Magazine article Global Finance

Barclays Sells Down Africa Stake

Magazine article Global Finance

Barclays Sells Down Africa Stake

Article excerpt

UK-based Barclays has reduced its shareholding in Johannesburg-listed Barclays Africa from 62.3% to 50.1% this year and is believed to be seeking to reduce that stake further to around 20%.

This exit is awkward for Britain's post-Brexit ministers charged with forging new trade and financial links with countries around the world, including Commonwealth members. Barclays Africa is a major player in precisely those countries-South Africa, Kenya, Ghana-where long-standing relationships need to be strengthened, not severed.

The main driver behind Barclays' move is regulation: the need to bolster capital adequacy ratios at group level, and the requirement as majority shareholder to hold capital for the whole of Barclays Africa. Barclays Africa's latest half-year results beat expectations, according to Adrian Cloete, portfolio manager at South Africa-based PSG Wealth, and return on equity is much higher than that of Barclays PLC.

"The move to exit is not because of the [unjattractiveness of the African market," says Chris Steward, head of equity research at Cape Town-based Investec Asset Management. "[It] is being driven by new capital rules required of systemically important global banks. They are selling down to achieve regulatory deconsolidation."

New banking regulations require a majority shareholder to hold the same amount of capital as if they owned 100% of the shares, an approach which, Cloete comments, is "not capital-efficient." Other pan-African banks are facing similar problems, says Steward. Standard Bank, considered systemically important by the South African regulator, has to set aside capital for 100% of the risk-weighted assets for its 52% stake in a Nigerian bank. …

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