Barclays Africa Officially For Sale: Bob Diamond May Want To Buy It

Written by Dana Sanchez

Barclays has officially announced its intention to sell down its 62.3 percent interest in Barclays Africa Group over the next two to three years, reducing its risk so it no longer has a controlling stake, NewYorkTimes reported.

With 45,000 employees in Africa, it won’t be an easy thing to sell and the list of potential buyers is short, said BBC editor Simon Jack.

Ex-Barclays CEO Bob Diamond might be at the top of that list of potential buyers, Jack said in a BBC report.

Barclays would be “pleased” to continue to hold a minority stake in the African business, CEO Jes Staley told reporters during a conference call with journalists.

Barclays has done business in Africa for more than 100 years. Reducing its stake to a minority stake in Africa will remove Barclays “from an accounting and regulatory perspective,” Staley said.

Why is Barclays cutting its stake in Africa?

The lender cited several challenges to continued ownership its Africa business, including regulatory and capital requirements and a British tax, known as a bank levy, that taxes banks based in Britain on their worldwide balance sheet. International competitors, however, are taxed only on their businesses in Britain, NewYorkTimes reported.

“It’s a dynamic continent,” Staley said. “Really, the decision to sell down is driven by the fact that the current regulations mean we essentially have to respond as if we own 100 percent of Barclays Africa.”

It was a “very difficult” decision, Staley said, according to BBC.

“The reality is, in this new regulatory environment, we carry 100 percent of the liabilities but we only own 62 percent of Barclays Africa.”

Like many of its British competitors, Barclays is preparing to wall off its
British retail ­banking business from its riskier investment banking operations
in a process known as ring­fencing, NewYorkTimes reported. British banks must do so by 2019.

The lender wants to form two, main core divisions — Barclays U.K. and Barclays Corporate & International.

Barclays has more than 12 million customers in 12 African countries.

“You go to places like Uganda and Kenya and the brand of Barclays is as strong there as it is in the U.K.,” Staley said. “But we have to make some very difficult decisions if we are going to get Barclays into focused, clear, compelling business model that generates returns for our shareholders.”

Staley is acting to dramatically simplify the Barclays group, said Laith Khalaf, a senior analyst at Hargreaves Lansdown.

“When the dust has cleared, the bank should have two high quality financial services divisions, and the potential to offer investors a decent dividend, but it’s going to take some elbow grease to get there.”

The move to reduce Barclays’ interests in Africa makes sense as it will “free up capital and get rid of an unwanted distraction as the bank continues its clean-up operations.”

Under former CEO Antony Jenkins, Barclays’ African business was considered one of four pillars of the bank’s continuing strategy along with investment banking, credit card and consumer operations, NewYorkTimes reported. Jenkins left in July.

Before him, Diamond resigned Barclays under a cloud, BBC reported. Diamond lost the confidence of the governor of the Bank of England over the Libor rate-rigging scandal.

The scandal arose when it was discovered that banks were falsely inflating or deflating their rates to profit from trades, or to give the impression that they were more creditworthy than they were.

Diamond was described as the unacceptable face of banking by British Labour politician Peter Mandelson, , according to BBC. But Diamond had ambitions to create a sub-Saharan banking business, and he created Atlas Mara, an African banking venture.

As Atlas Mara chairman, Diamond appointed another ex-Barclays man, John Vitalo, as CEO. Before joining Barclays, Vitalo ran Absa Capital, the investment-banking arm of the South African lender. Barclays bought control of the South African operation in 2005.

Atlas Mara may not be able at present to buy all of Barclays Africa’s business, but it would be interested in acquiring some of it, Jack said in a BBC report.

Other interested parties could include Gulf and Chinese interests, Jack said, “but Bob Diamond and John Vitalo know this business inside out and Barclays certainly have their numbers.”

Diamond co-founded Atlas Mara in 2013 with Dubai-based businessman, Ashish Thakkar. The company is an Africa-focused financial services investment group that has since acquired eight banks in seven sub-Saharan African countries, according to HowWeMadeItInAfrica.

Diamond said his risk appetite to invest in African banks is even greater than before despite slowing growth in markets such as South Africa.

“We still believe in the (African) story, and the entry points in terms of prices are lower. The competition for acquisitions is lower. The currencies are cheaper compared to international currencies. So frankly we see this as an improving environment,” he said. Diamond spoke at the recent Bloomberg Africa Business and Economic Summit in Cape Town.

Diamond’s reputation took a big hit after he stepped down from Barclays, partly because he was awarded millions in compensation, which many considered to be excessive, CNN reported in 2013. The U.S.-born Diamond resigned from Barclays in July 2012.