Finance

Duncan Mavin is a former Bloomberg Gadfly columnist.

Chapter one in the manual given to all new bank CEOs directs them to survey every business line, looking for fat that can be trimmed and capital that can be reallocated.

Shares Falling
Source: Bloomberg data

So, it's standard procedure for Barclays CEO Jes Staley to rifle through the bank's divisions a couple of months into his tenure.

It would make less sense, though, if that review results in a sale of all or part of Barclays's Africa business, something that's now being considered according to the Financial Times.

Sure, Africa is under a cloud right now. Economies that rely heavily on natural resources are struggling to cope with tumbling commodity prices, while Jacob Zuma's capricious approach to the South African finance ministry has helped send the rand to record lows.

Some peripheral African units could be in the firing line given Staley's remit to turn Barclays into a leaner, more focused entity. But it seems unlikely Barclays would exit its South African business, which accounts for the bulk of its business on the continent.

Africa makes an important contribution to earnings. In the third quarter, African banking delivered a return on tangible equity of 13.3 percent, up slightly on the previous year, and above the 11.4 percent figure for the core bank, those operations Barclays plans to keep long-term. By contrast, the investment bank delivered a measly 5.5 percent return.

Barclays' Returns on Equity
Source: Bloomberg data

Africa produces about 15 percent of the bank's pretax profit. As recently as July, Chairman John McFarlane said he was "biased" to make South Africa part of the bank's "solid core." That doesn't sound like a retrenchment is on the cards.

Elsewhere, Barclays' new CEO is expected to speed up the disposal of non-core businesses -- the bank recently agreed to sell its Italian retail branch network as well as several units in Portugal. And he has to deliver an orderly restructuring of the investment bank, shrinking that business without destroying it in the process.

Barclaycard is a strength, but the company says net interest margins are likely to fall. Bloomberg Intelligence notes that's a particular concern given the card business's increasing contribution to overall revenue -- 19 percent today compared with 14 percent in 2011. Headwinds for Barclaycard will put more pressure on other units, including the investment bank, to improve revenue.

Africa is sure to be a challenge in the short term. But as Staley surveys his new empire, there's plenty elsewhere he needs to get a read on.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Duncan Mavin in London at dmavin@bloomberg.net

To contact the editor responsible for this story:
Edward Evans at eevans3@bloomberg.net