Monday, October 25, 2021

Barclays Africa: The historic sell and arrival of Absa in Botswana

Ever since the acquisition of the Barclays businesses in Africa in 2016, – the Barclays Africa Group Limited (BAGL) continued to work with two identities and brands. Absa in South Africa and Barclays in the rest of Africa including in Botswana.

But the tables are about to turn as Barclays Africa prepares to rebrand as Absa across the continent including in Botswana.

Barclays Bank Botswana Managing Director, Reinette van der Merwe says as Barclays Africa Group now separates from its former parent company, the London based Barclays PLC and emerges as a stand-alone business across Africa, the new owners have since addressed the future name and brand.

For years, the Absa brand has been choked by the partnership between BAGL and its former British parent Barclays PLC. Now Barclays has flown the coop, allowing van der Merwe and her African counterparts to allow the group Chief Executive Maria Ramos a free hand to overhaul the bank’s culture and ultimately fix some of its biggest problems. In 2017, BAGL successfully completed the share transfer transaction and Barclays PLC now owns 14.9 percent of the Barclays Africa Group.

“The new identity is further evidence of the scale of the transformation and change in our business – a new brand for a new banking group”, says van der Merwe who was speaking at the local unit’s full year financial results presentation in the capital Gaborone on Thursday.

The bank’s intention is to change the name of the group holding company from BAGL to Absa Group Limited in June this year. The change is however subject to receiving the appropriate regulatory and shareholder approvals.

While in Botswana, the bank can still retain the right to use the Barclays brand for a further two years, Sunday Standard has been informed that Barclays PLC is said to have insisted that in neighbouring South Africa, the term “Member of Barclays” must be removed by 6 June 2018, subject to an additional two-year run off period in respect of debit and credit cards.

The lender, which has operations in 11 other African countries, was given up to June 2020 to use the name BAGL by Barclays PLC. This is part of a transitional trade mark license agreement, entered into between the two groups as part of the separation arrangement.

“Our new African identity allows us to be the masters of our destiny, to reset our culture and redefine our course, and creates a sustainable enterprise, with longevity and a sense of stewardship at its heart”, says van der Merwe.

 

WILL BOTSWANA, AFRICA ACCEPT ABSA IN HER SHORES?

While van de Merwe and her team on Thursday presented financials that underscore Barclays Bank Botswana’s resilience as a business, their biggest challenge is to finally convince the market that new look Absa will remain one of the country’s premier retail bank.

The rebranding in Botswana and elsewhere in Africa will either support or destruct the group CEO ÔÇô Maria Ramos’s strategy of three years back which was unveiled with much fanfare.

Amongst other things, Ramos’s strategy was to turn the bank’s subsidiaries to be in the top three by revenue in its biggest markets ÔÇô South Africa, Kenya, Ghana, Botswana and neighbouring Zambia.

At the time, Ramos also announced an ambitious plan to achieve a return on equity (ROE) of 18 ÔÇô 20 percent with a cost to income ratio in the low 50s.

The group’s latest financial results (FY 2017) released at the beginning of March 2018 shows that its cost-to-income ratio rose to 56.8 in 2017 from 55.2 percent recorded in 2016. At the same time, Return on Equity decreased to 16.4 from 16.6 percent during the same period.

In Botswana, the bank’s Finance Director Mumba Kalifungwa on Thursday said that the local subsidiary’s Return on Equity remains strong at 22 percent while the Cost to Income ratio of 52 percent was registered during 2017.

At the same time, while Barclays Bank Botswana chairman, Andrew Motshidisi says the local unit’s 2017 results show that it has a winning strategy, “and an able team who deliver on their mandate”, the group worryingly posted what bankers call, “negative jaws”, as operating expenses went up by four percent compared to a one percent upward movement in revenue.

To date, Barclays remains the second-biggest bank in Botswana, the third in Ghana, the fourth largest in Kenya, the third in Zambia, and it still has the biggest retail presence in South Africa,

This however does not explain why Ramos’s big reveal of early March 2018 was met with a big dose of scepticism as reflected by the group’s stock performance at the Johannesburg Stock Exchange (JSE).

Apart from concerns relating to the stock performance at the capital markets, branding could be another concern for BAGL, soon to be Absa Group. With over 100 years on the continent, Barclays has created a loyal following with brand recognition at its core. As such, the pull out by London based Barclays PLC as a major shareholder could leave the branding of the now African controlled business in limbo. This would apply if the strong blue image of an eagle that has over the years adorned Barclay’s branches throughout Africa is lost, some assume there could also be an exodus of customers as well.

On Thursday, van der Merwe expressed confidence on the new name ÔÇô Absa. She told one journalist during the Question and Answers session at Avani Hotel in the capital Gaborone that consultation on the new identity was done over the past two years.

To date, both the local capital market and existing customers are yet to aggressively react to the imminent change in brand. Motshidisi maintains that the group’s new strategy, underpinned by a new organisational culture, will create not only sustainable value to all stakeholders, but also a lasting impact in the local community.

Time line

July 2005 ÔÇô British group, Barclays PLC acquired a 55.5% stake in Absa.

July 2013 ÔÇô The Barclays Africa deal saw the majority of Barclays’s businesses in Africa combined with Absa and Barclays PLC’s stake in the combined entity went up to 62.3%.

March 2016 ÔÇô News broke that Barclays PLC want to quit Africa (BAGL).

May 2016 ÔÇô Barclays PLC sells about 12% of its stake in BAGL.

May 2017 ÔÇô A historic bookbuild saw South Africa’s PIC, Allan Gray and Old Mutual Asset Management buying a combined 33.7% stake that belonged to Barclays PLC in BAGL. Barclays PLC stake reduced to minority 14.9%.

March 2018 ÔÇô BAGL announces that it will rebrand its African units to Absa by June 2018.

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