Category Archives: Barclays

NewGold ETF Debuts at the Nairobi Securities Exchange

March 27 saw the listing of 400,000 gold bullion debentures, via NewGold, an exchanged traded fund (ETF)  at the Nairobi Securities Exchange. NewGold is represented by Barclays Financial in Kenya. It is incorporated in South Africa and is also listed on stock exchanges in Botswana, Nigeria, Mauritius, Namibia and Ghana. The listing will be equal to these previously issues ones.The NewGold ETF tracks the value of gold bullion and will be the Kenya shilling equivalent of the international market price of gold. Selling of NewGold will not attract capital gains in Kenya. Also in March 2008 NewGold got approval in South Africa for being shariah compliant with Islamic principle of ethical investing “NewGold and NewPlat ETFs open the way for Muslim investors to gain exposure to precious metals – gold and platinum – through investing in a listed ETF.”

NewGold listed at the Johannesburg Stock Exchange in 2004 and “since launch NewGold has grown rapidly, attracting over R21 billion investment, due to its healthy returns. It is the largest ETF listed on the JSE

Notes from NewGold

  • JSE Code GLD: GLD are designed to track the spot gold price less management fees
  • ISIN ZAE000060067
  • Gold Entitlement Approximately 1/100th one fine troy ounce of gold.
  • The Underlying Assets: Allocated Gold – all gold is kept in the form of 400 oz London Good Delivery Bars. The gold is kept in an allocated form, and as such does not carry third party credit risk
  • Absa is the originator, Barclays is the sponsoring broker, and Mboya Wangongu advocates are the legal advisors.

Barclays Exiting Africa: Part II

Almost a year after Barclays Africa announced a decision by (parent) Barclays PLC to exit Africa, they released their Barclays 2016 results (PDF). While the world is now a different one after BREXIT and President Donald Trump, the exit plans are still on course.

Excerpts of the some statements released on Thursday 

  • Revenue from (the rest of) Africa) has been growing at about 16% a year, compared to 5% in South Africa, but, the rest of Africa (excluding SA) is still just 23% of revenue for Barclays Africa. They expect that rest of Africa growth should exceed South Africa’s
  • They have agreed with Barclays PLC on terms of the “separation payments and transitional services  – Barclays PLC will contribute £765m, comprising of £515m in recognition of the investment required in technology, rebranding and other separation projects, £55 million to cover separation related expenses, £195 million to terminate the existing service level agreement relating to the rest of Africa operations”.
  • Barclays PLC will contribute an amount equivalent to 1.5% of Barclays Africa market capitalization towards a black economic empowerment (BEEP) scheme and Barclays plans to create an equity plan for employees in the next 12 to 18 months.
  • They will continue to use the ‘Barclays’ brand in the rest of Africa for three years from the date on which Barclays PLC reduces its shareholding in BAGL to below 50%.
  • During 2016, Barclays PLC reduced its shareholding from 62.3% to 50.1%. Other shareholders include Public Investment Corporation (SA) 6.86%, Old Mutual Asset Managers 3.31%, Allan Gray Investment Council 2.16%, Prudential Portfolio Managers 2.01%, Schroders Plc 1.93%, BlackRock 1.69%, Vanguard Group 1.66%,  Dimensional Fund Advisors 1.65%, and Sanlam Investment Management (SA) 1.62%.

June 1 2017 update

  • Barclays Africa Group Limited today announced that following the completion of South Africa’s largest bookbuild in South African Rands, Barclays PLC has sold 33.7% of Barclays Africa’s issued share capital at a price of R132 per share.
  • This results in accounting deconsolidation of Barclays Africa from Barclays PLC.
  • Barclays PLC sold 285,691,979 Barclays Africa ordinary shares at a price of R132 per share, which results in Barclays PLC reducing its shareholding to 23.4%, with a further 7% to be taken up by the Public Investment Corporation at a later date, following receipt of the necessary regulatory approvals.
  • The significance of this sell-down is that Barclays PLC is no longer the controlling shareholder of Barclays Africa, which now has a diverse shareholder portfolio made up of very supportive, long-term, institutional and individual investors.
  • Ownership of Barclays and Absa operations in Africa does not change as a result of the reduction in shareholding. The 11 banks that form part of Barclays Africa will continue to be led and operated by people with deep local knowledge and a diversity of skills and experience.
    £1 is $1.25, £1 = KES 128.5, and  £1 = 16.1 ZAR.

