Johannesburg - The nationalisation of Barclays is unlikely to force a sale of its Absa stake but it may raise some interesting foreign ownership issues, say industry experts.
Speculation has been mounting in the UK that Barclays PLC, the London-listed banking group which holds a 56.4% stake in Absa Group, may be the latest financial firm to face nationalisation. This speculation was fuelled by sharp declines after the Barclays share price had fallen for seven consecutive trading days.
Warwick Lucas, an analyst with stockbroker Imara SP Reid, told Fin24.com: "I doubt that a nationalised Barclays would sell off its Africa businesses which are very profitable - but countries could raise sovereignty issues if the British government were the main shareholder."
According to Lucas, countries which could object to government ownership of Barclays include South Africa, Botswana, Kenya, Zimbabwe, Nigeria and Malawi. In these countries, the bank either operates or hold strategic stakes in other banks.
Neville Chester, a senior portfolio manager at Coronation Fund Managers, cautioned against reading too much into speculation around Barclays. He pointed out that the firm was one of the few major UK banking institutions not to avail itself of government financial support in 2008, opting instead to raise capital from Middle Eastern investors.
Chester said: "It is easy to say that they would like to focus more on the UK, but since Absa is a strong cash generative bank it would be detrimental to Barclays' long-term future to sell it. Factoring in the fact that there are no likely buyers in the current market, I don't think it would be high on the agenda."
Window to African opportunity
The only potential drawback Chester could see was that Absa was unlikely to receive any major capital injections from Barclays, should the need arise. However, he added that as Absa has "surplus capital and will in all likelihood will be getting further capital from its empowerment partners", he did not see this as an issue.
Lucas also told Fin24.com he thought that Barclays' focus on UK banking issues may give Absa an opportunity to pursue its African strategy.
On Wednesday, Absa came out with a statement saying: "Absa is a separately listed company on the JSE and is a South African-registered bank regulated by the SA Reserve Bank. Barclays is a shareholder of Absa; as such Absa is unaffected by the financial position of any of its shareholders, including Barclays."
Barclays responded to the plummeting share price with the following announcement: "The board of Barclays knows no justification for the fall in the share price. Barclays will announce full results for the year ended December31 2008 on February 17 2009.
"The board of Barclays expects to report profit before tax for the year, after reflecting all costs, impairment and market valuations, well ahead of the £5.3bn consensus estimate of sell-side analysts."
The Reserve Bank, the institution which regulates the ownership of South African banks, had not responded to Fin24.com enquiries about foreign ownership of SA banks at the time of writing.
- Fin24.com