Barclays Africa’s trade and export finance future will be in the hands of the bank’s next majority shareholder after Barclays reduces its 62.3% stake to around 20% over the next two to three years.
Following the announcement made this week by Barclays’ chief executive, a spokesperson for the bank tells GTR that there will be no immediate changes to the Barclays Africa trade and export finance teams or activities, as the share sale will take up to three years and there is no certainty as to how it will be structured.
GTR understands that since Barclays Africa has always been a separate entity to Barclays, selling stakes will not necessarily involve a restructuring of the business, which could theoretically change shareholders and remain intact. It will then be up to the new shareholders to decide the direction the bank should take.
Market speculation is running high as to who is likely to purchase Barclays’ shares in Africa, with Chinese investors and Barclays Africa’s former chief, Bob Diamond (currently head of Africa-focused financial firm Atlas Mara) as top contenders.
In its 2015 annual report, Barclays chief executive Jes Staley explained to investors: “This has been a very difficult decision to make. Barclays has been in Africa for over 100 years. We have some excellent franchises across the continent, with a great management team and dedicated colleagues. But we face a regulatory environment where we carry 100% of the financial responsibility for Barclays Africa, and receive only 62% of the benefits.
“The international reach of the UK bank levy, the Global Systemically Important Bank (GSIB) buffer, minimum requirement for own funds and eligible liabilities (MREL) and Total Loss Absorbing Capital (TLAC), and other regulatory requirements, present specific challenges to Barclays as owners. The returns Barclays realises from its controlling interest in BAGL are significantly below the 17% Return on Equity reported locally. Because of these specific challenges, we believe that it is in the best interest of shareholders to reduce our position.”
This has been a very difficult decision to make. Jes Staley, Barclays
He added that the sale would be executed “opportunistically over the next two to three years”, but would result in the cutting of £2bn in costs and 40,000 in head count.
The bank has been working to restructure its business around three separate banks, currently referred to as Barclays UK, Barclays Corporate and International and Barclays Africa, each of which will have its own board, chief executive, management team and certain operational services.
It has also been exiting “non-core” operations such as non-UK retail, elements of the investment bank in nine countries, its Egyptian and Zimbabwean businesses, Southern European cards and wealth management in Asia.
In early February, Barclays made most of its senior, London-based ECA finance team redundant and united its trade and export finance businesses under the helm of Baihas Baghdadi, who had recently took over from Dan Roberts as global head of trade and working capital.
The move followed the January 21 announcement by Staley that Barclays planned to cut 1,200 investment banking jobs worldwide and close its offices in Australia, Taiwan, South Korea, Indonesia, Malaysia, Thailand, the Philippines and Russia in a bid to reduce costs.