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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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SMEs benefit from Consumer Fair growth

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The Botswana Investment and Trade Centre (BITC) has applauded Botswana Consumer Fair’s continued efforts to improve small to medium enterprises’ linkages.

BITC Chief Executive Officer, Keletsositse Olebile, when opening the fair, said the event has provided interactive forum for both local and foreign exhibitors. He said the shopping show has enabled manufacturers, wholesalers and traders to market their products directly to consumers, an alignment to government’s endeavors.

“As part of government intention, we continually encourage local sourcing by retailers and distributors,” said Olebile who is just few months into his new post. He further celebrated the growth of Botswana Consumer Fair over the years, attributing the expansion to quality of goods displayed at the previous shows.“Improved quality and increased variety of wares increases the interest of the visitors and makes them look forward to returning the following year,” said Olebile.

This year’s exhibitors at the 13th event still running under the banner: ‘It is more than just shopping’ have been drawn from Lesotho, Zambia, Swaziland, South Africa, Nigeria, Ghana, Kenya, Egypt, Japan, India, Tanzania and Zimbabwe.

Consumer Fair is a flagship event for Fairgrounds Holdings and provides a platform for small medium enterprises (SMEs) from the different sectors of the economy to showcase and promote their products and services. In addition, the SMEs are expected to establish long term business linkages and promote local manufactured goods.Fairgrounds Holdings is already optimistic that the Fair immensely contribute to the socio-economic development of the country through supporting SMEs.

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‘Involve SMMEs in standards development’-Minister

Keikantse Lesemela

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Minister of Investment, Trade and Industry, Bogolo Kenewendo appealed to Botswana Bureau of Standards (BOBS) to include the Small, Medium and Micro Enterprises (SMMEs) when developing the standards to improve the sector.

She said the Ministry of Investment, Trade and Industry has identified three areas of focus going forward which are modeled on SMME development, investment promotion and export development apexes. “I would like to implore you to include this sector in standards development processes and assist in improving SMMEs conformity to standards and compliance to technical regulations,” said Kenewendo.

Speaking during the BOBS Technical Committee Members appreciation ceremony on Thursday, Kenewendo explained that the important roles of standards are underpinned by the aspirations and intentions espoused in both diversified export led economic growth and job creation as priority areas. “It goes without saying that the diversification of the economy requires a National Quality Infrastructure and Technical Regulatory Framework that promote competitiveness of Botswana goods and services.”

She also emphasized that an effective National Quality Infrastructure and Technical Regulatory Framework are essential as they provide crucial links to global trade, market access and export competitiveness through their contribution to consumer confidence in product safety, quality and the environment.Since inception in 1997 BOBS has published more than 1700 standards through 48 technical committees across several sectors of the economy; 109 certification licences have been issued against some of these standards. Currently 46 Botswana Standards are being implemented through the standards regulations with a view to protecting the health and safety of consumers as well as protection of the environment.

On her note, BOBS Vice Chairperson of the Standards Council, Professor Edward Dintwa said standards are powerful tools for helping organisations that implement them to realize their potential, have access and compete in the global marketplace. “In this highly competitive and complex world, issues of sustainability and productivity, viewed from economic, environmental and societal perspectives require that businesses must be more efficient in their operations, which can be achieved through the implementation of standards”.

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