Barclays Africa appears to be on track to deliver its ambitious targets laid out in annual results in February this year, but costs are mounting up as the financial services major makes required investments in its four-pronged strategy to achieve the needed growth thrust.
Accordingly, operating costs were up 9% from a year ago to Rand 17.3 billion (MUR 49.83 billion), with the cost to income ratio increasing from 55.5% to 56.4%. Incidentally, one of Barclays’ stated targets is to achieve a cost-to-income ratio in the low 50s by 2016.
Of the operating costs, it was the staff costs that accounted for a majority, having risen 11% to Rand 9 billion (MUR 25.92 billion), with growth in salaries being a result of more senior hires and awarding entry-level staff higher wage increases. Headcount increased too, with Barclays Business Banking adding 150 people to its South African operations.
“Barclays Africa has further built on the strength of its management team over the past 6 months and is investing heavily in talent retention,” commented Maria Ramos, group chief executive of Barclays Africa.
Also, with another of Barclays’ stated targets being to achieve a revenue share of 20-25% from outside of South Africa by 2016, the financial services major ensured that growth in its markets outside South Africa remained resilient, despite a slowdown in key economies such as Ghana and Zambia.
As Ramos noted, growth outside of South Africa had been strong, adding that “this portfolio now constitutes 20% of group revenue, which is already within the range we have set as target for 2016.”
Another challenging target that will require revenue improvement is achieving a return on equity (RoE) of between 18% and 20% even though Barclays has already improved its RoE to 16.1% from 14.3% a year earlier.
With the group’s revenue growth up 7% year-on-year to Rand 30.7 billion (MUR 88.13 billion), Ramos said it was clear that Barclays would have to accelerate further in order to achieve its commitment of becoming one of the top three banks by revenue in its five largest markets – namely, South Africa, Kenya, Ghana, Botswana and Zambia.
Net interest income (income from investments) rose 10% to Rand 17.2 billion (MUR 49.54 billion), while non-interest revenue (income from fees) was up 5% to Rand 13.5 billion (MUR 38.88 billion) and accounted for 44% of total revenues.
Across banking divisions, it was Corporate and Investment Banking (CIB) that contributed the bulk of the earnings growth as its headline earnings grew 24% to Rand 1.9 billion (MUR 5.47 billion), with as much as 58% growth outside of South Africa.
For the other divisions, Ramos noted that, by the end of the year, “I expect that we will have made further progress in the turnaround of our retail and business banking (RBB) business, with particular focus on our business banking franchise.”
Already, the RBB division has increased headline earnings 9% to Rand 3.8 billion (MUR 10.94 billion), largely spurred by a strong performance from home loans as credit impairments declined.
Besides, having obtained the license for Barclays Life Assurance Kenya, early signs of capturing the growth opportunity in Wealth, Investment Management and Insurance franchise are emerging already for the group in Africa.
Headline earnings disappointed by staying flat at Rand 688 million (MUR 1.98 billion) but it was largely due to low life insurance earnings and loss in the distribution business, while wealth, short-term insurance and fiduciary services demonstrated solid growth in double digits.
Ramos said that six months into its three-year strategy the bank’s results were “exactly where we wanted them to be” and that she had no doubt that Barclays would become the “go-to bank in Africa” – the destination of choice for consumers and clients.
Image: Cecilia Samoisi): Feyçal Caunhye, Communications Manager/Corporate Affairs at Barclays Bank Mauritius, unveiled the group results at a press conference in Mauritius.
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