Absa, Barclays looking at opportunities in Africa

| Friday April 30, 2010 00:00

'If we revenue share with Barclays, we can derive adequate revenues without carrying the cost of the infrastructure,' Louis Von Zeuner, deputy chief executive officer of the Johannesburg-based bank, said in an interview on Wednesday. 'Our mindset has changed from owning it all to growing our pie in Africa with Barclays.' London-based Barclays bought almost 60 percent of Absa in 2005.

Two years ago, the lenders shelved plans to combine their African businesses after the global financial crisis forced Barclays to focus on its U.K. operations, while Absa decided to conserve capital. With South African rivals Standard Bank Group Ltd and FirstRand Ltd. now expanding into the rest of Africa, Absa is looking at new ways to gain business on the continent.

'Hopefully we'll show revenues coming through from Africa in 2011 and a lot of that has been influenced' by Absa Chief Executive Officer  Maria Ramos, Von Zeuner said. It's 'embarrassing' that Absa's management didn't think of using Barclays's infrastructure and joint ventures in Africa before, he said.

Opportunities for collaboration with Barclays exist within the areas of agri-business and Islamic banking, Absa said on Wednesday in an e-mailed statement, adding that it planned to use these capabilities across the continent for the benefit of the entire group.'We will focus on implementing our solutions and expertise in those countries where Absa and Barclays operate,' the bank said.

Absa said on Feb. 16 that full-year profit in 2009 fell 36 percent after bad debts surged and it lost money on equity investments. The doubtful-loan outlook has improved so far this year, Von Zeuner said, adding that there is still no clear trend and the bank will only be able to gauge the level of recovery in May.

'While clearly having a lower bad-debt charge, in and of itself, is a positive rather than a negative thing, when looking towards an earnings recovery, it does suggest that there is less improvement going forward' for Absa, Deutsche Bank AG analysts Voyt Krzychylkiewicz and Nicole Penny said in a note to investors last month. 'We believe that Absa's bad-debt charge will only fall about 70 basis points over the next three years as a percentage of interest earning assets.'

The first six months of this year are still going to be 'pretty difficult' for Absa, according to Von Zeuner, who said consumer spending hasn't returned. The lender's second-half performance is expected to be better, he added. (Bloomberg)