statement that the decision would not affect its customers in any way and that its future as Barclays Africa remained bright, including and its “ambition to be Africa’s leading bank.”

The announcement was made during release of the company’s annual results where its chief executive also announced plans to increase the bank’s investment in education and skills development across Africa.

“We plan to invest $93 million in education and skills development across Africa in the next three years,” he said adding that none of its Africa operations would be affected by ownership changes.

News of the sale has shocked the financial market since it was first made public last year in press reports but the bank has maintained that it will not affect its customers.

Barclays, which employs 42,000 people across Africa, maintains that it has a strong balance sheet of over $66 billion and is well capitalised.

Financial commentators say that a number of options are on the table for the UK’s banking giant which has a huge presence in Africa.

Barclays’ largest Africa unit is in South Africa but the lender also has a substantial presence in East Africa with 769,000 customers in Kenya, its second largest Africa market, 561,000 in Tanzania and 136,000 in Uganda.

READ: Barclays CEO confirms Africa divestiture

Barclays has had operations in parts of Africa for almost a century and is this year celebrating 100 years of continuous presence in Kenya.

Barclays Africa Group, which includes the South African network Absa bought in 2005, is one of the largest banks on the continent.

The bank has 1,267 branches across 12 African countries, including Kenya, Ghana, Tanzania, Mozambique, and Uganda.

The African banking unit generated £791 million of pretax profits in the first nine months of last year, 15 per cent of the bank’s total but has been imperiled by high operating costs.

Analysts said Barclays has the option of selling its retail banking operations in much of Africa, including Kenya while keeping some corporate and investment banking business.

The lender owns 62 per cent of Barclays Africa Group, which controls the Africa operations. Absa is a subsidiary that mostly operates in South Africa and Namibia. 

Investment bankers said that if Barclays did decide to retreat from Africa it could sell shares in the open market or to one or group of its current shareholders.

A takeover of the stake by local rivals such as Standard Bank, Nedbank or FirstRand has also not been ruled out.

Project Serengeti

It has also been suggested that Atlas Mara — firm founded by former Barclays CEO Bob Diamond — could be interested in the stake but there is doubt as to whether Atlas has the financial muscle that is required to buy Absa.

Earlier indications that a change in Barclays Africa operations was on the cards came after The Wall Street Journal and the Financial Times reported that the UK bank was considering selling its Africa business.

Another indication that change was afoot came with the suspension of Project Serengeti aimed at rebranding all its operations across the continent as Barclays Bank.

Despite acknowledging that Africa is one of the banks few genuine growth areas, the Financial Times said Barclays Africa operations were felt to be “a costly distraction” especially in light of a slowdown in the bank’s key South Africa market and devaluation of the rand.

The sale of the bank’s (£3.5 billion) stake in the Johannesburg-listed subsidiary “will depend on numerous factors, including market conditions and the response of regulators,” the Financial Times said.

Barclays’ problem seems to be that while it does not own all of the equity in its African subsidiary it does own all the risk should things go wrong.
Analysts said that one benefit of selling out of Africa is that it could address worries about Barclays’ capital.

“The decision marks a symbolic reversal for Barclays,” the Wall Street Journal said. “The bank built up its African banking network over nearly a century, making it one of the leading western banks, along with Standard Chartered PLC and Citigroup Inc. operating on the continent.”

Successive CEOs touted the Africa business as a growth driver for the British bank. But investor and regulatory pressure has forced Barclays, like many of its European peers, to damp down its global ambitions.

Mr Redfern is a journalist.