Barclays Bank: A Giant Fighting Ghosts From the Past…

• Barclays Bank  Tanzania faces stiff competition in the banking sector in Tanzania, but those in the lead, who include NMB Bank and CRDB Bank may need to acknowledge they have a formidable competitor in their midst, and to continue working with that understanding.

 

By TZ Business News Staff.

Barclays Bank operations in Tanzania can be thought to pose an ‘oligopolistic threat’ in the market from operating under two different names. But the Fair Competition Commission (FCC) has described the bank harmless; that it poses no unfair competitive threat in the market.

The British banking giant operates the National Bank of Commerce (NBC) and a bank that carries the holding company’s flag, Barclays Bank Tanzania. Theoretically, this condition can give Barclays Bank an unfair competitive advantage over the other operators in the market.

But Frank Mdimi, a Consumer Complaints Officer at FCC told TZ Business News this problem was reviewed by the commission and a consensus was reached Barclays Bank does not pose any unfair competitive threat in the banking sector in Tanzania.

Oligopoly is a confidential marketing strategy in which two or more businesses doing a similar business activity in the same market can collude to jointly manipulate prices to their advantage, say by confusing competitors with two or more price levels which result in channelling a larger number of clients to one, two or more of the colluding operators in the market; the plan being that any resulting super- profit is to be spread to the colluding companies. One of the colluding companies can set prices lower than market rates as part of the ‘oligopolistic scheme’.

Yes, Barclay’s Bank operates two banks in Tanzania, Mdimi said, but conditions that exist in the country do not give this bank any chances for market monopoly or any other form of unfair competition. Tanzania has over 30 banks licensed and operating, the country now has many co-operative SACCOS banks in operation, there are also numerous privately owned financial institutions.

Barclay’s bank does not have any chance to monopolise this market, Mdimi said, adding: “National Microfinance Bank (NMB) is larger than NBC. We instructed Barclays Bank to not merge their two banks, but to continue running them as two independent banks to alleviate problems in the market.”

South African-based Barclays Bank Africa Group, headed by Maria Ramos, owns a majority shares in the National Bank of Commerce (NBC) in Tanzania, as well as Barclays Bank Tanzania. The Tanzania government and the International Finance Corporation (IFC) are also shareholders in National Bank of Commerce.

Barclays Bank Africa Group took over ownership of the NBC in Tanzania after acquiring South Africa’s ABSA group, which was the original owner of the NBC in Tanzania. South Africa’s Absa Group owned 55% stake in National Bank of Commerce in Tanzania. The Government of Tanzania retained 30% shareholding while the International Finance Corporation (IFC), a member of the World Bank Group took up 15% shareholding during privatization of the formerly state owned NBC bank somewhere between 1998 and the year 2000.

At present, according to the Barclays Bank Africa Group’s 2013 annual report, NBC Bank has 463,000 customers, 272 automated teller machines (ATMs) and 52 branches in Tanzania. Barclays Bank Tanzania has 87,000 customers, 42 ATMs and 24 branches. That makes a combined 76 branches and 314 ATMs.

Main rivals in the country include CRDB Bank and NMB Bank who have in recent years been identified as the country’s best banks. NMB bank had 133 branches in 2010. One year earlier, CRDB Bank reported a network of 54 branches in Tanzania, but it announced plans to establish branches in Kenya, Uganda, Rwanda and Burundi. In November 2011, CRDB Bank announced plan to cross-list on the Nairobi Stock Exchange (NSE) and on the Uganda Securities Exchange (USE). In December 2012, CRDB Bank established its first foreign subsidiary in Bujumbura, the capital of Burundi.

While the FCC maintains Barclays Bank should continue to operate its two branches separately to protect ‘consumers,’ the Bank’s Tanzania operational arrangement is being seen as a problem back home in South Africa. Experts are raising questions about the efficiency and cost of running two banks in one country.

