Barclays Africa to Receive $1.1 Billion After Split From Parent

  • U.K. bank will contribute 2.1 billion rand for black investors
  • Barclays Africa allowed to use the Barclays brand for 3 years

Barclays' CEO Looks Forward to Ending Restructuring

Barclays Africa Group Ltd. said it will receive about $1.1 billion for costs associated with splitting from its U.K. parent and the setting up of a black economic-empowerment program.

The U.K. bank will contribute about 2.1 billion rand ($163 million) toward the inclusion of black shareholders, the Johannesburg-based lender, which trades under the name Absa in South Africa, said in a statement on Thursday. It will also pay 765 million pounds ($952 million) for the investments required in technology, rebranding and other separation-related expenses and agreements.

“There were questions of whether Absa would bear all the costs of the separation,” said Patrice Rassou, the head of equities at Sanlam Investment Management in Cape Town. “The agreement from Barclays Plc to carry a large portion of the costs is very positive.”

London-based Barclays said in March last year it wanted to cut its 62 percent holdings as part of Chief Executive Officer Jes Staley’s plan to retreat from the continent and raise cash to reduce its capital burden. Barclays sold about 12 percent of its stake in Barclays Africa in the market in May for about 13.1 billion rand. The U.K. bank has now applied to the South African Reserve Bank to take its holding below 50 percent, according to Barclays Africa.

Barclays Africa will be allowed to use the Barclays brand in the rest of Africa until 2020 and “will receive certain services from Barclays on an arms’ length basis for a transitional period, typically up to three years,” the bank said.

Earlier Barclays Africa said full-year net income rose 2.6 percent to 14.7 billion rand from 14.3 billion a year earlier after the bank contained costs and increased lending to businesses. Earnings per share excluding one-time items rose 5 percent to 17.69, missing the 17.94 rand median estimate of 11 analysts surveyed by Bloomberg. Return on equity declined to 16.6 percent from 17 percent and the cost-to-income ratio dropped to 55.2 percent from 56 percent.