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Barclays Plc planning new Kenya subsidiary

BarclaysThe Barclays Plc has sought regulatory approval to start a subsidiary in Nairobi to handle back-office operations for its African activities, making it the largest investment by the bank in Kenya.

The UK bank is seeking permission of the Central Bank of Kenya to establish the office called Barclays Shared Services (BSS) that would be handling functions such as opening of accounts, loan approvals, and card services for its operations in nine countries of Africa.

People who are aware of the plan revealed that the BSS which will be fully owned by Barclays Plc has already hired 70 employees, most of whom are Kenyans. It proposes to increase this number to 1,000 by June 2013 which will also include expatriate staff.

Barclays Plc plans to spend billions of shillings on the venture, especially on IT equipment and infrastructure, and this action is expected to improve Nairobi’s rising profile as a regional financial hub. Barclays is racing to create seamless operations in Africa, but it could lead to job cuts in countries like Tanzania, Uganda, Nigeria, and Zambia.

The Chief Operating Officer of Barclays Bank of Kenya, Abidi Mohamed, confirmed the plan to open the BSS in Nairobi but did not give any details. He said that they had made applications for the hosting of the shared services in Nairobi and the details will be available early next year.

BSS is also waiting for regulatory approval in other countries as part of their back-office services will be run from Nairobi. However, Barclay’s subsidiaries in Egypt and South Africa will not be part of the Nairobi shared services plan.

People who are versed with the plan feel that the bank’s Africa units will pay BSS a fee for handling their back-office operations as the UK bank is looking to make a bigger dent in the continent’s financial service market.

Barclays Plc is planning to reorganise its Africa business into one seamless operation called ‘One Africa’. It had acquired a 55.5 per cent stake in 2005 of South Africa’s third-largest bank Absa, but both these have remained separate entities outside South Africa and are running parallel operations in Tanzania.

Barclays Plc is planning to merge operations in Ghana, Kenya, Botswana, Zambia, Uganda, and Tanzania with Absa into an African unit. The shareholding of the Kenya unit will be held by Barclays Africa Limited, which will be fully owned by Absa.

Over the past five years, Nairobi has attracted major banks from West Africa who were interested in establishing subsidiaries, and global banks who had opened representative offices to tap the growing regional trade. Standard Chartered Plc has converted its Nairobi office into a regional hub, the US bank JP Morgan Chase is planning to set up an office in Nairobi, while Visa International, a payment systems service company, has commenced operations in Nairobi to serve all the markets in the region.

Some of the banks that have already set up offices in the country, in recent times, include Nigeria-based United Bank of Africa and Togo-based Eco Bank while the CBK has already issued licences for five representative offices of foreign banks such as HSBC, Bank of China, and FirstRand.

Barclays Africa is planning to widen its business to include investment banking and insurance services after the consolidation.

The bank which has a heavy portfolio in corporate and retail lending is planning to adopt the financial supermarket model, which includes arranging corporate deals, selling insurance products, and offering loans.

The bank has reorganised its Nairobi top brass with the appointment of Jeremy Awori, 42, as the Managing Director following the promotion of Adan Mohamed to the Bank’s Africa office as Chief Administrative Officer. Mr. Awori, who is the chief Executive of Standard Chartered Tanzania, will join the Barclays Bank of Kenya in February.

The rejuvenated bank will escalate competition for its market share among top banks like StanChart and CfC Stanbic, most of which is owned by South Africa’s Standard Bank that will try to go neck-to-neck with Absa for control of Africa’s financial services market. The lender recorded the slowest profit growth among the top banks in the country for the nine-month period till September, which made it the fourth profitable bank from the top position in 2010.

Image courtesy: FreeDigitalPhotos.net

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