) is working on cleaning up its image as is evident from the
flurry of activity by the London-based bank over recent months.
Last week, Barclays struck a deal with the Absa Group to merge
operations of both banking groups in high-growth African economies.
The Absa Group will be renamed the Barclays Africa Group with
Barclays increasing its stake in the South Africa-based bank from
the current 55.5% to 62.3%.
In October, Barclays had unveiled plans of
strengthening its core banking services in the U.K. with the
acquisition of ING Direct UK
reorganizing the top management
- decisions aimed at appeasing investors, regulators and customers
who were not pleased with Barclays' involvement in manipulating the
We are in the process of revising our
$15 price estimate for Barclays stock
, in view of the recently announced changes to its business
See our full analysis for Barclays stock
The Deal Has A Strong Rationale
Barclays has been optimistic about the sub-Saharan region for
quite some time now, something it demonstrated when it acquired a
majority stake in the Absa Group in 2005; a significantly calmer
period for the banking industry. And Barclays is still looking to
maintain a strong presence in the region to benefit from the high
growth potential of the underdeveloped nations.
According to Barclays' annual reports, its revenues from the
Africa Retail & Business Banking division have grown sharply
over the years; jumping from £934 million ($1.5 billion) in
2005 to £3.77 billion ($6.06 billion) in 2011. To understand
the importance of this figure, it must be remembered that Barclays'
cornerstone U.K. Retail & Business Banking division roped
in £4.66 billion ($7.5 billion) in revenues for 2011. Things
are further broken down into perspective when we compare the net
incomes for the two divisions; the U.K. division
contributed £1.02 billion ($1.64 billion) to the bottom-line,
whereas the Africa division contributed £910 million ($1.46
The Deal Presents Significant
As Barclays takes control of the combined business spread across
South Africa, Botswana, Ghana, Kenya, Mauritius, Seychelles,
Tanzania, Uganda and Zambia, it should be able to record faster
growth in the volume of loans handed out over the years to come.
The African operations contributed to only £36.7 billion ($59
billion) of the group's £266 billion ($427 billion) in
outstanding loans for 2011.
Barclays has been forced to reduce its focus on investment
banking operations due to stringent regulatory requirements as well
as high investor pressure. It has hence been working on
beefing up its core banking business in a bid to make up for the
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