Barclays again warns on investment bank results

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Profits in Barclays investment banking arm will not be as high as last year, the bank said, as it asked shareholders for permission to sell off its African operations.

The trading update on the investment operation was contained in a circular being sent to shareholders ahead of the bank’s annual general meeting on 28 April. It intends to call a general meeting immediately after the AGM to facilitate the African sell-off.

The Barclays chief executive, Jes Staley, last month told investors he intended to scale back in Africa as he cut the dividend payout by more than 50% for the coming two years.

The bank, which admitted last month that profits in the investment banking arm would be down, blamed current market conditions and a particularly strong performance a year ago.

“In Barclays’ investment banking operations, income in January and February was broadly in line with the same period last year. However, in light of current market conditions for investment banking and on the back of a particularly strong March in 2015, the board of Barclays does not expect as strong a performance from its investment banking operations for the whole of [the first quarter] of this year,” Barclays said.

Staley wants to reduce the bank’s 62% stake in its African operations – which are listed on the Johannesburg stock exchange – over the next two to three years. Former Barclays boss Bob Diamond has been mooted as a possible buyer, though in the circular to shareholders Barclays said the “current intention of the board is to retain a meaningful stake in Barclays Africa”.

It wants to reduce its shareholding to below 20% so it can remove the operation from the wider group. Barclays listed a number of reasons for selling the business – which boasts assets of £50bn and made profits last year of £1.1bn – including reducing the need to hold capital against the operation. It also cited “stringent UK and US conduct and other regulatory standards which are required to be applied to Barclays Africa’s business in addition to those standards that might otherwise apply to the Barclays Africa Group”. These include EU, UK and US economic sanctions and financial crime rules.

The circular refers to a number of legal matters facing the African operations including those at Abas, its South African operation, which has admitted it has “identified potentially fraudulent activity by certain of its customers using import advance payments to effect foreign exchange transfers from South Africa to beneficiary accounts located in Asia, UK, Europe and the USA”.

It also disclosed that Barclays could be required to pay compensation – yet to be calculated – to the African business for ending services such as credit risk, support services, human resources and technology services. Barclays can also renegotiate the use of its name in countries such as Botswana, Ghana and Mauritius, if its ownership falls below 35%.

Barclays said it had hired its own investment banking arm as well as bankers from Citigroup and JP Morgan Cazenove to advise on the disposal of part or all of the African operation.

Powered by Guardian.co.ukThis article was written by Jill Treanor, for theguardian.com on Tuesday 5th April 2016 17.56 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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