Barclays to merge Tanzania units, says it will not split Africa business

Saturday March 12 2016

A Barclays Bank branch in Nairobi. The lender has 769,000 customers in Kenya alone. PHOTO | FILE

A Barclays bank branch in Nairobi. Barclays Africa Group is consolidating its Tanzania units. PHOTO | FILE 

By ALLAN OLINGO

Barclays Africa Group is in discussions with the Bank of Tanzania to merge its two business units in the country.

David Hodnett, Barclays Africa Group Ltd (BAGL) deputy chief executive told The EastAfrican the lender intends to combine the operations of its branded unit with those of the National Bank Commerce (NBC).

“There is still significant work required to ensure the merger goes through so it is too early to make further comment. For now, NBC and Barclays Bank Tanzania continue to operate as two separate and independent entities, with separate boards and management teams,” Mr Hodnett said.

The merger will be subject to approvals by Bank of Tanzania (BoT), and the country’s Fair Competition Commission. Mr Hodnett did not give a timeline for the merger but it is expected to happen within the three years that the bank has given itself to reduce its interests in Africa, which are owned through the Barclays Africa Group (BAGL).

Mr Hodnett said merging the Tanzania units would improve the balance sheet of the merged bank, giving it a competitive edge in big ticket transactions.

Barclays Tanzania managing director Kihara Maina, however, indicated the merger was on the cards even before the parent company decided to reduce its 63.8 per cent stake in BAGL in order to reduce the taxation exposure in the UK.

“These merger talks have been going on for a while now. If successful, it will enable us to share our expertise and combined asset base in a bid to provide robust and progressive service to the market,” Mr Maina said.

Barclay Tanzania is wholly owned by BAGL, and boasts of more than 70,000 customers, with 22 branches while NBC has more than 50,000 customers, 52 branches and has been in operations since 1967.

Despite being owned by BAGL, the two banks have been operating independently in the Tanzanian market for the past three years.

NBC came under the control Barclays after Absa of South Africa acquired majority shares of National Bank of Commerce (NBC) in 2000, only to be taken over by Barclays Plc in 2006. By then, the UK bank had registered Barclays Tanzania in 2001.

Barclays Plc has seen mixed results with its regional units with Barclays Kenya posting flat growth last year with profit after tax at $84 million. The performance was attributed to bad debt provisions, higher costs and interest rate volatility.

BAGL serves more than 769,000 customers in Kenya; its second largest market, 561,000 in Tanzania, and 136,000 in Uganda.

The Johannesburg listed company generates about 20 per cent of its profits from its operations outside of South Africa, with Kenya being the region’s anchor. The bank also operates in Zambia, Tanzania, Uganda, Mauritius and Botswana.

The rise in non-performing loans (NPLs) has been one of the banks low points in the region as all its units in Kenya, Uganda and Tanzania recorded a rise provisioning. In its 2015 results, Barclays Kenya booked $17.6 million in provisions for bad debts, a 25 per cent increase from the previous year.  

In Tanzania, BAGL has seen the two banks’ NPLs hovering around 10 per cent of gross loans, twice the statutory benchmark.  

Barclays Tanzania had a cumulative loss of $1.6 million in the first nine months of last year compared with $402,060 recorded over the corresponding period of 2014.

As at December last year, its asset base stood at $318.8 million while its customer deposits amounted to $274.8 million. The two banks offer retail and corporate banking services, with NBC also offering treasury services while Barclays Bank Tanzania offers cash management and trade finance.

Barclays Plc’s intention to reduce its interest in BAGL to a minority stake has led to speculation that the bank is likely to offload its interest unit by unit and phase out the brand. Mr Hodnett, however, said this was not the case.  

“We continue to be optimistic about our prospects in Africa, where we have a strong franchise with assets of over $65.5 billion. We are deeply committed to the success of our continent and are well-capitalised and independently funded,” Mr Hodnett said.

But he admitted that the sell down by Barclays Plc will impact BAGL work with multinational corporations and its cash-equities business.

He said that Barclays’s Corporate and Investment Banking (CIB) growth outside South Africa to 37 per cent of the business earnings in 2015 demonstrated that the group’s pan-African strategy was working.

“Our investment bank unit still has room to grow and we want to expand in Nigeria, while searching for insurance assets in Ghana as part of a strategy to be among the largest lenders on the continent,” Mr Hodnett said.

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