SPECULATION this week mounted over the future of Barclays Bank Zimbabwe after controlling shareholder, Barclays Bank Plc, last week indicated its intention to sell the Zimbabwean business.
Market watchers said the British bank could be forced to completely abandon its identity and strategy in the event of a new shareholder swooping on the local assets, but hinted that a unit of Barclays Bank Plc, Barclays Africa Group Limited (BAGL), which expressed interest on the Zimbabwean business last year, could renew its interest after a failed bid.
The Johannesburg-listed BAGL was created following the acquisition by Barclays Plc of ABSA Holdings’ operations in South Africa in 2005. Following the acquisition by Barclays, Absa in turn acquired Barclays’ subsidiaries on the continent, with the exception of the Egyptian and Zimbabwean units.
But two months ago, BAGL, which is run from South Africa, announced that it had failed to reach an agreement with Barclays Plc for the purchase of its assets in Zimbabwe and Egypt “following extensive discussions”.
“Barclays Africa Group and Barclays Bank Plc could not agree key commercial terms and have decided not to proceed with the proposed combination,” said BAGL.
A Barclays Africa group spokesperson yesterday confirmed the failed bid for the Zimbabwean business last year, but did not say if the group would still pursue a deal now that Barclays Plc had announced its intention to do away with the unit.
“Over time Barclays Plc and Barclays Africa Group Ltd (BAGL) held discussions about the combination of Barclays Plc’s Egyptian and Zimbabwean businesses into BAGL. Last year, BAGL and Barclays Plc couldn’t agree commercial terms. We note that the Egyptian and Zimbabwean businesses have now been earmarked as non-core to Barclays Plc and may be sold.
“Barclays Bank Egypt and Barclays Bank Zimbabwe are well-established businesses in their local markets and Barclays Plc believes that they will be attractive to prospective buyers. In the meanwhile, Barclays Africa continues to operate the Zimbabwean and Egyptian bank with no disruption to customers,” she said.
Barclays Bank Zimbabwe managing director, George Guvamatanga, said he did not know how the planned disposal of the Zimbabwe business could turn out. But he said the effect of the banks’ operations and strategy in the country would depend largely on who was going to take over control of the business.
While BAGL was a natural suitor, there is a chance that Barclays Zimbabwe could get another buyer in the form of a regional or even a multinational bank. This could be a plus for the bank in as far as maintaining its safe haven status is concerned, given the volatility of the local banking sector and client views of indigenous banks.
Barclays Plc, which owns 68 percent of Barclays Bank Zimbabwe Limited through an investment vehicle, Afcarme Zimbabwe, last month announced its planned exit from Africa as it seeks to focus on the British and American markets.
The move could see Barclays ending its 104-year history in Zimbabwe, where it has run the second oldest bank after fellow British bank Standard Chartered.
With rumours of former Barclays Plc chief executive officer, Bob Diamond, eyeing the African empire and possible renewed interest by Barclays Africa to buy Zimbabwean operations, Guvamatanga said it was too early to tell what effect the intention to sell from Barclays Plc would have on the bank.
“As for now nothing has changed, we still remain Barclays Zimbabwe. That is the reality; we still remain committed to serving our clients… It is too early to tell what effect the intention to sell from Barclays Plc will have on the bank and it largely depends on who will eventually takeover,” he told the Financial Gazette’s Companies and Markets (C&M).
Barclays Zimbabwe and Egypt were left out when Barclays Plc intergrated its businesses in Africa after the takeover of ABSA in South Africa. Egypt was omitted due to the political unrest then while Zimbabwe was omitted due to uncertainty over the indigenisation regulations.
Barclays’ assets in Africa include a 62,3 percent in Barclays Africa, which has operations in 11 African countries as well as direct subsidiaries in Zimbabwe and Egypt.
A bid by Barclays Africa to buy the Zimbabwean and Egyptian banks from Barclays Plc failed last year after the parties could not agree on a price.
Insiders say since Barclays Africa’s negotiations to buy Barclays Zimbabwe failed due to valuation issues, the likelihood of renegotiating look slim, though it could not be totally ruled out.
“If Barclays Africa is willing to pay the right price they will most likely get it. Even if Barclays Africa does not buy, the bank still remains attractive to any potential suitor given the quality of the loan book and extensive branch network,” an official told C&M.
Reports last week said former Barclays Plc chief executive officer, Bob Diamond, was approaching investors to back a takeover bid for Barclays’ African business.
Diamond is said to have held preliminary talks with global investors whom he hoped would put hundreds of millions of dollars into a deal to buy Barclays’ African operations outside of South Africa.
Diamond already has a presence in Zimbabwe after he bought into BancABC through his Atlas Mara – a London-listed vehicle to invest in African banks. He left Barclays Plc in 2012 over the Libor rate-rigging scandal.
In a statement last week, Barclays Bank Zimbabwe said its parent company believed it no longer fitted into its core strategy.
“Following the decision not to combine Barclays Bank Zimbabwe with Barclays Africa Group Limited, the business is no longer a good fit with Barclay’s core strategy.
“Once Barclays’ plan to combine Barclays Bank Zimbabwe with Barclays Africa Group Limited had come to an end, it was logical that Barclays would consider where that business sat in its wider strategy,” it said.
The bank, however, said it was important to note that at this time, all that had been done by Barclays Plc was to announce their intention to sell their stake in this business.
“We will continue to focus on providing customers and clients with the high standards of service which they expect and will update them as and when there is anything to communicate.”
Presenting their financial results last Tuesday, Barclays Zimbabwe said a model anchored on corporate and investment banking remained relevant after the group sustained growth in income, capital, advances and managed impairment stock to low levels in the year to December 2015.
“We witnessed a 16 percent growth in the loan book. We started lending to the public sector as promised and now seven percent of the loans are in that area. The biggest growth however, came from retail banking as we reached out to more small customers. The loan loss ratio remained below two percent at 1,2 percent.”
Due to the growth in the loan book, the bank’s net interest income increased 18 percent to US$16,6 million, from US$14,1 million the previous year.
Non funded income was however down to US$29,3 million from US$32 million due to the impact of a non-recurring item at US$2,9 million recorded only in 2014.
As a result total income was flat at US$46 million while an increase in impairment losses to US$1,67 million from US$500 000 and operating expenses at US$38,5 million from US$37,5 million saw the group report a 29 percent drop in the pre-tax line at US$5,8 million.
The bottom-line was down 41 percent to US$3,9 million and earnings were 0,18c from 0,31c.
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