Barclays Africa outlines growth commitments

First combined results, delivers encouraging financial momentum

Salient features

  • Diluted headline earnings per share (HEPS) increased 14% to R1 396,6 cents.
  • Pre-provision profit increased 5% to R26 billion.
  • Return on equity (RoE) increased to 15,5% from 14,1%.
  • Declared a final dividend per share (DPS) of 470 cents, taking the total to 820 cents, up 20%
  • Paid a special DPS of 708 cents.
  • Revenue grew 8% to R59,4 billion.
  • Net interest margin (on average interest-bearing assets) rose to 4,48% from 4,28%.
  • Non-interest income increased 5% to R27,1 billion and accounted for 45,5% of total revenue.
  • Operating expenses grew 10% to R33.4bn, increasing our cost-to-income ratio to 56,3% from 55,2%.
  • Loans and advances to customers grew 7% to R605.3 billion, while deposits due to customers increased 8% to R588,0 billion.
  • Credit impairments declined 21% to R7,0 billion, resulting in a 1,20% credit loss ratio from 1,60%.
  • Non-performing loans (NPLs) improved to 4,7% of gross loans and advances to customers from 5,9%.
  • Return on risk-weighted assets (RoRWA) increased to 2,18% and return on assets (RoA) improved to 1,29% from 2,09% and 1,17% respectively.
  • Net asset value (NAV) per share improved to 9 125 cents, due to paying R11,6 billion in dividends during the period.
  • Barclays Africa’s Common Equity Tier 1 (CET1) capital adequacy ratio was 11,9%, well above regulatory requirements and our Board targets.

Tuesday 11 February 2014 - Barclays Africa Group Limited (Barclays Africa) today outlined its medium-term strategy for growth as it reported financial results, for the first time as a combined entity, which showed encouraging signs of momentum. This is an important landmark in the continued development of the Barclays Africa franchise, which reflects its unique platform, combining a powerful local bank, a powerful regional bank and a powerful global bank.

Maria Ramos, Chief Executive of Barclays Africa, said: “We met our key commitments to the market with improved credit quality and robust cost containment although revenue growth remained challenging. The Barclays Africa deal gives us access to markets with good growth prospects and I’m confident that we have the right strategy in place to capture this opportunity.”

Barclays Africa’s headline earnings increased 14% to R11 843 million and attributable profit grew 20% to R11 981 million. This was largely on the back of improved credit impairments, particularly in retail mortgages and commercial property finance. Despite substantial investment spend, improved revenue growth in the second half produced a 5% increase in pre-provision profit to R26,0 billion.

After considering regulatory changes, the Group’s strong capital position, strategic plans and near-term business objectives, a total ordinary dividend per share of 820 cents was declared.

Barclays Africa today outlined targets in line with its strategy to become the ‘Go-To’ bank and a strategic partner for African development by defining its objectives for the next three years, including:

  • Be in the top three banks by revenue in South Africa and in our four largest markets outside of South Africa, Ghana, Botswana, Zambia and Kenya.
  • Increase its RoE to between 18 - 20%.
  • Reduce its cost to income ratio to low 50s
  • Increase our businesses revenue share from outside South Africa to 20 - 25%.

Maria Ramos adds: “The creation of Barclays Africa is a crucial strategic play; very few other banks can claim this kind of franchise and our strategy is built around leveraging this competitive advantage. Where we use this leverage to deliver for the benefit of our customers, clients and shareholders is where we become the ‘Go To’ bank in Africa. We have a clear set of deliverables to create a truly pan-African franchise. The financial performance we report this morning is an early indicator that we are on track.”

Barclays Africa also outlined four priorities to transform its business to take full advantage of the benefits from its strategy and platform. First is the successful turnaround programme for Barclays Africa’s retail and business banking franchise in South Africa, and the build out across the continent to regain its leading position in the retail market. Second is Barclays Africa’s continued investment in Corporate Banking to expand its footprint across Africa and third is to capture the growth opportunity in its Wealth and Investment Management businesses. Barclays Africa will continue to develop and invest in talent.

These priorities will be underpinned by an investment programme of over R3bn this year, of which a third will be invested into large projects such as branch transformation.

Retail and Business Banking’s (RBB) headline earnings increased 41% to R8,0 billion, due largely to lower credit impairments. Retail Banking in South Africa grew 36%, on significantly lower mortgage credit impairments. Business Banking in South Africa delivered strong 64% earnings growth, having benefited from substantially lower losses in equities, while its core business rose 24% on lower credit impairments. Retail and Business Banking outside South Africa produced strong 30% net interest income growth that generated good pre-provision profit growth.

Financial Services’ headline earnings grew 8% to R1,4 billion, as strong growth from Investments, Fiduciary and the rest of Africa outweighed lower short-term insurance earnings. Corporate, Investment Bank and Wealth’s (CIBW) headline earnings decreased 4% to R3.0 billion, reflecting lower private equity revaluations, a higher effective tax rate and difficult trading conditions in markets.

Total Group assets increased 7% to R959.6 billion at 31 December 2013, with 7% growth in customer loans and 28% higher loans to banks.

The Group maintained its strong liquidity position, growing customer deposits 8% or by R44,9 billion to R588,0 billion. The Group’s Net asset value was flat at R77.3 billion, as it generated retained earnings of R11,4 billion in the period, which was offset by paying R11,6 billion in dividends. Its capital levels remain above Board targets and regulatory requirements.

Credit impairments fell 21% to R6 987 million from R8 855 million, resulting in a lower credit loss ratio of 1,20% from 1,60%. Unidentified impairments and identified impairments for performing loans increased 35% to R3,8 billion, which amounts to 0,64% of performing loans from 0,52% at 31 December 2012.

As previously indicated, Barclays Africa is investing more for growth, with operating costs rising 10% to R33 420 million from R30 329 million, including 15% in the second half. This pushed the group’s cost to income ratio to 56.3% from 55.2%. Excluding the Edcon portfolio, which was included for the full year, total costs grew closer to 7%.