As part of its restructuring initiatives, Barclays PLC (BCS - Analyst Report) has agreed to sell its Retail and Corporate Banking business in Egypt to Attijariwafa Bank S.A., the biggest bank of Morocco in terms of revenue. The completion of the deal is subject to regulatory approvals and is anticipated to occur by the end of this year. Notably, the deal value was not disclosed.
Barclays is thus ending its 150 years of history in Egypt, where it has around 56 branches and 1,500 employees. The divestiture is expected to result in a benefit of 10 basis points in the bank’s Common Equity Tier 1 (CET1) ratio, as of Jun 30, 2016. Further, the deal is expected to reduce the bank’s risk weighted assets (RWAs) by approximately £2 billion ($2.55 billion).
The divestiture is in line with Barclays’ decision to focus on its U.K. and U.S. operations, while selling or minimizing its activities in Africa, continental Europe and Asia. Further, the restructuring is in view with the bank’s aim to simplify its structure and seek higher shareholder returns.
Barclays Group’s CEO Jes Staley said, "I am pleased to announce a further reduction in our Non-Core business. Today's announcement demonstrates our continued focus on improving the Group's returns and our ability to execute our strategy quickly."
Moreover, this move is in sync with Barclays’ plan to offload its Egyptian and Zimbabwean operations, since it decided to drastically cut back its African presence earlier this year. In May, the bank successfully sold a 12% stake in Barclays Africa Group. (Read more: Barclays Sells 12% Stake in Africa Unit: Now What?)
However, further attempts to sell the bigger share of its holdings in Barclays Africa Group face various difficulties, including the disparate nature of the local units. Nonetheless, the bank plans to keep a stake of around 10–20% in its African business. In addition, Barclays is in talks to sell its French division to a private equity group.
Hence, Barclays remains on track to lower its non-core RWAs to nearly £20 billion by 2017. Also, the bank plans to merge its non-core division with the rest of the group within the same time frame.
Notably, Barclays is not the only bank focusing on restructuring initiatives with a view to enhance its profitability. Global banks like Deutsche Bank AG (DB - Analyst Report) , HSBC Holdings plc (HSBC - Analyst Report) and Citigroup Inc. (C - Analyst Report) have also been carrying out many restructuring activities, with a view to focus more on their core-businesses and divesting operations that are not strategic and less profitable.
Currently, Barclays carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>