Barclays, one of the UK’s main four banking groups, used the release of its 2015 results to announce that it will divest itself of its 62.3% stake in Barclays Africa over the next two to three years.
The withdrawal from Africa is one of the first decisions taken by Jes Staley, who took over as chief executive (CEO) three months ago and will re-organise Barclays around two main divisions: UK retail banking and its corporate and investment bank.
The aim is to prepare the bank for ringfencing regulations that require it to hive off the UK retail banking unit and its US activities into stand-alone entities.
Barclays will also reduce its dividend by more than half this year and in 2017, from 6.5 pence to 3 pence to strengthen its capital buffer, which is currently below both its own target and the level of several rivals. Last year the bank’s core equity ratio rose to 11.4%, but is still below its 12% target. Barclays said that selling its African business will boost its capital ratio by at least 1 percentage point.
Barclays has had operations in parts of Africa for nearly a century, although the bank’s divestment from South Africa will be its second in 30 years. In 1987 a large portion of shares of what was then Barclays National Bank was sold to mining conglomerate Anglo American and affiliates De Beers and Southern Life.
Barclays returned to South Africa in 2005 with the purchase of a 55% stake in Absa Group (formerly Amalgamated Banks of South Africa) for US$5.5bn, which it increased to 62.3% in 2013 when it created what is now Barclays Africa. In that transaction, Absa Group bought eight of Barclays’s African operations for 18bn rand (ZAR).
In response to recent reports of Barclays’ plans for its Africa business, Barclays Africa has reassured customers and investors that it is a well-capitalised independent entity “with a track record of generating strong returns”.
However the contribution of Barclays Africa to the overall group’s profits has deteriorated due the devaluation of the ZAR against the British pound (GBP). Barclays reported a 17% return on equity (RoE) last year in local currency, but this fell to 8.7% at group level.