Barclays Plc has announced its intention to sell 62.3 percent interest in its business in Africa (BAGL).
According to the British banking giant, the sales will be done “over the coming two to three years, to a level which will permit us to deconsolidate it from an accounting and regulatory perspective, subject to shareholder and regulatory approvals if and as required”.
The bank notes in its just released 2015 full-year results that the stake in BAGL presents specific challenges to Barclays as owners, such as the level of capital held in respect of BAGL, the international reach of the UK Bank Levy, the GSIB buffer, and MREL/TLAC and other regulatory requirements.
BAGL is today reporting a 17 percent return on equity for 2015 in its standalone local currency results versus the 8.7 percent return reported for Africa Banking in Barclays’ results.
Profit before tax increased 11 percent to £1.0 billion reflecting an increase of 18 percent in operations outside of South Africa and increase of 9 percent in South Africa. This is largely due to good growth delivered in key focus areas of retail business banking (RBB) in South Africa; WIMI (wealth, investment management and insurance) and corporate banking in South Africa
Income increased 7 percent to £3.6 billion. Net interest income which increased 8 percent was driven by higher average customer advances in Corporate and Investment Banking (CIB) and strong growth in customer deposits in RBB.
Net interest margin improved 11bps to 6.06 percent but impairment increased by 11 percent, driven by an increase in single name exposures and additional coverage on performing loans. Costs also increased 5 percent reflecting inflationary impacts, partially offset by savings from strategic cost programmes in the branch network, technology savings and property rationalisation, the bank noted.
Jes Staley, Group Chief Executive Officer, in his Strategy Update said the bank declared a final dividend of 3.5p per share, making 6.5p in total for 2015. This will reduce in 2016 and 2017 to 3.0p.
“We expect to set appropriate dividends as Core and Group earnings become aligned through Non-Core run down and reduction of legacy headwinds, and we expect to pay out a significant proportion of earnings in dividends to shareholders over time. We will pay dividends semi-annually from 2016 rather than quarterly,” Staley said.
Barclays Plc. expects the combination of the dividend reduction and the BAGL sell-down to contribute at least 100 basis points of proforma accretion to the Group’s common equity tier 1 (CET1) ratio over the next two to three years, supplementing organic capital ratio accretion.