Barclays Africa earning jump ahead of separation

By Mnaku Mbani

Barclays Africa group, the financial service group with operations in twelve countries in Africa today reported a third consecutive year of earning growth.

Presenting the financial results through video conference from Johannesburg, Barclays Africa Group Chief Executive Maria Ramos said the headline earning for 2016 increased by 5 per cent to R14.9 billion.

For South Africa, earnings were up by 2 per cent to R12.2 billion and the rest of Africa, including Tanzania, the bank earnings went up by 17 per cent to R2.8 billion.

Revenue increased by 8 per cent to R72.4 billion while the group common equity Tier 1 (CET 1) ratio increased to 12.1 per cent, well above regulatory requirements.

According to her, slower economic growth resulted in an increase in impairments, and non performing loans.

Credit impairments rose 26 per cent in 2016 compared with 2015, negatively affecting the return that Barclays Africa shareholders earned on the money they invest in business.

Contribution from non-South Africa business increased to 23.1 per cent of the group revenue while revenue grew by 8 per cent while costs grew by 6 per cent, with positive effects on cost-to-income ratio, which improved by 55.2 per cent.

But, she maintained that in 2017, the group expect to see modest economic recovery with South Africa’s economy estimated to grow at one per cent while other markets in Africa will grow at an average rate of 4.5 per cent.

“The creation of Barclays Africa Group was a crucial strategic play- it created the platform for us to develop our businesses,” said Ramos.

“It has given us a significant footprint across Africa. We set out with a vision to create proudly pan African bank and today we can confidently say that we are a delivering on this ambition.”

She said the group priorities over the past three years included growing corporate banking operations, which has achieved double-digit growth for the past four years and, delivering the opportunity the bank has in Wealth, Investment Management and Insurance (WIMI) business.

She also announced that Barclays Africa Group has agreed terms of separation with UK-based Barclays PLC, which is reducing its shareholding in Barclays Africa.

The agreement is expected to unlock opportunities for Barclays Africa as an independent pan African bank.

“It is good outcome that enables us to complete the separation and provide continuity and improve services for our customers,” Ramos said.

UK-based Barclays PLC announced in March last year that it intend to sell the majority of its shareholding in Barclays Africa over a period of two to three years.

She mentioned that Barclays PLC has submitted an application to the South African Reserve Bank for approval to reduce its shareholding in Barclays Africa group below 50 per cent.

The application, which also requires the approval from South African Minister for Finance, includes the terms of the separation payments and transitional services arrangements, which have been agreed between Barclays PLC and Barclays Africa.

The agreement provides for contributions by Barclays PLC totaling GBP765 million (R12.8 billion) based on December 2016 exchange rates, primarily to fund the investments required for Barclays Africa Group to separate from Barclays PLC.

However, she noted that the expectations is that the financial contributions will neutralize the capital and cash flow impact of separation investment of the group over time.