Absa won’t become a state bank
Absa becomes SA-controlled business for first time since 2004, but Barclays Plc and PIC will remain long-term investors
Last week’s bookbuild, in which Barclays Plc sold 286m shares in its African subsidiary, will ensure that Barclays Africa is a widely held financial institution with no controlling shareholder. Speculation that the Public Investment Corp (PIC) would use its stake as a building block of a new state bank were incorrect.
Even the process of building up a black economic empowerment consortium will be controlled from the centre, as Barclays Plc is donating R1.7bn of shares to a suitably friendly outfit.
For the first time since 2004, Absa Bank (and its holding company, for now called Barclays Africa) will be an SA-controlled business.
More than a year after Barclays Plc sold its 62% holding down to 50%, more than double the number of shares were made available in the second bookbuild. Barclays Africa CEO Maria Ramos says more than half of these shares were allocated to local investors, and two-thirds of these to long-only institutional investors, such as pension funds and unit trusts.
The foreign allocation was evenly split between European and North American investors. It was a good time to buy more shares at a price of R132, more than 25% below the 12-month high. The share will get an immediate boost from index trackers as the free float has increased more than 33 percentage points.
Jaap Meijer, from Dubai-based Arqaam Capital, say there could be more than US$200m of inflows into the SA-based bank, as both main index trackers MSCI and FTSE adjust their indices immediately.
Barclays Africa finance director Jason Quinn says there will still be two long-term investors — Barclays with just below 15% and the PIC with 14.9%.
The PIC has to wait for its additional 7% until it has permission from the authorities in Kenya, Mauritius and the Seychelles.
PIC spokesman Sekgoela Sekgoela says the corporation’s percentage shareholding in Barclays Africa will fluctuate only to ensure it does not have an underweight holding when its free float on the JSE is adjusted upwards
Quinn says because the PIC owns shares in the Barclays banks listed in these countries directly, it will exceed maximum ownership rules on a see-through basis. He confirms that even if this process is successful, and the PIC becomes one of the two largest shareholders in Barclays Africa, the state-owned asset manager will not seek board representation.
Barclays Plc has been more generous in its managed separation than, say, Old Mutual Plc. It contributed £765m to Barclays Africa, while Old Mutual contributed nothing towards its Africa business to pay for the costs of separation. Absa’s corporate and investment bank, in particular, operated with technology sourced from Barclays London. The delinking will have little practical impact on the retail and business banking operations. Barclays Plc will be left with about $1bn of capital in Barclays Africa, modest in the context of group capital.
Ramos says independence will give what is now Barclays Africa the opportunity to introduce a competitive staff ownership plan. And she is unequivocal about the group’s commitment to its 10 markets in the rest of Africa: "Our ambition is to entrench and grow our position as a leading bank on the continent."
Quinn says Barclays Africa was never forced to buy these businesses by Barclays, and in fact did not buy the banks in Egypt and Zimbabwe.
Barclays Africa will be required to stop using the Barclays name in SA and announce the intention to change the name in 12 months’ time. It has three years to change the brand on the rest of the continent.
The Prudential Regulation Authority in the UK requires that the bank severs durable links such as brand and technology before there is true deconsolidation.
Barclays Africa won’t be able to rely on corresponding relationships with Barclays Plc outside Africa and will eventually have to set up its own offices in the global financial centres.
Surprisingly, Quinn says Absa is seriously being considered as the brand for the entire group. He says research has shown it has a powerful colour and a memorable logo.
Neelash Hansjee, who runs the Old Mutual Financial Services fund, says the bookbuild was at a good price. He was happy to join in: Barclays Africa is already his biggest bank holding.
"But let’s not get carried away. It hasn’t affected the tough fundamentals of the business or the banking sector," he says.