“The only reason why you would keep [the two banks] separate is if they segment the customers they serve,” Sanlam Investment Management Global fund manager Kokkie Kooyman told South Africa’s Business Day. “But it does not make sense to run separate banks for a long period. You are inefficient in terms of capital, staff, liquidity and you must be inefficient in terms of your branches. You might want to scale some of your branches.”

NBC bank offers retail, corporate and treasury services. Barclays Bank Tanzania offers retail and corporate banking services including cash management and trade finance services.

The last set of data on Tanzania published by Barclays Africa Group showed Barclays Bank Tanzania had a cost-income ratio of 110.1% in the first half of 2012 and reported a loss. The return on equity was -19.5%, according to Business Day. The 2012 financial statements of National Bank of Commerce show the bank had net income after tax of 2.2-million Tanzanian shillings. One South African rand is equal to about 158 Tanzania shillings. The return on ordinary shareholders’ funds was 1.65%.

Asked about the Tanzania arrangement, a Barclays Bank group spokesman said: “Barclays Bank Tanzania Limited (BBT) and National Bank of Commerce (NBC) operate separately and compete in accordance with local legal and regulatory requirements. This arrangement, operating BBT and NBC as independent entities with separate boards and management teams, will continue for the foreseeable future.”

Barclays Bank returned to Tanzania in the year 2000 after decades of absence; a return which can be called an effort to regain lost territory. Barclays Bank was established in Tanganyika (now Tanzania) in 1925. The largest ‘colonial bank’ was nationalized in 1967, under socialist policies and converted into National Bank of Commerce (NBC). The bank literally collapsed under socialism policies.

But following the liberalization of the economy in 1985, and later the liberalization of the banking sector in the 1990s, Barclays Bank re-entered the country to resume operations but under a completely changed environment.

GHOSTS FROM THE PAST

The entry in 1925 may have been smooth. The re-entry in the year 2000 is a completely different story. Two local banks with a large local ownership are leading the market. Barclays Bank has an uphill task in the market. In 2013, CRDB Bank was declared the first and only Bank in Tanzania to win a SuperBrands recognition. CRDB stood third in East Africa in terms of brand recognition. Superbrands are nominated after a series of Marketing Research and Customer brand preferences on quality, reliability, availability, acceptance and share of voice in the market.

The Bank’s Managing Director Dr. Charles Kimei received the award for being the best brand in Tanzania in the Banking and financial category through a worldwide brand research firm called SuperBrands. This year, the National Microfinance Bank (NMB) has taken the lead. CRDB missed the award as NMB took over the Superbrands lead in the Banking sector in Tanzania.

Barclays Bank is fighting an uphill battle, a victim of history. The bank recently officiated the first Paperless banking initiative in Tanzania. Speaking at the launch event which took place at Barclays Bank Ohio branch in Dar es Salaam, the bank’s Retail Director Mr. Kumaran Pather told a Tanzanian blog they are proud to be the first bank to introduce such an initiative in the market.

Paperless Banking is just one of the projects that the Bank has embarked on with the aim of improving their customer excellence and experience as part of their customer agenda. How far this effort will go in the fight for recognition remains to be seen.

“Paperless banking services are taking the place of traditional paper products including the use of withdrawal and cash deposit forms. This is a fantastic innovation and a milestone to be proud of as our customers can now complete their teller banking transactions in less than three minutes with no fill in slips required for cash and cheque deposits, cash withdrawals and cash encashment.” Kumaran said.

The British Bank is nevertheless a force to reckon with, and which market leaders should be watching. Barclays Bank has a long history dating back to the 1700s, when it started off as a privately owned home bank in London.

A rich goldsmith called John Freame was operating an informal home bank on a street in London in the year 1700. The founding businessman, who is also described as a highly religious person of the Quaker faith, had a pretty daughter named Pricilla– daddy’s little girl, one could say.

