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Barclays Bank plans to retain stake in African business

By Moses Michira | April 14th 2016

Barclays Bank Plc plans to retain about 20 per cent stake of its African business that includes the Kenyan bank in its planned shareholding review.

The outcome of the part disposal means that the Barclays brand could still be in use in Kenya, and that the UK firm would still hold some decision-making powers in the business.

Jeremy Awori, the managing director of Barclays Bank of Kenya, said the UK-listed ‘grandparent’ company will not make a total exit from continent. Barclays Plc controls a 62.3 per cent stake in Barclays Africa Group – which in turn owns a majority stake in the Kenyan business and varying stakes in 11 other countries.

“The UK company still intends to retain a 20 per cent stake in the African business,” Mr Awori said yesterday while giving the actual reasons for the planned exit. He was addressing a media briefing on the developments in Kenya’s banking sector where he pointed out that the increased defaults on bank loans were actually normal after the surge in lending in the recent years.

A spike in lending rates in the second half of last year has contributed to the sharp rise in bad debts, which have resulted in reduced profitability for several lenders, while others have reported losses. Awori said the decision to make the disposal of Barclays’ African business is informed by regulatory needs, and better utility of the employed capital.

JPMorgan and Citi Bank have been appointed as transaction advisers for the sale that could be one of the biggest deals in Africa. Previously, the officials of the UK firm announced the exit plans, stoking jitters across the continent including here in Kenya.

Thousands of Barclays customers in Kenya have expressed concern over the pending divestiture, leaving executives of the bank struggling to explain what the exit would mean to them. Awori told a press conference the UK firm had found the African business under-performing, after converting the profits to its reporting currency – the British Pound.

Dividend payout of the African business when viewed from the perspective of UK investors was below their requirements for the capital invested. In technical terms, the return on equity was only 8.7 per cent while the return on capital employed was 11 per cent, for 2015.

The combined current valuation of the African business is Sh839 billion, Awori said, suggesting that the selling price of the UK firm’s stake is between Sh500 billion and Sh600 billion. From that valuation, he ruled out any possibility of an African company buying out either the entire stake or any significant proportion of it.

“When you look at the people who have expressed interest (in buying out the African business), then you ask yourself, is it really feasible?” Awori said.

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