Barclays changes business model

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BARCLAYS Bank Zimbabwe (Barclays) has changed its business model from the cautious lending regime to adopt a more aggressive use of its banking asset, Old Mutual Securities (OMSEC) says.
In its history, the formerly British-owned bank has had very little lending appetite, and maintained a rigorous loaning criteria.
“Barclays is under transition as it comes under the full stewardship of FMB Capital Holdings Limited (FMB). The new strategic thrust has clearly left the safe banking model reminiscent of the former CEO and shareholder as it embarks on a more aggressive use of its banking assets,” said OMSEC in an analysis of the bank’s financial results for the half year to June 2018.
“That is not to say that the bank has discarded prudent lending practices, but just that the prior shareholder had limited lending appetite in the somewhat tricky macroeconomic environment versus the new shareholder who is willing to enhance income streams through funded income,” the advisory firm said.
It said the bank’s risk and control processes will continue to be benchmarked against best practices.
The current management team is tasked with the implementation of a stronger and more capable ICT platform with a phased rebranding expected to take shape.
Shareholders have approved the name change which should see a total rebranding of the bank by October 2020.
OMSEC valued Barclays in a two-pronged approach — the price earnings relative valuation (9,5 cents) and discounted cash-flow valuation (8,2 cents).
“Thus our mean valuation of Barclays is 8,8 cents per share and we recommend accumulating the share for short to medium term gains.”
OMSEC said it believes that the change of shareholding at Barclays was unlikely to materially affect the bank’s clientele, as some of the executive management and board members have been retained.
“We, however, expect that a more aggressive leveraging of the bank’s assets is expected to improve the bank’s profitability,” it said.
The new shareholder’s regional bank presence and better ICT platform should benefit the bank’s regional reach and enhance fee and commission income.
Notwithstanding the growth in advances, Barclays remains amongst the banks with the lowest non-performing loans, with a ratio of 0,6 percent.
Barclays’ cost to income ratio has declined from 90,4 percent in 2015 to 62,2 percent in the current period as increased leverage of the balance sheet saw income growing more aggressively than cost.
The bank has an almost 50-50 split between primary treasury instruments and those acquired from other banks in secondary markets.
“What is most clear from the Barclays’ statement of financial position is the sharp growth in advances from June 2017 to June 2018. As the bank invests more in funded income streams, their profitability has grown in similar aggressive fashion,” said OMSEC.
In the meantime, the bank is set to list its property unit Makasa Sun Limited (Makasa) after shareholders approved an unbundling exercise.
Following its acquisition by FMB, the financial group has been moving to unbundle non-core banking properties into a separate entity.
Barclays has a 50 percent shareholding in Makasa and has been in negotiations to shed the stake for $14,6 million since 2015.