Barclays makes $876 million from African business share sale

A woman uses an ATM at a branch of Barclays South African subsidiary Absa bank in Johannesburg on March 6, 2016. Barclays is selling down its 62 per cent stake in the South African lender as part of a plan to simplify the bank's structure, shore up its balance sheet and generate higher shareholder returns. PHOTO | REUTERS 

By Reuters

In Summary

• Barclays is selling down its 62 per cent stake in the South African lender as part of a plan to simplify the bank's structure, shore up its balance sheet and generate higher shareholder returns.

Barclays has raised 603 million pounds ($876 million) by selling a 12.2 per cent stake in Barclays Africa Group, a crucial first step in a plan to curb risk and refocus on core markets in Britain and United States.

Barclays is selling down its 62 per cent stake in the South African lender as part of a plan to simplify the bank's structure, shore up its balance sheet and generate higher shareholder returns.

Following completion of the placing, the British lender will continue to hold 424.7 million ordinary shares or a 50.1 per cent holding in Barclays Africa, worth around $4.4 billion based on the placing price.

The sale, priced at a discount of 6.5 per cent, was oversubscribed multiple times and attracted "very high quality demand" from domestic and international investors, a source familiar with the matter said.

Barclays did not give any details of the investors who took part in the placing. South Africa's state pension fund Public Investment Corporation (PIC) said on Wednesday it planned to acquire up to 10.3 million shares.

PIC, Africa's largest fund manager with more than $122 billion of South African government employee pension assets under its custody, was already the second-biggest shareholder in Barclays Africa with a holding of about 6 per cent.

Capital lift

Thursday's share placing is expected to result in a proforma increase of about 10 basis points to Barclays' common equity tier 1 ratio, a key measure of the bank's financial strength.

Gary Greenwood, an analyst at Shore Capital, praised the "initial step" in a plan to reduce exposure to the African arm, one of the bank's heaviest burdens in terms of risk budget, but it would only "be able to reap the capital benefit of this process" when ownership dropped below 20 per cent.

Barclays has struggled to reassure shareholders it will not need a fresh cash call to prop up its 11.3 per cent tier 1 ratio, which lags behind its major UK banking sector peers, after cutting its dividend to fund its restructuring efforts.

Shares in the bank, which have fallen 25 per cent in the year to date, were trading up 0.6 per cent at 163.4 pence at 0820 GMT. Shares in Barclays Africa dropped 1.5 per cent