The pretty young woman fell in love with a handsome merchant called David Barclay. This was sometime in the early 1700s. David Barclay married the rich man’s daughter. The father-in-law liked his son-in-law’s name and decided that would be his bank’s name, and so the informal, home bank got the famous British name, Barclay’s Bank.

After marriage, David Barclay joined the home-based banking business and the rest is now history. The business has never known failure since then except, maybe, in South Africa, where the African National Congress (ANC) closed it down after ‘independence’ because they supported apartheid, and in Tanzania, where the Tanganyika Africa National Union (TANU) forcibly took over its assets to distribute the wealth to the poor under socialism. And of course we all know what happened when socialism took over the bank in both places. The bank was destroyed and it had to be privatized.

Historical records show Barclay’s Bank has grown into an international multi-billion dollar financial institution through strategic marriages, mergers, amalgamations and take-overs since its formative years in the 1700s. There were numerous little banks of its kind back then in London , but Barclay’s was seen to lead the rest in performance. The bank financed trusted enterprises operated by religious entrepreneurs of the Quaker faith–in which the bank owner was a leader.

After merging with 20 other little banks in England and opening new branches, Barclay’s Bank increased in size. In 1896 Barclay’s Bank registered itself as a limited liability company. But mergers, branch opening and acquisitions continued to be a tradition in the bank. Barclays Bank opened a branch in Tanganyika in 1925 and remained in the country until nationalization in 1967.

In 1968, Barclay’s Bank acquired Martins Bank in England and was reported to own 3000 branches across the globe. In 1985, the British bank was controlling everything from the Bank of Scotland, to the Belgian Banque de Bruxelles and Banque de Commerce D’Anvers, the Canadian Bank of Commerce and the Spanish Banco del Desarollo Económico Español.

Barclay’s Bank also controlled the Barclay’s Overseas Development Corporation, the Credit Conglais, Barclay’s Bank California and had interests in the Bank of London and Montreal, and the Société. Financière Européenne.
Historical records say Barclay’s Bank was also the sole owner of the finance company Mercantile Credit. Barclay’s Bank was ranked as the 12th largest bank in the world in 1985. The British bank was however given a bad nickname in the 1980s. South Africans called it ‘Boerclays Bank’, due to its continued involvement in South Africa during the apartheid regime.

South Africa’s Absa banking group, which the ANC did not accuse of supporting apartheid was founded in 1991 through the merger of various financial service providers such as the United Bank (South Africa), the Allied Bank (South Africa), the Volkskas Bank Group as well as the Sage Group.  In 1992, Absa acquired the entire shareholding of the South African Bankorp Group which included Trustbank, Senbank and Bankfin. In 1998 Absa adopted a new corporate identity and the name was changed into Absa Group Limited.

In May 2005, the political atmosphere had changed in both Tanzania and South Africa. Barclays Bank of the United Kingdom purchased 56.4% stake in Absa as part of its drive to expand its global product and international retail and commercial banking businesses in ‘untapped markets’ outside the UK. This transaction was Barclays’ largest foreign direct investment in South Africa, and its largest investment outside the UK.

Barclays Bank had returned to South Africa, with later consequences being a  return back in Tanzania owning two banks. To reflect the bank’s enlarged pan-African image, the Group’s name changed from Absa Group Limited, to Barclays Africa Group Limited on 2 August 2013. Registered head offices are in South Africa and the Group has majority stakes in banks in Botswana, Ghana, Kenya, Mauritius, Mozambique, Seychelles, South Africa, Tanzania (Barclays BankTanzania and National Bank of Commerce), Uganda and Zambia.

The Group has representative offices in Namibia and Nigeria, as well as bancassurance operations in Botswana, Mozambique, South Africa and Zambia. Barclays Bank Kenya and Barclays Bank Botswana continue to be listed on their respective stock exchanges. Barclays Bank PLC has operations in Egypt and Zimbabwe, which are part of the African business and continue to be run by Barclays Africa Group’s management.