It’s December 2015 and Jes Staley, the veteran American banker who had spent almost three decades on Wall Street with JP Morgan Chase is appointed CEO of Barclays Bank PLC.
Expectations are high among financial observers that they finally have the man to lead the firm to the top of the pile after being mired in scandal after scandal starting with the Libor rigging case. Jes Staley’s first order of business is unexpected, he makes his intention known of pulling out of Africa.
It’s a decision that surprised many including Barclays PLC chairman, John McFarlane, who had waxed lyrical about Africa’s prospects just a few months prior to Staley’s appointment. But there was no turning back for the man they simply called “Jes”, according to him, the African operations were a costly distraction to the overall strategic objectives of focusing on core US and UK markets. Being a savvy American risk taker steeped in Wall Street deal making and risk taking, he wanted complete focus on investment banking and his goal was to make Barclays PLC the biggest Trans-Atlantic bank able to compete with the crème de la crème of Wall Street.
Barclays Africa group Ltd did not see this one coming, but signed divorce papers were nevertheless served to them in March 2016. The corporate divorce was effectively initiated and Barclays PLC promised to make the process as less painful as possible by implementing it in phases over a “reasonable” time period probably three years. The reality that they were now on their own soon dawned on Barclays Africa group Ltd, it was a brave new world without their rich partner.
Barclays Africa needed to make some hard decisions going forward and one of those involved giving up the iconic “Barclays” name that had served them so well. Even more heart-breaking, would have been the thought of never seeing on their corporate logo that majestic “eagle” and the strength it so signifies. However, life and most importantly business had to go on, and under the capable leadership of Maria Ramos, hard decisive decisions started flowing in thick and fast.
The first order of business was uniting the various African operations under one brand name. A brand that resonated with Africa as much as it was international. They chose the name ABSA. The plan is to have ABSA, pending regulatory approval, as the new name for Barclays Africa group Ltd by the end of 2020.
ABSA (Amalgamated banks of South Africa) was founded in 1991 from a merger of various financial service providers in South Africa. The ABSA name enjoys strong brand equity in South Africa, management is therefore betting this should provide a stable foundation to build on and further strengthen the brand across the African continent.
Reverting back to the Absa name is in my opinion a stroke of genius from the management team.
After the loss of a huge financial backer, Barclays Africa needed the money, it needed the money for all the operational activities it was going to implement to fulfil its ambitious strategy of expanding in Africa. The money was also going to serve as supplementary capital for the Basel III accord capital requirements. In light of the foregoing, Barclays Africa made a post-divorce debut on the international debt markets in London, Singapore and Hong Kong in April 2018.
But most analysts including myself were weary of such a move at a time when treasury yields were on the uptick in the United States, the world’s biggest economy. US treasury bonds are deemed to be the safest form of low risk investment for most international investors as it is backed by the full faith of the United States government and an uptick in their yield makes them more attractive. As a result, investors will ask for a small premium over and above US treasuries to invest in other riskier assets.
It was simply bad timing and Barclays Africa analysts should have known better noted some sceptics. However, Barclays Africa would prove the sceptics wrong, the debut bond was 3x oversubscribed in London, Singapore and Hong Kong with orders received exceeding 1.5 billion dollars with 400 million dollars raised in the process. On 26th April 2018, the bond beat market expectations and traded at a modest yield of 6.25% on the London Stock exchange. At this price, Barclays Africa got a good deal, it was a vote of confidence in all that they were envisioning for the future.
For the most part however, the success of the bond issue came down to the exquisite execution of the marketing strategy. It was an ingenious strategy that saw them sell not only their ambitious growth strategy but the Africa rising narrative as well. A marketing strategy that was executed with pure tactical class it left international investors in awe.
Who says a divorce has to hurt? It’s certainly a brave new world for Barclays Africa but I have a feeling they can now execute their pan-African vision the way they would love to, with total freedom. There is certainly no sign of any divorce blues, a colour they are leaving behind to take on the ever attractive red of ABSA. Barclays Africa is definitely moving on with a very big smile! Bravo!
By Katandula Chitika - The author is an Economist, Writer and a Corporate Executive. All views expressed in this article are solely mine and do not represent the views of my employer, church and any other organisation am affiliated to.