Bob Diamond’s Misadventures in Africa

The ex-Barclays boss went looking for redemption. It hasn’t gone well. Just wait, he says: “This isn’t five-minute rice.”

Bob Diamond is shifting restlessly on the sofa, his Brioni jacket draped behind him. He’s in his corner office, high up in the Seagram Building, a modernist icon on Park Avenue in Manhattan. He faces one of Takashi Murakami’s smiley face flower motifs, which perfectly captures the former Barclays boss’s signature optimism. He’s needed plenty of that in recent years as he’s tried to build a banking empire across sub-Saharan Africa. That daunting experience can be summed up by another eye-catching work of art, which is hanging in the reception area: a Pamela Rosenkranz metallic emergency blanket.

During an interview that lasts more than an hour, Diamond acknowledges the challenges the company he founded, Atlas Mara, has faced amid Africa’s weakening economies. And he bemoans its share price, which has tumbled 68 percent since it went public in December 2013. No matter. His defense is a work of performance art. Frequently leaping to his feet—grabbing a golf club or a wad of bills from his wallet—he’s theatrically dismissive of past failings and resolute about a future that will prove him right. He insists he and Atlas Mara are just getting started: “This isn’t five-minute rice.”


Today, Atlas Mara’s acquisitions sprawl across seven countries, from tiny Rwanda to oil-rich Nigeria. But as Atlas Mara gobbled up banks, the commodities boom that had turned Africa into an investment hot spot fizzled, cutting the pace of economic growth in the region to a 15-year low. And that’s only part of the story. The impact of the commodities bust was compounded by what seems like a number of missteps or miscalculations: buying a bank with operations in economically dysfunctional Zimbabwe as bad loans mounted, for instance, or taking a minority stake in a Nigerian lender that may need an injection of capital.

The downward spiral of Atlas Mara stock didn’t just frustrate shareholders, it also threatened the company’s trumpeted plan to keep growing through acquisitions. Still, Diamond, who was christened “Bobtimistic” during his time at Barclays, isn’t fazed by the criticism that’s laid at his feet. “This is a long game,” he says, “a five- to seven-year game.” He’s on a “mission,” he says, and it’s too early to count him out: “You acquire, you protect, and you grow banks during a difficult environment like this—and people are giving a report card now? I think the report card is very strong.”

For the 65-year-old Diamond, his African venture offers the hope, however slim, of a new narrative after his unceremonious exit from Barclays. Although never accused of wrongdoing himself, he quit as chief executive officer in 2012 when the company was fined for manipulating benchmark interest rates.

Diamond soon zeroed in on sub-Saharan Africa, where a growing population is demanding more and better banking services. Only about a third of African adults had bank accounts in 2014, compared with 94 percent in rich countries, according to the World Bank. By creating a financial-services business in one of the world’s poorest regions, Diamond says he’s “found the perfect intersection of doing good and doing well.”

Diamond’s detractors, several of whom were interviewed for this article, say he underestimated both the challenges of operating in developing African economies and the resources required to fulfill his aims. What’s more, they say, the stock performance reflects that and threatens to impede further growth. “The lower the share moves, the more difficult it becomes for Atlas Mara to do a deal,” says Ayodele Salami, who holds the company’s securities among the $450 million of African equities he oversees as chief investment officer at Duet Asset Management in London. “If they don’t get scale, they will fail.”

One deal that could catapult Diamond’s venture into the big leagues—the purchase of a stake in Barclays Africa Group—has gone quiet. Last spring, Diamond said his private equity company, Atlas Merchant Capital, was in talks with investors including Carlyle Group, the U.S. giant, about joining it in a possible bid. Diamond says the talks with Carlyle are now dead. (A spokeswoman for Carlyle declined to comment.)

Atlas Mara has spent more than $600 million to assemble banking assets. That’s more than twice the company’s market value. Its biggest asset, a stake of just over 31 percent in Union Bank of Nigeria, has exposed Atlas Mara to growing bad debts, a currency devaluation, and falling oil prices. The situation isn’t likely to improve anytime soon, according to forecasts by the International Monetary Fund, which says the Nigerian economy, the second-largest in Africa, is set to shrink this year. Amid the upheaval, Atlas Mara posted a 71 percent decline in profit in the first half of this year as operating expenses exceeded income. Instead of rising toward a 20 percent target set in 2014, return on equity—a measure of profitability—fell to 0.4 percent.


Through it all, Diamond’s upbeat attitude remains intact. In August, presenting Atlas Mara’s results on a conference call, he assured investors that recent headwinds would eventually become tailwinds. Meanwhile, the company announced it will cut as much as 35 percent of the staff who provide services across the group. For growth, Atlas Mara is counting on the banks it already owns, as well as a division it’s building to provide risk-management and investment banking services to companies.

