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On Tuesday, Barclays PLC (BCS - Analyst Report) announced completion of the strategic review of its retail operation in the United Arab Emirates (UAE). Following the review, the company has decided to divest its retail business in the country, which will lead to a loss of up to 280 jobs.

Though not officially confirmed, the business unit will likely be bought by a local bank. Banks in the country are keenly seeking to expand at present.

As confirmed by Barclays, it will maintain its branches in Dubai focusing primarily on its comparatively productive corporate and investment banking as well as wealth and investment management. The company’s profitable retail business units in Egypt were not under consideration for review.

As reported by Reuters last month, this divestment was on the cards. Barclays, like other foreign banks, has been bracing a stringent regulatory environment in the UAE. After the recent financial crisis, foreign banks are finding it difficult to compete with well-capitalized local banks in the country.

Moreover, Barclays intends to slash 3,700 jobs, restrain senior bankers’ remuneration and close unproductive business units across the globe to save $2.6 billion annually.

Barclays is not the only global bank to vend its UAE retail operations. Over the last few years, there have also been divestitures by other global banks. In 2012, Lloyds Banking Group plc (LYG - Snapshot Report) vended its onshore retail, corporate and commercial banking business in the UAE to HSBC Bank Middle East Ltd, an indirect wholly owed subsidiary of HSBC Holdings plc . Additionally, in 2010, The Royal Bank of Scotland Group plc (RBS - Snapshot Report) divested its retail unit as well as small and medium enterprise businesses to Abu Dhabi Commercial Bank.

We may infer that though the global economy is improving, it continues to be volatile. Hence, financial institutions such as Barclays are forced to reduce costs in order to enhance profitability and comply with the stringent regulatory requirements. Its latest decision to offload its UAE retail business will help it save costs as well as focus more on core operations.  

Currently, Barclays carries a Zacks Rank #3 (Hold).

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