26 July 2013

Uganda: Absa-Barclays Merger Gets BoU Nod

With all regulator requirements fulfilled to complete the $ 2 billion merger of Absa, South Africa's largest retail bank, and Barclays Africa, attention is now shifting to the imminent restructuring that the bank could undergo in Uganda.

The deal to acquire Barclays's assets in Africa was first announced more than one and half years ago, but was only completed on July 22 following complex negotiations that took longer than expected to complete.

Absa and its parent company, Barclays of UK, suggested in a statement that the delay was expected given the pre-requisite approvals by regulators in Botswana, Ghana, Kenya, Mauritius, Seychelles, South Africa, Tanzania, Uganda and Zambia.

The approvals paved way for the merger, which will take effect on July 31. Under the deal, Barclays will have a 62.3% shareholding in Barclays Africa, which means Absa Group Ltd will have its name changed to Barclays Africa Group effective Aug.02.

However, the Absa brand will continue to be used in South Africa while the Barclays brand would continue in the other countries including Uganda. But the group will be listed on the Johannesburg Stock Exchange as Barclays Africa. Barclays Bank Kenya and Barclays Bank Botswana are to remain listed on their respective securities markets.

Officials said the deal marked an extraordinary milestone that sets the Group on course to "conquer" the continent. "By capitalising on our heritage and seizing the opportunity in some of the fastest growing economies in the world, we are well positioned to win in Africa," said Maria Ramos, the Absa CEO.

Indeed, Barclays Bank Uganda Managing Director Charles Ongwae had a reason to be optimistic. "We are excited about the opportunities that this development brings to the growth of our business in the market, particularly the ability for us to offer our clients and customers the best of both Barclays and Absa services and products in Uganda," he said.

Potentially, the deal enables Barclays and Absa to throw the gauntlet to the Standard Bank Group, which owns Stanbic Bank, Uganda's biggest bank by assets. Barclays Uganda assets are worth about $500 million, making the third largest commercial bank in Uganda after Stanbic and Standard Chartered.

However, the indigenous banks, which include Crane Bank, Centenary Bank and DFCU have been gnawing deeper into its market share in recent years, which means that the Barclays Bank Group should brace for a good run for its money.

Uganda currently hosts some 24 commercial banks, several solid deposit-taking institutions and a wide network of credit-giving institutions, all of which make Uganda's financial services market one of the most competitive in the region.

But the entry of Absa will also give competitors some worrisome nights. Since May 2005, Absa has been a subsidiary of UK-based Barclays Bank, Britain's third-largest bank, following the acquisition of a majority share holding in the bank, which at the time was Barclays' largest investment outside the United Kingdom.

Barclays Bank UK is still reeling from the shock of a scandal over traders' manipulation of London Interbank Offered Rate (Libor), which resulted into a massive 200 million Pounds fine. In the aftermath of the well-publicised scandal, three of the Barclays' top executives, including CEO Bob Diamond, were shown the exit under pressure from the Bank of England and financial regulators in the UK.

But observers say the success of Absa in South Africa with a massive 12 million customers; about 9,300 ATMs, and more than 36,500 permanent employees, will give the bank is significant push in the highly competitive market.

With the merger, Absa will add some six million new customers to its network of more than 1,300 branches across ten markets. This according to officials, is one of the strategies to accelerate its famous 'One Africa Strategy,' which could potentially make Absa one of the fastest-growing companies on the African continent.

The prospect of Uganda's budding oil industry also appears to be a strong incentive to invest in the country, and which means the financial services giant will have more focus on this market.

Recently, the bank also acquired credit cards for Edcon Proprietary Ltd, one of South Africa's largest clothing retailers, for approximately £800 million ($1.23 billion).

In Uganda however, Barclays Bank's more than 1,000 employees at 45 branches are keeping fingers crossed because a massive restructuring programme is definitely on the cards.

This is because Absa was last year a subject of negative publicity for its notorious restructuring initiatives, which have resulted into retrenchment of staff in a bid to enhance cost-efficiency.

However, Ugandan longsuffering sports lovers will be keen to welcome Absa with open hands given that in it is one of the leading sports enthusiasts in South Africa - sponsoring the national football team Bafana Bafana and the national rugby team the Springboks; among other sporting events.

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