BARCLAYS on Thursday reported its African banking operations showed good profit growth during the third quarter. If sustained, the bank could show earnings slightly above full-year consensus when it reports results for the 2014 financial year.
The UK parent group said Barclays Africa Group showed improvement in bad debts in the South African home loan book and good loan growth in corporate and investment banking.
Barclays said the Africa banking operations grew profits 11% — which was marginally better than the I-Net Bridge consensus of 10.6% — on constant currency basis in the nine months ended last month. The firm reported a profit before tax of £756m for the Africa banking operations.
“Consensus for the full year is 11%. It’s a little bit ahead … There is obviously some corporate lending. I think that’s for infrastructure in the rest of Africa,” PSG Wealth portfolio manager Adrian Cloete said on Thursday.
Out of all the business divisions at Barclays Africa Group, which include retail and business banking, wealth, investment, management and insurance, the corporate banking division had the fastest growth in earnings in the first half of this year and seems it continues to steam ahead.
Barclays Africa Group has indicated it is investing in the corporate and investment banking division and deploying its capability in the rest of Africa.
In the third-quarter update on Thursday Barclays said there were more improvements in the South African mortgage portfolio. The South African operations of Barclays Africa Group have been working on improving the state of its mortgage book.
In the 2012 financial year the operations of Barclays Africa Group in SA reported a decline in earnings hit by bad debts on its mortgage portfolio. In 2011 the bank had underestimated the bad debts on home loans as it lowered its cover for bad debts to 17.1% from 19.1% in 2010. After this misjudgment it upped the nonperforming loans coverage ratio to 28.5% in the 2012 financial year.
With the improvements on the mortgage book, this has been lowered to 26.9% in the first half of the 2014 financial year.
“I think they really cleaned up the book (home loan) and they are taking a lot of action. It seems it’s much better provided for and being managed much better,” Mr Cloete said.
In the third-quarter update Barclays Africa Group said its return on equity had improved in the third quarter compared to 16.1% in the first half, a sign that earnings were growing. Barclays Africa group hopes to grow its return on equity to 18%-20% next year.
Barclays Africa Group shares finished flat at R171 at the end of trade on the JSE on Thursday. The JSE all share index ended down 1% Thursday.
For the year to date, Barclays Africa Group’s shares have so far been the best performer among major banks in SA with the stock rising about 29.3%.
Source: Business Day