Absa Group Ltd. (ASA), the South African bank controlled by Barclays Plc (BARC), plans to add as many as six analysts this year, part of the U.K. lender’s push to expand its equities unit after the purchase of Lehman Brothers Holdings Inc.’s brokerage.
“We’ve got about 20 people at the moment and will probably end with 25 or 26,” Stephen Van Coller, chief executive officer of Absa’s investment banking unit, Absa Capital, said in a telephone interview from Johannesburg. “Barclays is looking at the whole equity idea. As they roll out the global equity business and look at Europe, the Middle East and Africa, you see Russia and South Africa make up 20 percent of the fee pool, so you must have them to be top-ranked.”
Barclays, which bought Lehman’s U.S. unit in 2008 after the New York-based firm filed the biggest bankruptcy in history, has since added more than 2,000 bankers in Europe and Asia as it expanded its equities operations. Chief Executive Officer Robert Diamond is seeking to expand in Africa to help him meet his target of boosting return on equity, a measure of profitability, to 13 percent. Barclays’s African operations posted a return on equity of 10 percent last year, more than the whole company’s 6.6 percent total.
Absa Capital isn’t offering candidates signing-on bonuses or above-average salaries, Van Coller said. The lender will compensate analysts for deferred bonuses and stock options they accrued at their previous employers to encourage them to join, he added. The investment bank will cover about 70 percent of the Johannesburg stock exchange’s market value once the hirings are completed, he said.
Barclays has already added analysts and bankers in South Africa including Citigroup Inc.’s (C:US) former head of equities in the country, Quintus Kilbourn, and Goldman Sachs Group Inc. (GS:US)’s Philip Lindop, who was named head of Africa investment banking in May.
The number of equity research teams in South Africa has increased in the past 18 months, with firms including Macquarie Group Ltd. (MQG), HSBC Holdings Plc (HSBA) and SBG Securities, a unit of Standard Bank (SBK) Group Ltd., adding to their research teams.
More than 15 analysts follow Standard Bank, Africa’s largest lender, almost twice the number in January 2011, according to data compiled by Bloomberg. That’s prompting concern among investors that too many analysts are chasing too little revenue.
“There will be some form of consolidation,” said Neville Chester, a fund manager who helps to manage the equivalent of $35 billion at Cape Town-based Coronation Fund Managers Ltd. (CML)
Barclays’s total income from investment banking rose 91 percent in the first quarter of this year compared with the last quarter of 2011 and gained 3 percent from the year-earlier period, according to Chris Lucas, the U.K. lender’s finance director. Equities revenue increased 1 percent in the first quarter from the year-earlier period, he said in a presentation on April 26.
Barclays purchased a 54 percent stake in Absa for 32.8 billion rand ($3.9 billion) in 2005. The British lender operates its investment banking business in the country through Absa Capital.
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