John Vitalo, Atlas Mara’s CEO, says the company is looking to expand in Nigeria, enter Kenya, and eventually have operations in 12 to 15 African markets. During an interview in Kigali, Rwanda, Vitalo, the former head of Barclays’s Middle East and North Africa business, speaks over the bustle of customers entering the main branch of Banque Populaire du Rwanda, which Atlas Mara bought last year. Next door, where Banque Populaire’s new headquarters is under construction, builders are banging together steel scaffolding. The hubbub reflects the stubborn expectation that African  economies will boom again. “You have high growth potential at the same time as capital is pulling back,” Vitalo says. “That was the vision and insight of Atlas Mara.”

These days, that potential is only patchily evident. By combining Banque Populaire with the commercial banking arm of the Development Bank of Rwanda, or BRD, Atlas Mara is creating the country’s second-largest lender by assets. But even Rwanda’s relatively robust $8 billion economy is feeling the pinch, with growth forecast to slow to 6 percent this year, from 6.9 percent in 2015.

Although Diamond concedes that Atlas Mara’s stock “is not a good currency” for making acquisitions right now, he says the company can find alternative sources of funding or even pay with its shares in some cases. Atlas Mara is looking at using the company’s stock to purchase a bank, Diamond says, without identifying the target. It bought a bank in Zambia this year without raising money from investors. “We’re very confident that given the right deals, we will find the right funding strategy,” he says.

Kato Mukuru, the former head of equity research at Exotix Partners, who’s been an African-bank analyst for eight years, doesn’t buy Diamond’s line. He says Atlas Mara’s piecemeal expansion is too slow and too thinly spread. “They need to make up their minds on what they really want to be in Africa and go for it in a big way to convince investors to reverse that share price,” he says.

Earlier this year, it looked as if Atlas Mara might be ready to do just that as it circled Barclays Africa. “The funding is in place,” Diamond said on a conference call in April. “There is support for this potential transaction.” The following week those plans were crushed when South Africa’s central bank signaled that a private equity offer for one of the country’s lenders wouldn’t fly. With a market capitalization of more than $9 billion, Barclays Africa would be too big a reach for Diamond, says an investment banker who’s had meetings with Atlas Mara and asked not to be identified. Atlas Mara’s market value has dwindled to $244 million as of late September, down from almost $800 million in 2014.

Even so, Diamond says he and David Schamis, his partner at their investment vehicle, Atlas Merchant Capital, met with “many investors” to discuss their interest in a bid for Barclays Africa, which he describes as “the single best business across sub-Saharan Africa.” Diamond declines to comment on the progress of any discussions, though he hasn’t abandoned all hope—marshaling once again the boldness that crackles through his 37-year career in banking.

The Massachusetts-born Diamond defied the skeptics at Barclays, which traces its roots to 1690, by turning what had become an also-ran investment bank into a profit engine in the years before the financial crisis. And he hasn’t shied away from risky deals. In 2007, when he was president, Barclays launched an unsuccessful €67.8 billion ($76 billion) bid for Amsterdam-based ABN Amro Holding. A year later, in the darkest days of the financial crisis, Diamond struck an agreement to buy the North American investment-banking business of bankrupt Lehman Brothers Holdings for $1.75 billion.

Getting control of Barclays Africa, a business he helped build and champion, would bring Diamond full circle, because that’s where his interest in African banking took root. Barclays bought a controlling stake in South Africa’s third-largest bank, Absa Group, in 2005. It was Diamond who asked Vitalo, then the chief operating officer at a Barclays Capital unit in London, to move to Johannesburg to run Absa’s corporate and merchant bank. “Both of us have the view that one of the greatest gifts from working for Barclays was getting to learn about Africa,” Vitalo says.

In April 2011, three months after becoming Barclays’s CEO, Diamond grew visibly excited when the broadcaster Charlie Rose asked him about Africa in an interview. “When I step back and look at the opportunities for Barclays, and I say to myself, ‘Where is there growth in the world and where is there a real competitive advantage for Barclays?’ Africa comes right to mind,” Diamond said. That year, Barclays decided to move its Africa headquarters to Johannesburg from Dubai and said it was considering increasing its stake in Absa.

Yet Diamond’s time at Barclays was running out. The polarizing American, who spent more than a decade building London-based Barclays’s investment bank into a bond-trading powerhouse, was dubbed the “unacceptable face of banking” in 2010 by then-U.K. Business Secretary Peter Mandelson. His high pay and Wall Street swagger were out of step with the mood in post-crisis Britain. He famously told Parliament in January 2011 that the time for “remorse and apology” from bankers for the financial crisis needed to come to an end, unleashing a torrent of criticism.

In May 2013, Diamond traveled to Cape Town for a World Economic Forum meeting on Africa. That’s where he met the Ugandan with whom he would later found Atlas Mara. Ashish Thakkar, the head of Mara Group Holdings, was seated beside him at an event and, like Diamond, had an iPad mini with a red cover. By the end of the day, they had struck up a friendship. By September, Diamond says, they’d agreed to set up Atlas Mara. Thakkar, 35, who moved to Uganda from the U.K. as a child and started his company at 15, has investments in real estate, technology, and now banking.

Diamond and Schamis had already started Atlas Merchant Capital to invest in financial-services companies in developed markets, including Europe. To buy banks in Africa, Diamond says he knew he would need “permanent capital.” So in late 2013, he and Thakkar sat down for a continental breakfast at Citigroup’s offices in Lower Manhattan.

