Absa, Barclays Banks Consolidate To Dominate Africa

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Written by Dana Sanchez

South Africa’s Absa Group has purchased London-based Barclays’ African business for $1.83 billion to create the continent’s largest retail bank by branch networks and customers, according to a report in BusinessDayLive.

Barclays is Britain’s second-biggest lender by assets, and has been in talks with South Africa’s Absa for seven years to combine their African units, Bloomberg.com reported in August.

Barclays, based in London, bought 54 percent of Absa in 2005 for $4.5 billion to expand in emerging markets. 

When the latest deal goes into effect July 31, Barclays will increase its 55.5 percent stake in Absa to 62.3 percent through the issue of 129.5-million ordinary shares by Absa, the report says.

Maria Ramos, Absa group CEO and Barclays Africa CEO, said Africa was a “core focus area for growth.”

The bank was in a strong position to consolidate the business and plans to grow in areas including retail banking, corporate and investment banking and credit card business, Ramos said.

Barclays Africa will include more than 1,300 outlets and 10,400 ATMs in 10 countries. Absa will change its name to Barclays Africa on Aug. 2. The bank will be branded Barclays in Botswana, Ghana, Kenya, Mauritius, Seychelles, Tanzania, Uganda and Zambia. It will remain Absa in South Africa.

The group will be listed on the Johannesburg Stock Exchange as Barclays Africa. Barclays Bank Kenya and Barclays Bank Botswana will remain listed on their respective exchanges.

Egypt and Zimbabwe were excluded from the transaction due to political and economic instability, the report said. “Ideally we would like to run as one portfolio, but we will continue to run them operationally for now,” Ramos said.

Absa dropped its original plan to buy the Barclays assets in 2008 after commodity-driven economic growth in Africa sent their earnings surging, making the businesses too expensive to acquire, Bloomberg.com reported. Barclays revived the plan in April 2011, aiming to consolidate operations at Absa headquarters in Johannesburg and move other work to Dubai.

The South African bank’s shareholders will get a single entry point into Africa from the deal, giving shareholders in both businesses the benefit of African growth, CEO Ramos said in an August interview in Bloomberg.com.

Since Barclays bought into Absa in 2005, the lender went from being South Africa’s best-performing bank stock to its worst after an exodus of executives, slowing income, and rising bad debts caused profit to slump, Bloomberg.com reported. Rivals Standard Bank Group and FirstRand boosted lending and expanded in Africa while Absa’s growth on the continent stalled.