Barclays Africa Group’s share price surged more than 5% to an intraday high of R130.50 on Tuesday after the bank reported a 14% rise in earnings as it showed bad debt was under control and its retail division’s turnaround plan was gaining traction.
CEO Maria Ramos said on Tuesday the group was on the right track after a “tough period”.
“Over the past three years, we have dealt with significant external and internal change as we de-risked our business and built a better base for more sustainable earnings,” she said.
The share price closed 2.77% higher at R127.50.
The group has been among the worst performing of the big bank stocks in the past year.
Last year, Absa acquired UK-based Barclays Plc’s operations in Africa to be renamed Barclays Group Africa. Barclays Plc grew its stake in Barclays Africa to 62.3%. Ms Ramos said the group was on track in implementing its strategy to be among the top three banks by revenue in South Africa, Kenya, Ghana, Botswana and Zambia.
“I am confident we are executing the right strategy and have the right plan in place,” she said.
Analysts said the results dispelled concerns, including how the group dealt with bad debt and the poor performance of its retail division. Barclays, the first of the big four banks to report results this season, showed diluted headline earnings per share increased 14% to R13.97 from R12.28 in the previous period.
Tracy Brodziak, a banking analyst with Old Mutual Equities, said the quality of Barclays Africa’s nonperforming loan book had been of concern, and whether the group had sufficient provisioning against the loan book and nonperforming loan book.
Nonperforming loans had dropped from 5.9% of gross loans and advances to 4.7%. The group has increased its coverage, the amount provided against nonperforming loans, to be more in line with its peers who had earlier increased provisions to pre-empt rising interest rates. “The results dispel a lot of the concerns about bad debt and the quality of the book,” said Ms Brodziak.
Matthew Warren, First Avenue Asset Management’s head of financials and retail, said Barclays’ reduced credit risk appetite over the past three years was paying off.
“Things are starting to turn in Barclays’ favour at this stage of the credit cycle,” he said.
“The other banks will continue to report higher bad debt. But Barclays’ bad debts are down and normalised, so you can expect it to outperform this year on that basis,” said Mr Warren.
The other area of concern was the retail banking business, where customer numbers continued to fall in 2013 to 8.8-million from 9.7-million in 2012, with most losses coming from the loss of the government contract to administer social grants. But customer attrition in the retail division’s core middle-market and affluent segments had stabilised.
Kagiso Asset Management analyst Jihad Jhaveri said turning around the retail business — which contributes about 40% of earnings — would be key in achieving the bank’s target of reaching return on equity of 18%-20%.