Picture: ISTOCK
Picture: ISTOCK

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IT HAS been a dramatic couple of weeks in SA’s financial services sector, with Barclays announcing it will cut its 62% stake in Barclays Africa (Absa) to below 20% and Old Mutual announcing it will deconglomerate, as it were, through a "managed separation" of its four component parts. Those parts include Nedbank, in which Old Mutual SA’s controlling 54% stake will be reduced to a "strategic minority" stake of around 15%-20%.

At big-picture level, the change in the global regulatory landscape in the post-financial crisis era is one of the factors driving both groups’ restructuring. Once, global reach was a big plus for a financial services group. Now, it’s increasingly a big burden, with regulators imposing costly capital requirements on groups with complex cross-border structures, especially if these involve emerging markets.

In Old Mutual’s case, too, investors have long been unhappy with the group’s complex structure and that it wasn’t clear whether it was an emerging markets player or a developed markets one; or whether it was an insurance or banking group.

Barclays and Old Mutual have put two to three-year time scales to their restructuring processes, so we could be in for a lengthy stretch of uncertainty and speculation. SA’s regulators have in both cases issued statements that make it clear they will be overseeing the process closely to ensure the financial sector’s continuing stability and health.

But although there are similarities between the two announcements, the differences are greater, and more dramatic. First is the relationship between parent and subsidiary. Barclays Africa’s chairwoman, Wendy Lucas Bull, and CE Maria Ramos have been adamant that the South African group was told of its UK parent’s plans to divest only hours before the announcement went out to the market a few weeks ago.

By contrast, Old Mutual and Nedbank have made it clear they have been working collaboratively from the start on the group’s strategic review, including on the options for the bank. Whatever "governance" issues Barclays claimed to be worried about that caused it to exclude Lucas Bull and Ramos from its review process, did not seem to be an issue at Old Mutual.

Second is the degree of detail, and of uncertainty. Investors will no doubt be disappointed at how little detail the Old Mutual announcement contained on exactly how the group plans to effect the separation of its Old Mutual Emerging Markets, Nedbank, UK-based wealth management and US-based institutional asset management operations.

The end game is to take out the London head office, leaving four self-sufficient businesses.

This is clearly going to require a highly complex series of transactions, and it is not that Old Mutual doesn’t have a plan — rather that, as CE Bruce Hemphill emphasised, implementing it requires consultation with a range of stakeholders.

Now that the shape of the "managed separation" is out in the open, the way is clear for the group to consult on the details and put the plan in place. The company’s transparency is a welcome development.

Particularly welcome is the certainty the announcement has brought Nedbank. There’s long been speculation that Old Mutual wanted to sell its stake. Now at last we know: Nedbank is definitely not up for sale.

Old Mutual will distribute Nedbank shares in an appropriate way to shareholders, keeping a 15%-20% "strategic minority stake" and continuing the collaboration between bank and insurer.

Sadly, Barclays Africa’s fate is not nearly so certain.

Barclays seems to have gone public on its intention to sell without any idea who it might sell to.

It’s almost as if the UK parent decided to get rid of its Barclays Africa subsidiary by simply leaving it out on the sidewalk in the hope that someone would come along and pick it up.

The domestic team is now proactively seeking new shareholders, and there is said to be interest in buying the stake. The Reserve Bank and National Treasury have made it clear their consent will be needed for any transactions, and that they will need to manage any capital flows that might result, as well as ensuring the stability of SA’s banking system.

One final contrast between the two announcements that is related to regulators: in Barclays’ case, the regulators issued a statement only a day later; in Old Mutual’s the bank, Treasury and Financial Services Board were ready with an immediate announcement endorsing Old Mutual’s plans, saying they had been consulted from the commencement of the strategic review.