During the meeting, Diamond impressed the bankers with talk of the huge opportunities in Africa, according to two people with knowledge of the private gathering who asked not to be identified. His plan, according to the people: buy up African banks, inject the latest technology, import top executives to run operations, and watch the profits roll in. Before the year was out, Citigroup helped Atlas Mara raise $325 million in a London initial public offering. Six months later, the company tapped investors for an additional $300 million.

Atlas Mara brought on experienced Africa hands, including Arnold Ekpe, the Nigerian former CEO of Ecobank Transnational, who joined as chairman, followed by Vitalo. For Vitalo, who’s known Diamond since they were both at Credit Suisse First Boston in New York in the mid-1990s, joining forces with Diamond was a no-brainer. “How often in life does an opportunity like this come along?” Vitalo asks.

They set about doing deals. Atlas Mara agreed to buy Gaborone, Botswana-based BancABC, the country’s fifth-biggest bank, for as much as $265 million in April 2014, gaining access to financial-services operations in Botswana, Mozambique, Tanzania, Zambia, and Zimbabwe.

Atlas Mara gained a 9.1 percent stake in Union Bank of Nigeria through its purchase of BancABC. By the end of 2014, it had spent an additional $270 million to increase its stake. Union Bank is Nigeria’s eighth-largest lender by market value. Its stock has declined about 50 percent in the past two years. Given Nigeria’s bleak economic outlook, Atlas Mara said in its earnings statement in August that the naira’s decline may “dampen UBN’s contribution to net income” in the second half of the year. Diamond says he’s still eager to get control of the bank, but he’s been unable to buy more stock.

Atlas Mara’s most recent acquisition, completed this year, is Finance Bank of Zambia, the country’s sixth-largest lender. FBZ was bought for about $61 million in cash, partly funded by development finance institutions, and 3.3 million Atlas Mara shares. Once integrated with BancABC’s Zambian operations, it will create one of the nation’s largest lenders by branches.

Atlas Mara’s challenges are obvious. Its slumping share price and global investors’ souring mood toward Africa will make it harder to raise money for larger deals, says Zoran Milojevic, an analyst at brokerage Auerbach Grayson in New York. “There’s no money around, and raising money for African assets is even harder,” says Milojevic, who’s been covering frontier markets for about 20 years. “Africa is not the funky, hot place it was three years ago.” Ilan Stermer, a banking analyst at Renaissance Capital in Johannesburg, has a buy rating on the stock because he believes it’s undervalued. Even so, he estimates Atlas Mara’s net income will probably fall 55 percent, to $5.1 million, this year.


This interview appears in the November issue of Bloomberg Markets.
This interview appears in the November issue of Bloomberg Markets.
Cover artwork: Zachary Walsh

The company will keep moving forward in the hope that the stock will improve, Vitalo says. “We are making money in spite of the more difficult economics and the fact that we have M&A costs,” he says. “We are executing on what we said we are going to do.”

Atlas Mara’s third-quarter results may show “continued positive operational momentum” when they’re released later this month, the company said in a statement today. Chairman Epke will step down in December, and Diamond will take his place on an interim basis, the company said.

Executives are losing money, too, Vitalo says, adding that he bought Atlas Mara stock at about $11 a share when he joined in April 2014; it closed at $3.45 on Sept. 28. In 2015, he and Arina McDonald, the chief financial officer, took their bonuses in stock. “No one likes to suffer a declining share price,” Vitalo says. “We hate it, too. None of us have sold a single share.”

Investors such as Salami, who’ve criticized the level of pay at Atlas Mara, are unlikely to be sympathetic. Vitalo’s compensation amounted to $3.43 million in 2015, according to the company’s annual report, or about 60 percent more than the $2.1 million paid to Barclays Africa CEO Maria Ramos. Diamond is unrepentant, describing the compensation as “very fair.”

For the equities desk at Citigroup, which arranged Atlas Mara’s IPO almost three years ago, the share performance has turned into a headache, says a person with knowledge of the situation. Clients looking to sell Atlas Mara stock, but unable to find buyers, have demanded that Diamond and Citigroup repurchase shares, the person says, asking not to be identified because the dealings are private. Both parties bought back some stock, to little effect. To increase the liquidity of the stock, Diamond says the company has “very, very specific plans,” but he doesn’t elaborate. (A spokeswoman for Citigroup declined to comment.)

Diamond is undaunted—and not as alone as he appears in his misadventures in sub-Saharan Africa. Take Eric Brock, founding partner of Boston-based investment firm Clough Capital Partners, which manages $3.5 billion of assets and holds about 6 percent of Atlas Mara. “You can’t look at the performance of the stock and be happy with that,” he says. “I believe in the company, the opportunity, and the management team. Things are never as dire as they look. There’s a recovery in there.” Diamond sees it, too, but it’s elusive. And time is running out.
—With assistance from Vernon Wessels and Max Abelson
Bonorchis covers finance in Johannesburg. Griffin covers finance in London. Wallace covers Nigeria in Lagos.