LONDON/JOHANNESBURG (Reuters) - British bank Barclays (BARC.L) is in talks about combining its African operations with those of majority-owned subsidiary Absa Group ASAJ.J in a move aimed at accelerating expansion on the continent to catch up with rivals.
Barclays acquired a majority stake in South Africa’s third-largest bank in 2005 but the two have remained separate entities outside South Africa - in one case, Tanzania, running parallel operations in the same country.
The bank said on Tuesday that combining the businesses would help increase growth opportunities in Africa.
“The Africa business is an important long-term growth driver,” said Oriel Securities analyst Mike Trippitt who estimates Barclays’ African loan book will grow by an average 9 percent per annum between 2011 and 2015 compared with 5 percent for the group.
Analysts have said Absa, which is 56 percent owned by Barclays, has been slow to take advantage of its parent’s wide presence on the continent, trailing fast-moving rival Standard Bank (SBKJ.J).
Absa’s shares have been hammered on concerns that rising bad debts were derailing its recovery. The bank posted a surprise drop in first-half earnings last month.
The shares are down nearly 7 percent over the last six months, making it the worst-performing stock among South Africa’s four biggest banks. By contrast, rival FirstRand (FSRJ.J) is up nearly 20 percent over the same period.
Absa shelved plans to buy Barclays’ African assets in 2008 citing price differences. The planned purchase had been part of the original deal when Barclays acquired its Absa stake.
The latest proposal would see Barclays combining its interests in Botswana, Ghana, Kenya, Tanzania, Uganda, Zambia and the Indian Ocean with Absa, and remaining as the majority shareholder of the combined African operations.
Barclays and Absa had already agreed to work more closely together in their “One Africa” strategy and had set up a joint team of executives.
The proposed combination of the businesses will mirror the operational structure already in place, said Maria Ramos, chief executive of Absa and Barclays Africa.
“It will provide a platform for further growth,” she said.
The two lenders are hoping to grow their retail and corporate franchise across the continent, while growing the investment bank. They have launched financial services in Botswana, Mozambique and Zambia, and are planning to roll out similar products in Kenya.
“It will result in cost savings,” said Faizal Moolla, an analyst at Avior Research. “It could mean that Absa will be focused on South Africa and the new combined entity will spearhead the drive into Africa.”
Barclays said combining the businesses would not result in job cuts.
Shares in Barclays were up 1.8 percent to 194.3 pence at 1323 GMT, compared with a 0.7 percent rise in Europe's bank index .SX7P. Absa was down 0.1 percent compared with a 1 percent increase in the Top-40 index .JTOPI.
Reporting by Matthew Scuffham in London and Helen Nyambura-Mwaura in Johannesburg; Editing by Erica Billingham