Barclays has announced it will offer private banking services to individuals in South Africa, following the granting of a licence by the Financial Sector Conduct Authority (FSCA).
This, it says, means Barclays plc bankers “will now be able to proactively reach out to and meet individuals in South Africa, to offer the advisory and discretionary products and services offered by Barclays Private Bank”.
It is telling that the lead for the private bank, to be based in Johannesburg, is Amol Prabhu. Prabhu has been with Barclays for 15 years, and most recently led the establishment of Barclays’s corporate and investment banking (CIB) services in Africa. He continues to hold the role of market head for the continent and has responsibility for all its businesses in Africa.
Barclays had to build out a CIB business on the continent – again – following the protracted divorce from Absa Group. The two operated through a single entity, effectively Absa Capital, for about a decade until the separation begun in 2017.
The key focus of the private bank in South Africa will be to service Barclays’s global clients across the continent. Global corporates were 15% of Absa CIB’s revenue when Barclays was still in the picture and the African bank relied on Barclays’s “global connectivity”. With the relationship terminated, it is likely that Barclays ‘won back’ a number of its global clients since it was granted a CIB licence in October 2018. These clients (and Barclays’s other clients in the region) demand full-service banking.
It’s all about relationships
And this level of banking, whether CIB or (real!) private banking for high-net-worth individuals, is a relationship business, which is precisely why Prabhu has been appointed.
Salman Haider, Head of Global Growth Markets, Barclays Private Bank, says: “We consider South Africa and the wider African continent to be an exciting growth market for the Private Bank and are pleased to be able to provide our first class global services to affluent, high-net-worth and ultra-high-net-worth individuals in the region, while also connecting them to the broader Barclays offering. We also look forward to servicing our clients seeking offshore solutions.”
The problem for Absa is that it will struggle to compete in this space (basically serving executives of multinationals and the very wealthy).
It was left completely flatfooted with the exit of Barclays and returned to being ‘just’ a regional investment bank. Plus, its private banking offering is not exactly set up to target family offices, for example.
To replace the reach and expertise lost has required significant investment (R1.8 billion more in 2018 and 2019) and patience. On the CIB front, it has taken two years to open two representative offices: one in London and the other in New York. It still has nowhere near the global reach that was offered while Barclays was its parent.
Last year, it signed a commercial agreement with Société Générale on a combined wholesale banking offer to serve clients across their markets in Africa. The partnership will extend to include project financing and will be “enriched over time” with other products and services, to service 27 markets across the continent (with little overlap).
One wonders, after Barclays’s move, whether this cooperation will be extended to the private banking sphere over time? Or will Absa be content with ceding this space to global investment banks on the continent?
This article first appeared on Moneyweb and has been republished with permission.