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Barclays Banks: Goodbye Africa, We’re Going Home

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After much analysis of the current state of affairs, the board of Barclays Banks ruled that it wasn’t financially sound to continue using their Johannesburg-based branch. The branch is to be sold as a strategic move to undersell the faltering economic state in South Africa as the rand steadily loses value. Additionally, the very fact that Barclays does not own 100% of the company makes them less in control of the inner workings of the branch and leaves them more susceptible to corruption and the damage that can come from such dealings.

Currently there is no active pursuant for the 62.3% claim on the Barclays Africa, but since the branch is worth R78bn ($4.83 billion), delegates will wait for the right market conditions to sell. Stocks are falling steadily however, so the clock is ticking.

Other Branches to Follow

There is going to be even more spring cleaning in the coming months. Barclays CEO Jes Staley announced that there would be massive layoffs as the corporation closed down branches in Brazil and Russia, as well as other locations across Asia and Europe. With the pressure off from these smaller branches, Barclays will refocus more of its resources upon more prosperous lines, including the British and American branches.

Capital Gains Won’t Come Easily

Analysts have to wonder if this massive move to expunge smaller fish in the larger Barclays pond isn’t all a response to a need for greater core capital ratio. Barclays is striving for a 12% ratio, and the Africa sale could propel it forwards towards that goal. According to Jefferies analysts, Barclays stands to gain nearly 0.8%, a substantial step in the direction of that overall target.

Saying goodbye to Africa will not be a simple move though. The Barclays Africa Group Ltd. employs nearly one third of the entire Barclays staff, with 45,000 jobs held across 12 different countries. The selling market is not in Barclays favour either, but with the rand still down by a quarter and unit returns down to 9.3% in 2015 there isn’t much to discuss.

 

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