MALAWI-BASED First Merchant Bank is conducting due diligence on Barclays Bank Zimbabwe to ensure the affairs of the local financial institution are in order before a US$60 million purchase deal can be finalised.
By Bernard Mpofu
Should the transaction materialise, the British-headquartered Barclays Bank Plc would become a minority shareholder in Barclays Zimbabwe with a 10% stake.
Barclays Bank Plc last year said it was looking to dispose of its African assets to focus on the British and American markets.
Barclays Bank Zimbabwe, alongside the Egyptian business, was not part of the 2013 deal that saw Barclays Africa, formerly ABSA, acquire eight African operations from its parent company because of political uncertainty, although it already manages their operations.
Last year in February, Barclays Bank Plc announced that it was expecting to conclude negotiations on the pullout by June this year.
Banking sources who spoke to the Zimbabwe Independent this week said the due diligence would pave way for the takeover of the Zimbabwe unit which currently has a market value of US$60 million.
Under the proposed deal there will be an employee share ownership scheme, where management and employees are expected to control between 10 and 13% of the new entity which is expected to maintain its listing on the Zimbabwe Stock Exchange.
“Negotiations will take full force once the ongoing due diligence exercise is completed. Barclays Bank Plc will control 10% of the new entity and the remaining shareholders on the ZSE register will have 31%,” said a source familiar with the developments.
“Corresponding central banks from the two countries are also having discussions on this transaction. Depositors and minorities will continue to benefit from the listing and the commitment that Barclays Plc will have on the business,” added the source.
Apart from Barclays Bank Plc, major shareholders of Barclays Bank Zimbabwe include Old Mutual Life Assurance Company and FED nominees which own 3,44% and 2,45% respectively.
Last month, Malawi’s First Merchant Bank announced it was eyeing one of Zimbabwe’s iconic banks. Barclays Zimbabwe has been operating since 1912, making it the second-oldest bank after Standard Chartered Bank.
“First Merchant Bank is engaged in exclusive discussions with Barclays Bank PLC (‘BB PLC’), in relation to the potential acquisition of its interests in Barclays Bank Zimbabwe Limited (‘BBZ’),” First Merchant Bank secretary Oswald Mtokale said in a statement.
“Discussions with BB PLC are ongoing and may or may not result in the announcement of a transaction involving the acquisition by FMBCH of the interest of BB PLC in BBZ.”
Official figures from the Reserve Bank of Zimbabwe show that the banking sector remained profitable during the year-ended December 31 2016, with an aggregate net profit of US$181,06 million, an increase of 42,36% from US$127,47 million reported for the corresponding period in 2015.
Barclays Bank Zimbabwe’s after-tax profit increased by 177% from US$3,9 million last year to US$10,8 million, driven by strong growth in net interest income and reduction in impairment losses.
All operating banking institutions, according to the central bank, recorded profits during the period ended December 31 2016. The increase in profitability was largely driven by lower loan loss provisions in line with improving asset quality, lower interest expenses, as well as continued re-alignment of cost structures at most institutions.
The increase translated to improved average return on assets and equity from 2,07% and 11,03%, to 2,26% and 12,64%, respectively.