Barclays Kenya 2016 Financial Results

Today, Barclays became the first Kenyan bank to release its financial results for the year 2016, which was a tumultuous year for the Kenya banking sector.

New bank chairman Charles Muchene said the year saw challenges with new business models, interest rate caps and the announcement of the parent sale. He also praised his predecessor, F. Okello.

Thereafter CEO Jeremy Awori said that while Kenya’s economy looked stable with an enviable economic growth rate, a stable currency and moderate inflation, the dip in shares at the Nairobi Securities Exchange and profit warnings issued by various companies showed some the struggles that companies, including their customers, were going through. He added that challenges at some banks had resulted in increased regulatory scrutiny and audits on systems, anti-money-laundering, and insider lending all other banks, and Barclays had passed. Also, that  2018 will bring new rules on impairment (bad loans) and capital requirements.

They had the investment in technology by going paperless and customer focused channels including intelligent ATM’s that allow 24-hour cash deposits, as well as enhancing internet and mobile banking. They have also invested in alternative channels and were the first international bank to embrace agent banking in a deal they signed with Posta Kenya under which they would have post offices in far-off places (like Wajir) act as customer interaction points for the bank.

Bank branches handled 43% of transactions in 2016, which was down from 59% as other channels recorded increases with ATM;’s handling 34%, digital 14%, and POS 9%

Summing up the financial results for the year, Barclays assets grew by 8% to Kshs 260 billion, deposits went up 8% to Kshs 178 billion while loans went up 16% to Kshs 169 billion. Interestingly 68% of bank deposits don’t earn interest (they are in transactional accounts). Also, the loans increases were mostly in the first half of the year while those after the interest rate cap law (passed in September 2016)  were mostly existing customers topping up their loans.

Income went up 8% to Kshs 31.7 billion as expenses also went up 8% to Kshs 16.9 billion. But there was a huge jump in provision got bad loans, which more than doubled, to Kshs 3.9 billion and this resulted in pre-tax profit dipping from Kshs 12 billion to Kshs 10.8 billion. 90% of the impairments were from retail/ personal lending.

The dividend for the year will be Kshs 1 per share – comprising an interim dividend of 0.2 per share and a final dividend od 0.8 per share – unchanged from 2015. The payout will be a total of Kshs 5.43 billion (~$54 million)

Going forward, digital and automation will be key drivers to give customers better and efficient experiences. Barclays also plans launch new mobile banking products soon, and to become a financial technology partner to their customers, not just a bank.

Africa in 2017: Barclays Forecasts

Today Barclays Africa economists gave their forecasts on Africa and specifically Kenya for the year 2017 at an event that featured several roundtables sessions.

