Barclays Africa slides as sale date arrives

Despite reiterating that it “remains committed to Africa”, Barclays Africa Group Limited’s (BAGL) share price came under considerable pressure in early morning trade on Monday, following speculation that Barclays will on Tuesday announce an exit of its African operations.

At 11:14, BAGL was down 3.71%. The JSE’s Banks Index had given up 1.86%, with BAGL’s ‘Big Four’ banking peers also weaker, though not by quite as much as Barclays Africa. BAGL’s share price is down 14.92% year to date, with its peers under similar selling pressure as investors worry that slow economic growth and rising bad debts in their home markets will hurt banks’ earnings. A possible downgrade of South Africa’s foreign currency credit rating will also pose risks for banks, which cannot be rated above the sovereign, as it will raise their borrowing costs.

UK-based Barclays, which owns 62.3% of Barclays Africa, said this weekend that it continues to evaluate its strategic options in relation to its shareholding in Barclays Africa and expects to update the market on March 1, when it announces its full-year results for 2015.

“Barclays Africa is an independently-listed entity on the Johannesburg Stock Exchange, regulated by the South African Reserve Bank and we are well capitalised with a track record of strong returns,” Barclays Africa said in a statement.

On Sunday, Absa tweeted a similar comment.

Barclays Africa is financially-independent, listed independently – we are not closing our banking operation in South Africa

— Absa South Africa (@AbsaSouthAfrica) February 28, 2016

“We continue to offer a full and integrated range of products and services to more than 12 million customers in 12 countries across Africa and our customers can be just as confident doing business with us today as they have always been. With an independent board and a separate listing on the Johannesburg Stock Exchange we are deeply rooted in Africa and remain firmly in control of our future,” said Barclays Africa Group chief executive, Maria Ramos. “In doing so, we put the future of this organisation firmly in our own hands,” Ramos said.

Barclays Africa was established in 2013 when 12 banks across the continent were brought together.

Barclays Africa Group Limited is the majority, and in some cases sole, shareholder of the BAGL operations in South Africa, Kenya, Botswana, Ghana, Zambia, Mauritius, Mozambique, Seychelles, Uganda and Tanzania (Barclays Bank Tanzania Limited and National Bank of Commerce Limited).

“Any announcement relating to Barclays’s shareholding in BAGL does not impact the shareholding and ownership of these operations. We continue to be optimistic about our prospects in Africa, where we have a strong franchise with assets of over R1 trillion. We are deeply committed to the success of our continent. Our destiny is in Africa,” Ramos highlighted.

We remain committed to Africa, where we continue to be optimistic about our growth prospects & to operate normally: https://t.co/SfxX5T8FUU

— Absa Group (@Absa) February 29, 2016

On Friday, the Financial Times reported that Barclays’s stake in Barclays Africa is worth R78 billion at current market prices, but that there are no obvious strategic buyers for the African business.

Kokkie Kooyman, portfolio manager at Denker Capital, told Moneyweb earlier this month that it is more likely that Barclays will reduce its stake in Barclays Africa from the current 62% to, say, 50%, due to the regulatory complexities around selling such a large shareholding, the fact that there is unlikely to be a buyer willing to take on such a large stake, and the long-term growth prospects in Africa.

Barclays and Barclays Africa Group Limited will announce their 2015 financial results tomorrow.

Barclays Africa Group shares slid as much as 6.8% to R135.02, the biggest decline since January 11. The securities were trading 4.7% down at R137.96 as of 9:41am in Johannesburg.

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