Barclays Bank of Kenya. (Photo: Courtesy)
Barclays Kenya is set for a major re-organisation after the UK banking giant reached an agreement on the sale of its controlling stake in Barclays Africa Group Ltd (BAGL).
The agreement will see the Barclays brand fade from the market over the next three years after more than 100 years in the local banking industry.
The firm has, however, maintained that it is not exiting the African market, and will retain a considerable stake in BAGL.
“Barclays announced the decision to exit some markets or scale down its interests in others, and in our instance, they are selling down their share rather than exiting entirely,” said Peter Matlare, BAGL’s deputy CEO.
Mr Matlare, who also acts as the firm’s chief finance officer, said Barclays Plc could retain as much as 18 per cent shareholding in BAGL, down from the 51 per cent it currently holds.
Sealing the deal now paves the way for Barclays to shift its focus to the European and North American markets.
The agreement is, however, subject to regulatory approval. Barclays Plc has already submitted an application to the South African Reserve Bank for approval to reduce its shareholding in BAGL to below 50 per cent.
The agreement is also subject to approval from South Africa’s finance minister, and will see Barclays Plc pay a total of £765 million (Sh98 billion) to fund investments required for BAGL to separate from the UK lender.
This includes; £515 million (Sh66 billion) for investments required in technology, rebranding and other separation projects; £55 million (Sh7 billion) to cover separation-related expenses, of which £27.5 million (Sh3.5 billion) was received in December last year.
Another £195 million (Sh25 billion) will be used to terminate existing service-level agreements between Barclays and BAGL relating to the rest-of-Africa operations acquired in 2013.
The financial contributions are expected to help cushion Barclays Africa from the impacts on capital and cash flow that will be realised as a result of the separation.
Barclays also sought to allay fears among its more than 40,000 employees across Africa, saying the agreement will not lead to job losses.
“Over the next three years, there are some services we will continue to get from Barclays Plc, which will be given at an arm’s length. We do not expect any layoffs as a consequence of this change,” said Matlare.
Barclays Plc announced its intention to sell the majority of its shareholding in BAGL last year.
It is still unclear how the firm will offload shareholding from its African business, but similar agreements in other markets indicate a direct sale of block shareholding to local or regional players.
Last year, Barclays sold its retail and corporate banking business in Egypt to Moroccan firm Attijariwafa Bank SA, and sold its French retail banking and parts of its Italian loan book to European private equity fund AnaCap Financial Partners.