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Cape Town – Although the rate-rigging scandal puts the future of Absa Group [JSE:ASA] parent Barclays on uncertain ground, a local investment analyst doesn't believe that Barclays would sell Absa.
"The fine imposed on Barclays was just over £200m vs over £3bn in profit," Patrice Rassou, investment analyst at Sanlam Investment Management, told Fin24.
He was responding to recent suggestions by mostly overseas analysts that the fallout from the Libor price-fixing scandal may lead to significant asset disposals or even a breakup of the bank.
Barclays, Britain's third-largest bank, has been shaken by a scandal over traders manipulating the London Interbank Offered Rate (Libor), which is used worldwide as a benchmark for prices on about $350 trillion of financial products.
Reuters reports three of the bank's top executives, including CEO Bob Diamond, resigned this week under what sources say was pressure from the Bank of England and the financial regulator.
Chairperson Marcus Agius, an ex-investment banker at Lazard, will also leave and Jerry del Missier, co-head of investment banking until last month and then chief operating officer, also quit.
It seems that financial services regulators have been uneasy for some time. It emerged this week that Britain's financial regulator warned the Barclays board in February already that its culture was too aggressive and must change.
Credit ratings agencies Standard & Poor’s and Moody’s Investors Service this week also placed the firm's rating on a negative outlook, which could lead to a reduction in that of Barclays.
Meanwhile Absa, which started a relentless slide since announcing lower earnings expectations on June 26, started showing signs of stabilising in early trade on Friday.
The stock, which traded up 19c at R135.30, lost over 13% of its value on the back of the trade update and amid the Barclays debacle. How much of the slide can be ascribed to the Barclays saga is, however, uncertain.
"It is not clear how much is linked to Barclays," said Rassou. "Uncertainty at the parent company may lead to questions about the future strategy regarding Africa, since Bob Diamond was quite committed to growing the Africa business.
"His successor is likely to be an internal candidate – for instance, Anthony Jenkins the head of retail banking was on the Absa board a few years ago and knows the SA business well as a result."
On Absa as an investment prospect, Rassou thinks the bank is relatively cheap post the sell-off.
For Barclays, the prospect is hazier. "The last thing you want to do at the moment now is even look at something like Barclays.
"Where you find banks in trouble – it's a horrible analogy to use, but remember what (investment guru Warren) Buffett always says: when you find one cockroach in the cupboard, there are normally a lot more."
"I don't want to say this is a cockroach effect, but when troubles start to emerge, generally there are more around," according to Sasfin's David Shapiro.
In an interview on Thursday on Moneyweb Radio, Shapiro said he is very concerned about the stories coming out of Absa and the way that the share price has been performing.
According to Moneyweb's Alec Hogg, the inside story there is "that the only guy who's really from the old tam, who's really got his hands on everything, is about to leave – Louis von Zeuner.
"(There is) concern that many of the management have been leaving the organisation and (are) being replaced by people from Barclays."
"If you invest in Barclays you have to do so with your eyes open... it needs a certain sort of character to run it," a fund manager at one of the 40 biggest investors in Barclays told Reuters on condition of anonymity.
- Fin24
"The fine imposed on Barclays was just over £200m vs over £3bn in profit," Patrice Rassou, investment analyst at Sanlam Investment Management, told Fin24.
He was responding to recent suggestions by mostly overseas analysts that the fallout from the Libor price-fixing scandal may lead to significant asset disposals or even a breakup of the bank.
Barclays, Britain's third-largest bank, has been shaken by a scandal over traders manipulating the London Interbank Offered Rate (Libor), which is used worldwide as a benchmark for prices on about $350 trillion of financial products.
Reuters reports three of the bank's top executives, including CEO Bob Diamond, resigned this week under what sources say was pressure from the Bank of England and the financial regulator.
Chairperson Marcus Agius, an ex-investment banker at Lazard, will also leave and Jerry del Missier, co-head of investment banking until last month and then chief operating officer, also quit.
It seems that financial services regulators have been uneasy for some time. It emerged this week that Britain's financial regulator warned the Barclays board in February already that its culture was too aggressive and must change.
Credit ratings agencies Standard & Poor’s and Moody’s Investors Service this week also placed the firm's rating on a negative outlook, which could lead to a reduction in that of Barclays.
Meanwhile Absa, which started a relentless slide since announcing lower earnings expectations on June 26, started showing signs of stabilising in early trade on Friday.
The stock, which traded up 19c at R135.30, lost over 13% of its value on the back of the trade update and amid the Barclays debacle. How much of the slide can be ascribed to the Barclays saga is, however, uncertain.
"It is not clear how much is linked to Barclays," said Rassou. "Uncertainty at the parent company may lead to questions about the future strategy regarding Africa, since Bob Diamond was quite committed to growing the Africa business.
"His successor is likely to be an internal candidate – for instance, Anthony Jenkins the head of retail banking was on the Absa board a few years ago and knows the SA business well as a result."
On Absa as an investment prospect, Rassou thinks the bank is relatively cheap post the sell-off.
For Barclays, the prospect is hazier. "The last thing you want to do at the moment now is even look at something like Barclays.
"Where you find banks in trouble – it's a horrible analogy to use, but remember what (investment guru Warren) Buffett always says: when you find one cockroach in the cupboard, there are normally a lot more."
"I don't want to say this is a cockroach effect, but when troubles start to emerge, generally there are more around," according to Sasfin's David Shapiro.
In an interview on Thursday on Moneyweb Radio, Shapiro said he is very concerned about the stories coming out of Absa and the way that the share price has been performing.
According to Moneyweb's Alec Hogg, the inside story there is "that the only guy who's really from the old tam, who's really got his hands on everything, is about to leave – Louis von Zeuner.
"(There is) concern that many of the management have been leaving the organisation and (are) being replaced by people from Barclays."
"If you invest in Barclays you have to do so with your eyes open... it needs a certain sort of character to run it," a fund manager at one of the 40 biggest investors in Barclays told Reuters on condition of anonymity.
- Fin24
