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Barclays (BCS) Sells 33.7% Stake in Barclays Africa Group
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After receiving regulatory approval for further divesting stake in Barclays Africa Group Limited (“BAGL”), Barclays PLC (BCS - Free Report) is finally set to sell 33.7% of its stake in the former. This compares with the company’s earlier plans of selling 22% stake.
Strong investor demand made the company increase its placement of shares. It has now placed 286 million shares for sale, which will raise approximately ZAR 37.7 billion (£2.2 billion).
The sale is expected to increase the company’s Mar 31, 2017 pro forma CET1 ratio by 27 basis points.
The sale will also result in BAGL being deconsolidated from an accounting perspective from the Barclays group results.
Thus, Barclays’ stake in BAGL will be reduced from the current 50.1% to almost 16.4%. In fact, Barclays will contribute some of its shares in BAGL to a black economic empowerment scheme over time, which will finally decrease the company’s stake to 15%.
Also, post full deconsolidation, Barclays’ CET1 ratio is expected to increase by 73 bps, which includes the 27 bps accretion resulting from the sale itself.
Based on the pro forma financial statement as of Mar 31, 2017, Barclays estimates that the placing and the deconsolidation together will result in a loss of approximately £1.2 billion. The actual amount will be realized in the second quarter and will come under discontinued operations in the company’s financial statements.
Barclays has been continuously striving to simplify operations and focus on core businesses. With this aim, the company restructured its business lines into two divisions and has divested/closed non-strategic and less-profitable operations across the globe.
Moreover, this sale is in line with the company’s long-term strategy to improve profitability. Earlier, in Mar 2016, the bank had announced plans of selling its stake in the Africa unit amid heightened regulatory pressure.
However, the company has been facing pressure on revenues owing to weak global economic recovery and the aftermath of Brexit. Additional legal provisions for past business misconducts are expected to further hamper the company’s bottom-line growth.
Shares of the company have gained only 2.1% in the last one year, underperforming the Zacks categorized Banks - Foreign industry’s rally of 19.6%.
Barclays currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the finance space are Comerica Incorporated (CMA - Free Report) , The PNC Financial Services Group, Inc. (PNC - Free Report) and Northern Trust Corporation (NTRS - Free Report) .
Comerica witnessed an upward earnings estimate revision of 9.7% for the current year in the last 60 days. Moreover, its shares have gained 45.7% in the last one year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
PNC Financial currently carries a Zacks Rank #2 (Buy). For the current year, in the last 60 days, its earnings estimates have been revised 3.4% upward. Its shares have gained 31.9% in the last one year.
Northern Trust also carries a Zacks Rank #2. The company’s current-year earnings estimates have been revised 2.6% upward in the last 60 days and its share price have gained 17.6% in the last one year.
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Barclays (BCS) Sells 33.7% Stake in Barclays Africa Group
After receiving regulatory approval for further divesting stake in Barclays Africa Group Limited (“BAGL”), Barclays PLC (BCS - Free Report) is finally set to sell 33.7% of its stake in the former. This compares with the company’s earlier plans of selling 22% stake.
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Strong investor demand made the company increase its placement of shares. It has now placed 286 million shares for sale, which will raise approximately ZAR 37.7 billion (£2.2 billion).
The sale is expected to increase the company’s Mar 31, 2017 pro forma CET1 ratio by 27 basis points.
The sale will also result in BAGL being deconsolidated from an accounting perspective from the Barclays group results.
Thus, Barclays’ stake in BAGL will be reduced from the current 50.1% to almost 16.4%. In fact, Barclays will contribute some of its shares in BAGL to a black economic empowerment scheme over time, which will finally decrease the company’s stake to 15%.
Also, post full deconsolidation, Barclays’ CET1 ratio is expected to increase by 73 bps, which includes the 27 bps accretion resulting from the sale itself.
Based on the pro forma financial statement as of Mar 31, 2017, Barclays estimates that the placing and the deconsolidation together will result in a loss of approximately £1.2 billion. The actual amount will be realized in the second quarter and will come under discontinued operations in the company’s financial statements.
Barclays has been continuously striving to simplify operations and focus on core businesses. With this aim, the company restructured its business lines into two divisions and has divested/closed non-strategic and less-profitable operations across the globe.
Moreover, this sale is in line with the company’s long-term strategy to improve profitability. Earlier, in Mar 2016, the bank had announced plans of selling its stake in the Africa unit amid heightened regulatory pressure.
Later, in May 2016, the company divested nearly 12.2% interest. The sell-off had generated more than ZAR13 billion for the company (Read more: Barclays Sells 12% Stake in Africa Unit: Now What?)
However, the company has been facing pressure on revenues owing to weak global economic recovery and the aftermath of Brexit. Additional legal provisions for past business misconducts are expected to further hamper the company’s bottom-line growth.
Shares of the company have gained only 2.1% in the last one year, underperforming the Zacks categorized Banks - Foreign industry’s rally of 19.6%.
Barclays currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the finance space are Comerica Incorporated (CMA - Free Report) , The PNC Financial Services Group, Inc. (PNC - Free Report) and Northern Trust Corporation (NTRS - Free Report) .
Comerica witnessed an upward earnings estimate revision of 9.7% for the current year in the last 60 days. Moreover, its shares have gained 45.7% in the last one year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
PNC Financial currently carries a Zacks Rank #2 (Buy). For the current year, in the last 60 days, its earnings estimates have been revised 3.4% upward. Its shares have gained 31.9% in the last one year.
Northern Trust also carries a Zacks Rank #2. The company’s current-year earnings estimates have been revised 2.6% upward in the last 60 days and its share price have gained 17.6% in the last one year.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
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