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Fixing Affairs: Barclays Apologises for Rand Fixing

Barclays Africa Group Ltd. apologised for its role in a rand-fixing affair involving more than a dozen banks, saying that it alerted regul...

Barclays Africa Group Ltd. apologised for its role in a rand-fixing affair involving more than a dozen banks, saying that it alerted regulators about the practice after suspending two traders.

“We deeply regret that this conduct took place within our organization,” Chief Executive Officer Maria Ramos said on a conference call Thursday, without identifying the employees. “Those who contravened our rules will be held accountable.”

South Africa’s antitrust investigators listed more than a dozen banks, including Barclays Africa, in its probe earlier this month and named more than 30 traders for price fixing and market allocation in the trading of foreign-currency pairs involving the rand.

Citigroup Inc. on Feb. 20 said that it agreed to pay a penalty of almost 70 million rand ($5.4 million) to settle the case and would make witnesses available to help prosecute other banks.
Barclays Africa

Barclays Africa’s Absa unit said in a statement Thursday that the Competition Commission isn’t seeking any administrative penalty against the bank. The lender said it brought the conduct of the currency traders to the attention of the commission under the regulator’s leniency program.

“How we conduct ourselves is, for me, non-negotiable,” Ramos told reporters in Johannesburg. The bank’s involvement in the rand collusion case is “unacceptable and incompatible with the values of this organization.”

Under Pressure
The antitrust finding comes as President Jacob Zuma and his governing African National Congress step up pressure on the country’s four largest lenders, saying they should lend more to black clients. 

Zuma and the banks are also locked in a stand-off after the lenders closed the accounts of companies tied to his friends, the Gupta family, who are accused of using their relationship with him to influence government appointments and contracts.

The lender was also the target of protests outside some branches after a leaked draft report by South Africa’s anti-graft ombudsman said the lender may have benefited from a bailout provided to a bank it bought before the end of apartheid.

Barclays Africa will be making submissions to the ombudsman by the end of February, Ramos said. “We have factual and legal issues that we’ll take up because there are factual and legal inaccuracies. There have been a number of demonstrations and pickets. They haven’t at this stage impacted the bank’s operations in any way.”

Barclays Africa dropped 0.2 percent to 157.27 rand as of 1:22 p.m. in Johannesburg. It’s the worst-performing bank stock in South Africa this year, having declined 6.7 percent compared with the average drop of 3.5 percent on the six-member banks index.

Parent’s Payout
Earlier, Barclays Africa said it will receive the equivalent of about $1.1 billion for costs associated with splitting from its U.K. parent Barclays Plc and the creation of a program to empower black investors. The payout is “a good outcome,” Ramos said, adding that it would leave the South African lender broadly capital and cash-flow neutral.

“Although the settlement will help offset the costs Absa will incur to make the necessary investments in their IT systems and to rebrand the African entities, the risks around successfully executing the divestment without disrupting operations remain,” said Meyrick Barker, an investment analyst at Kagiso Asset Management.

Once the parent company’s stake drops below 50 percent, Barclays Africa will have three years to rebrand its units in the rest of Africa, according to Ramos. The U.K. bank will pay 2.1 billion rand toward the creation of a black-shareholder program that will include staff, Ramos said.

Earlier on Thursday, Barclays Africa said full-year net income rose 2.6 percent to 14.7 billion rand from 14.3 billion a year earlier after the bank contained costs and increased lending to businesses.

 Earnings per share excluding one-time items rose 5 percent to 17.69 rand, missing the 17.94 rand median estimate of 11 analysts surveyed by Bloomberg. Return on equity declined to 16.6 percent from 17 percent and the cost-to-income ratio dropped to 55.2 percent from 56 percent. - Bloomberg

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