  • Populism: During 2016 the world changed in terms of two surprising votes in the US and the UK that reflected an inward focus. The votes in those countries were driven by populations who felt that their politicians were not pushing their agendas  on matters such as trade and immigration. Also while incomes of the rich & poor have been improving, those of the middle class have stayed stable or declined.
  • US President-elect Trump is expected to reduce the US corporate tax rate which  may woo companies to bring back some of the $2 trillion profits sitting outside the US.
  • barclays-africa-forumBanks are seen as making too much money and not playing their part in society – this has resulted in things like the interest rate cap law in Kenya.
  • Reaching  Entrepreneurs: There are 40-50 million emerging SME’s in Africa but only 1/5 of them have access to capital, and this is because banks ask for collateral
  • Banks operate in cash driven economies and many entrepreneurs don’t want to share information. Banks also have to collect a lot of documentation that bothers customers.
  • Barclays is committed to making sure there’s no systemic risk from their exit from Africa, and that its customers will continue to get good service in all the 10 markets
  • Barclays has a platform called Rise with centers in London, New York, Cape Town, Mumbai, Tel Aviv where they partner with companies on ideas to be implemented.
  • Africa: The continent  is now becoming a bit more fragile, and for the first time in a decade, Africa is going to grow at a slower pace than the global average 3.5% (but if you exclude  South Africa and Nigeria), the growth is still above average for most
  • African countries have been spending much more than their revenue and the years of deficits have eroded Africas strong starting point. Going forward, African countries will face higher financing cost and lower capital inflows.
  • Brexit Impact: 45% of FDI into Africa comes from Europe and  Kenya gets 23% from the UK.  But the pound has continued to weaken since the vote and this will result in reduced global demand for African exports, less tourism from UK/EU, and reduced remittances from African migrants
  • Kenya: The shilling currency has been weakening at a lower rate than its peers. This could make exports expensive and widens the current account deficit. It’s possible that the Kenya shilling  could depreciate to  110/$ over the next 12 months. This is mainly due to the expected dollar strength against all currencies. Kenya has strong exchange reserves and can tap an IMF precautionary fund to cushion shocks.
  • East Africa:  Trade lags the rest of the world. Since East African borders “opened up” around 2010, Kenya’s exports to the EAC have only increased by 8% compared to 50% to the rest of the world.

Nairobi debate on BREXIT

Yesterday there was a debate in Nairobi on the UK’s referendum on EU membership, on which there will be a vote in the UK (and Gibraltar) on June 23. Europe is the second largest destination for Kenya’s exports (after the rest of Africa) and the UK is second in Europe with about Kshs 40 billion of exports from Kenya, slightly behind Netherlands (a destination for flowers). Overall, the UK is the fourth largest destination of Kenya’s exports (after Uganda, Netherlands, the US), and it imports about the same amount from the UK (Kshs 42 billion).

The debate was sponsored by the St. Paul’s Property Trust and had  Aly Khan Satchu (as the moderator), Graham Shaw (Brexiter) arguing for Britain to exit) and Chris Foot (Remainer)  arguing for Britain to remain in the EU).

 Reasons  to BREXIT

  • If #BREXIT doesn’t happen now, Britain will beholden to unelected decision-makers in Brussels for the next 40 years. Other countries will soon have similar votes.
  • The (bureaucratic) EU has 5 laws on pillow cases, 109 on pillows, and 12,000 on milk.
  • Germany bailed out Greece, and the EU will soon have to bail it out again (Italy is also shaky)
  • EU laws limit Britain’s ability to get top talent (e.g from Kenya) as they have to give preference to the EU states.
  • Under the EU, the production of a country is controlled (they may have to destroy fishing boats, and Portugal’s wine industry was destroyed by the EU).
  • Britain will have to renegotiate trade deals with 28 (and maybe 32) countries, but probably has no interest in trading with 10 of them.
Brexit debate in Nairobi

Brexit debate in Nairobi

Points against BREXIT

  • The great Winston Churchill wrote a book titled “Europe Unite”.
  • 56% of Britain exports are to the EU, – don’t BREXIT.
  • The last time the UK thrived outside the EU, it had a protectionist market called the colonial empire. 
  • There has not been much discussion about the positives of being in the EU – only the negatives – and that is not enough reason to leave.

Audience

  • Impact on Barclays Premier League (BPL)? : Arsene Wenger (Arsenal manager) asked Britain to stay in the EU (which is a huge global export, but how many in Europe watch the BPL ?).
  • The world is moving towards integration  (e.g The East African Community).
  • The rise of nationalism in Europe is a concern.
  • Britain at 16%, is Europe’s biggest export market, ahead of the US (14%), and China (8%).

Also see this forum, with the (then) High Commissioner from Britain to Kenya in which he discussed the relationship between the two countries.