Barclays plc is seeking to centralise its operations on the continent in a planned merger with Absa Group. It joins a growing list of African lenders seeking to centralise their operations in an effort to cut on costs.

Barclays Bank Kenya last week filed a cautionary notice with the Nairobi Securities Exchange over the planned merger of its parent company, Barclays UK’s Africa operations with those of Absa Group.

The deal, which is subject to regulatory and shareholder approvals in the UK and in African countries where Barclays and Absa have offices is expected to be completed by next year.

The bank now joins Equity, KCB, NIC, DTB and CFC Stanbic which manage their regional operations from a central point, enabling them to reap from economies of scale.

“Shareholders are advised that, in line with their strategy to operate as One Bank in Africa, Barclays Bank PLC and its subsidiary Absa Group Ltd are engaged in discussions about combining the majority of the Barclays Africa operations with Absa,” Barclays Bank of Kenya managing director Adan Mohamed said.

“This will enable them to have a uniform African Operation structure on which they can leverage to maximise their efficiency as well cut in costs,” Halima Saadia, a research analyst at Old Mutual securities said.

By merging operations, regional focused banks are able to cut operational costs as they can, for example, have a central clearing house or share some departments like HR, IT and Finance. This helps them to lower their transactional costs allowing them remain competitive.

NIC bank for example, says it will acquire a new Banking system that will allow it to clear all its banking transaction from Nairobi. The bank operates in Uganda and Tanzania. 

“The new system will cost around $8 million and should enable us to clear transaction from Nairobi as well as support online banking,” James Macharia, the banks CEO said.

The proposed merger will affect Barclays’ operations in Botswana, Ghana, Kenya, Tanzania, Uganda, Zambia and the Indian Ocean with Absa. Barclays Bank PLC will remain the majority shareholder of the combined African operations.

However, the merger is unlikely to affect the local listing of Barclays Bank Kenya.

“The listing of BBK on the NSE would be maintained. Only Barclays’ holdings in BBK would be included in the proposed combination,” Mr Mohamed said.

The proposed combination would be subject to, among other things, the approval of the Boards of Barclays and Absa (the latter on the recommendation of the independent members of the Absa Board), as well as Absa shareholders and regulators in the relevant jurisdictions.