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Barclays to reduce Africa stake, cut dividend in revamp plan

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Barclays Plc said it will sell down the stake in its Africa business, cut its dividend, and move more assets into its non-core unit as Chief Executive Officer Jes Staley laid out his strategy for the U.K.’s largest investment bank.

The lender will sell down its 62 percent stake in Barclays Africa Group Ltd. over the next two to three years to a level that allows it to deconsolidate the business, according to a statement Tuesday.

Fourth-quarter adjusted pretax profit, including restructuring costs, fell 56 percent to 247 million pounds ($344 million), according to the filing. That missed the 519 million-pound average estimate of five analysts surveyed by Bloomberg.

The moves are meant “to accelerate our strategy and simplify the group, as we prepare for regulatory ring-fencing requirements,” Staley, 59, said in the statement.

Staley is counting on his first results announcement and a revised strategy to reassure investors, who have been demanding bold moves to boost capital and returns as the bank languishes at its lowest valuation in more than three years.

In addition to selling down the African stake, the CEO has moved to address the underperforming investment bank. He previously announced 1,200 job cuts, the exit from seven countries in Asia, a hiring freeze and cutting the bonus pool to trim costs. The shares fell 7.6 percent at 8:28 a.m. in London trading. The stock has dropped 27 percent so far this year.

The African business had 9.5 percent of the bank’s risk-weighted assets at the end of 2015. Barclays has operated in the continent for almost a century and its stake in Johannesburg-based Barclays Africa Group Ltd. was built up under former CEOs John Varley and Robert Diamond.

“BAGL is a well-diversified business and a high quality franchise,” Staley said in the statement. “However the stake in BAGL presents specific challenges to Barclays as owners, such as the level of capital held in respect of BAGL, the international reach of the U.K. bank levy” and other reasons.

The divident cut

The company also cut its dividend to 3 pence per share for 2016 and 2017, from 6.5 pence last year. Ian Gordon, an analyst at Investec Bank Plc, had estimated the dividend would remain flat in 2016, while Raul Sinha at JPMorgan Chase & Co. had said shrinking the investment bank by 30 percent could fund an increase in the payout.

The dividend reduction, along with the African business move, will boost the firm’s common equity Tier 1 ratio by at least 1 percentage point, the company said. That measure was 11.4 percent at the end of 2015, up from 10.3 percent a year earlier.

Reducing the dividend for 2016 and 2017 was a “very difficult decision to make,” but will allow the bank to speed the shedding of non-core assets, Staley said in an interview with Bloomberg Television.

The CEO said the bank will get back to paying out “significant” percentage of profits in a dividend in 2018. “The dividend cut is justified, given the major restructuring ahead,” said Sandy Chen, an analyst at Cenkos Securities with a buy rating on the stock.

“No doubt the market won’t like the income miss, but trading at 0.5 of book value, this isn’t an expensive price for a decent future.”

New Structure

The company added 8 billion pounds of risk-weighted assets to its non-core division, bringing the total to 55 billion pounds, and said it will speed up divestment of assets in that unit to reach 20 billion pounds by 2017. The businesses being transferred to non-core are wealth-management units in Asia and the Americas, units in at least nine countries including Egypt and Zimbabwe, and certain product lines in the investment bank.

Staley also unveiled a new structure for the lender, splitting it into two divisions to comply with U.K. law requiring the separation of banks’ consumer and investment banking arms by 2019.

The so-called U.K. ringfenced retail bank will have about 70 billion of risk weighted assets, whereas the non-ringfenced business, called Barclays Corporate and International, is almost three times as large with about 195 billion pounds of assets, according to the statement. It will house the investment bank, wealth management and the U.S. and international cards business.

“Focus will be on the new strategy with CEO Jes Staley laying out a clear roadmap to a much better capitalised and simplified group through the sell down of Barclays Africa and expansion of Non-Core,” Sinha of JPMorgan wrote in a note to investors Tuesday. Staley “can move Barclays away from being a value trap by allocating capital away from the investment bank, which is a sub-6 percent ROE business.”

The stock has fallen each of the past two years, leaving the bank trading at less than 50 percent of its book value. In July, Chairman John McFarlane, 68, pledged to double the share price over the next three to four years.

Barclays took another 1.45 billion-pound charge for improperly sold payment protection insurance in the fourth quarter, increasing the total cost of compensating customers for the scandal to about 7.5 billion pounds.
Bloomberg

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ADB grants BDC P4m for capacity building

Koobonye Ramokopelwa

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BDC head of human capital, Thabile Moipolai

African Development Bank has granted Botswana Development Corporation (BDC) over P4 million for training and capacity building of its staff members, the latter’s Managing Director, Bashi Gaetsaloe has disclosed.

The grant, which is $400,000 could not have come at a better time for BDC which has just begun a foray into the African continent. According to the Head of Human Capital at the investment arm of government, Thabile Moipolai, the grant will be used in areas such as investment, legal and risk, the three divisions which are considered critical as they continue to push the five -year strategy.

BDC has been given the leeway to invest outside Botswana and already some investments are being made in West Africa. Capacitating the staff in the above areas will come in handy for the African expansion.

Moipolai was answering a question from The Midweek Sun on Friday during the company’s annual stakeholder briefing where operational and financial reports for 2017/2018 were made public. The grant will be utilised in the next two years. BDC has reiterated its plan to continue to invest initiatives which are aimed at developing and retaining staff members.

“As we continue to build a strong BDC for the future, continuous learning and development is critical for our business success and therefore remains a priority area for Human Capital,” BDC 2017 annual report reads.

BDC has also developed a future focused competency based training that will be used to make informed learning and development decisions. “The (BDC) academy will also help BDC produce future leaders that are fluid and progressive through a bespoke leadership development,” reads the report.

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KBL announces return of Kickstart program

Koobonye Ramokopelwa

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Previous kickstart beneficiaries

Kgalagadi Breweries Limited, a unit of Sechaba has announced the return of Kickstart, a youth entrepreneurial development program that was suspended three years due to lack of financial resources, Managing Director, Renaud Beauchamp has told the media.

Before the program was put on ice, it had benefited over 70 small medium enterprises with funding, mentoring and market access assistance. According to Beauchamp, the revamped Kickstart will start next year, with an annual budget of about P1, 5 million. “We plan to invest in 15 new businesses every year,” he said at a press briefing which also announced a price reduction for its alcohol brands such as St Louis, Castel Lite and Black Label.

Successful applicants will receive about P200, 000 grants to execute their business ideas. Beauchamp stated that, they have been able to reintroduce Kickstart from ‘freed capital’ as a result of the recent reduction in Alcohol Levy from 55 percent to 35 percent. The clear beer price reduction comes after the Alcohol Levy, which made beer expensive, was slashed by President Mokgweetsi Masisi regime some few months ago.

Meanwhile, Assistant Minister of Trade, Industry and Investment has announced changes in trading hours for businesses that trade with liquor.

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