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Will Barclays Divest Further Stake in Africa Unit Soon?


Barclays PLC BCS is awaiting regulatory approvals to further divest its stake in Barclays Africa Group. This news was first reported by Bloomberg last week.

The bank is mulling to sell 16% stake in the unit from the present 50.1%, after divesting nearly 12.2% interest last May. The sell-off had generated more than ZAR13 billion ($874.1 million) for the company (Read more: Barclays Sells 12% Stake in Africa Unit: Now What?)

Barclays is likely to generate nearly $1.5 billion from the sale of 16% stake, based on the current share price of Barclays Africa Group. Notably, following the regulatory approval for further divestiture of the stake, the company might even change the size of the sale. The stake sale is expected to be done through an accelerated book-build offering.

The sale is part of Barclays’ long-term strategy to improve efficiency and profitability. In Mar 2016, the bank announced plans to sell its stake in the Africa unit amid heightened regulatory pressure. Barclays intends to lower its stake to below 20% and keep a minority interest in the unit.

However, at present, Barclays is caught between political changes as the South African Finance Minister who had given conditional consent on the plan has been replaced. The country’s ratings cut to ‘Junk’ by the two rating agencies has complicated matters further.

All these have led to fall in Barclays Africa Group’s share price. This resulted in the company recording a goodwill impairment of £884 million against its interest in the unit in first-quarter 2017.

So, now it seems to be a wait and watch for Barclays as to when it gets the consent to further reduce its stake.

Over the last six months, shares of Barclays have rallied 2.8% underperforming a 14.6% gain for the Zacks categorized Foreign Banks industry.

Currently, Barclays carries a Zacks Rank #3 (Hold).

Some better-ranked foreign banks include Grupo Financiero Galicia S.A. GGAL, HDFC Bank Limited HDB and UBS Group AG UBS. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Grupo Financiero Galicia witnessed an upward earnings estimate revision of 7.9% for the current year, over the past 60 days. Also, over the last six months, its share price surged 50.6%.

HDFC Bank’s earnings estimates were revised 3.6% upward for the current year, in the past 60 days. The stock has risen 31.6% over the last six months.

UBS Group witnessed a rise of 5% in earnings estimate for the current year, over the past 60 days. Also, over the last six months, its share price increased 1.8%.

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