Barclays Africa Group spreads its wings

What’s in a name? According to Shakespeare’s Romeo and Juliet, not too much.

The change from Absa Group Limited to Barclays Africa Group Limited yesterday on the JSE was a joyous occasion for all the parties involved and resulted in lively early-hour trade on the bourse for the share – but has so far not boosted the share price significantly.

On Thursday, the last day the company traded as Absa Group Limited on the JSE, the bank’s share price closed on R141.10. Opening the next day to cheers and the clinking of champagne glasses in the JSE’s Exchange Café, the first matched trade was lower at R141.06, climbing by the third trade to R141.75.

This was against the backdrop of the JSE trading around its historical high levels reached in May, with the All Share Index touching on 42 050 points early morning.

The deal, which sees Absa acquiring Barclays’ banking operations in Zambia, Uganda, Tanzania, Seychelles, Mauritius, Kenya, Ghana, Botswana and Barclays’ Africa Regional Office in South Africa, received the green light from nine different regulatory jurisdictions with the last approval coming through in the last couple of weeks.

At the breakfast before Barclays Africa Group Limited’s debut on the JSE, Maria Ramos, CEO of Barclays Africa Group Limited, reiterated it was a transformational deal and a milestone for the company and Africa. Ramos said the deal was producing one of the biggest financial institutions in Africa and made Barclays Africa Group Limited a “formidable force” on the continent. “This is the largest acquisition ever by a bank in Africa,” Ramos said about the R18.3bn transaction.

Chair of Barclays Africa Group, Wendy Lucas-Bull, said that while “everybody wants a piece of the continent” the deal opened the door to improving the group’s long-term growth prospects.

The share price of the group shot up substantially on July 23 from R140.50 the previous day to R148.99, after the conclusion of the deal was announced and on top of the market’s expectation of a special dividend to be paid out.

But the share price dropped back from R151.67 to R141.00 – even with the declaration of a special dividend to be paid out in November.

By 10:49 yesterday the BGA share was again trading at Absa Group’s last trading price of R141.10.

Barclays Chief Executive Antony Jenkins recently underscored the importance of Africa to the group, pointing out that it is the group’s largest region after the UK and US, contributing greater than 10% of Barclays’ first half profit before tax.

In a statement Barclays Africa Group said that if the enlarged Barclays Africa portfolio were included in its first half earnings, it would have added 19% or R874 million to its first half earnings.

As it was, the group posted an 8% rise in half-year earnings.