Barclays has a rich history in Africa, which makes its recent announcement of a retreat from the continent all the more surprising. While new CEO Jes Staley has been diplomatic in explaining the reasons behind this exit, the topic of over-zealous regulation dragging down global banks is again coming under the spotlight. 

“We have 100% of the liabilities and 62% of the earnings.”  This is how Barclays’ new CEO, Jes Staley, explained his thinking in announcing his bank’s retreat from Africa.

“The reality is that the new regulatory environment means that we carry 100% of the liabilities of owning Barclays Africa,” he told the BBC, but diplomatically pulled away from making any direct criticism of the regulator. 

Selling down the stake in Barclays Africa over the next two or three years is part of a broader restructuring being undertaken at Barclays, with the ultimate aim of focusing on UK retail and corporate and investment banking. Barclays has announced a 2015 statutory loss of £394m ($550m) compared with £174m in 2014. 

Barclays’ predicament raises once again the big questions about whether the new regulations in banking make sense or whether we have merely swapped one bad set of regulations for another. 

Africa is the big growth market in banking. Returns on equity for African banks are regularly above 20%, an unheard of level for a global bank in the current environment. The longer story is one of rising incomes with lots of scope for selling banking services to the unbanked and underbanked, again a big contrast to Barclays' home market in the UK.

What makes the Barclays decision so surprising is the bank’s long history and strong position on the continent. It has had a presence there stretching back 100 years or so and bolstered its position hugely in 2005 by acquiring a majority stake in South Africa’s Absa. Then, in 2012, Barclays and Absa combined businesses, giving Barclays a 62% stake in the renamed Barclays Africa Group. 

The irony is that Barclays' former CEO, Bob Diamond, who left the bank in July 2012, has spent the past couple years establishing an investment vehicle Atlas Mara, with the aim of building a pan-African banking business. There is obviously speculation about whether Atlas Mara could buy a stake in Barclays Africa, but more likely the value for Atlas Mara will come in acquiring individual banks that require investment rather than shares in a more mature group. 

But it is interesting that Mr Diamond – in an interview with me at the FT Banking Summit in 2014 – recognised the regulatory problem of the global banks and therefore the opportunity for Atlas Mara. 

“Because of Basel III and a lot of other issues, money is being pulled back to the home market by banks in the UK, banks in Europe, banks in the US. More than 50% of trade finance in sub-Saharan Africa pre-crisis came from European financial institutions. Today it is virtually nil,” he said.

However, he did not think that Barclays was a likely seller, saying: “My sense from everything I have seen both when I was with Barclays and since is that [Barclays is] very committed to its operations in Africa so I wouldn’t see that as even a possibility.” 

Brian Caplen is the editor of The Banker.

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