* Diamond attracts U.S. hedge funds for Africa push
* Atlas Mara to raise $400 mln to pursue acquisitions
* Barclays targets Africa potential as it scales back
* Returns need to improve on back of economic growth, mobile
By Steve Slater and Helen Nyambura-Mwaura
LONDON/JOHANNESBURG, May 21 Gaborone and Lusaka
are the unlikely settings for a battle between one of the
world's most famous investment bankers and his former firm over
the future of African banking.
American banker Bob Diamond last week unveiled plans to
raise $400 million to double the war chest of his African
venture Atlas Mara and set him up to buy more banks.
This was just five days after Barclays, the British
bank where Diamond was chief executive before he was ousted in
2012, announced the dismantling of the investment bank he built
up and pinpointed Africa as one of its two main growth engines.
The prize both are chasing is sub-Saharan Africa's mostly
unbanked 1 billion population and the companies there looking
for capital to grow. Economies are growing on average at 5-7
percent a year, the fastest expansion in a generation, offering
lucrative returns for lenders who get it right.
"It's ripe for entry," said Keith Jefferis, a former deputy
governor at Botswana's central bank and now managing director at
Econsult, a consultancy in Botswana's capital Gaborone.
"If you operate efficiently and pick up market share then
potentially it's a very profitable strategy, but there is a lot
of fragmentation. Each country has different systems so it's
very management intensive, but openings are there."
Diamond has already bought a platform in Botswana,
Mozambique, Tanzania, Zambia, Zimbabwe and Rwanda. Barclays
wants to be a top three bank in South Africa, Kenya, Ghana,
Botswana and Zambia and also operates in seven other countries.
New technology, in particular a mobile banking boom, should
help banks spread further and reach more customers at far lower
cost than in the past.
OPEN THE ATLAS
Diamond has teamed up with Africa-based entrepreneur Ashish
Thakkar to set up Atlas Mara, with the intention of building it
into Africa's leading financial services firm.
They spent most of a $325 million initial fundraising to buy
BancABC in March, and will use the extra $400 million to get a
deeper and broader footprint.
Diamond, 62, spearheaded Barclays' takeover of the U.S. arm
of Lehman Brothers in the heat of the financial crisis in 2008
and the African deals mark a return to the spotlight.
The avid sports fan from Massachusetts was forced from
Barclays in 2012 by UK regulators after the bank was fined $450
million for attempted rigging of Libor interest rates.
Diamond's successor, Antony Jenkins, is attempting to repair
Barclays' reputation after a series of scandals raised concern
that a high-risk, high-reward culture ran across the bank.
Jenkins is dramatically shrinking Barclays' investment bank,
cutting 19,000 jobs and selling businesses in mainland Europe,
and wants to divert more capital to grow in Africa, where
Barclays has been since 1925, but where returns have been
sluggish for years.
EX-MARINES & HEDGE FUNDS
Less than a third of sub-Saharan Africans have bank
accounts, and an even lower percentage of firms hold a loan or
line of credit.
As well as huge untapped markets, margins are attractive,
with the spread between borrowing and lending rates over 10
percent in many countries, compared to 2 percent or less in many
Barclays said its Africa business made a return on equity of
8-9 percent last year, below what it costs to raise capital, but
it expects to improve that.
One investor in Atlas Mara said he expected Diamond to
deliver a return on equity of 20 percent or more and pursue "an
M&A strategy" in the company's early years.
"There's high growth in Africa and it's an underpenetrated
market. It should also have a cost of capital advantage over the
domestic banks, which is very significant and if he (Diamond)
executes well it will only get stronger over time," the investor
said, who asked not to be named as Atlas Mara is raising funds.
Two U.S. hedge funds are the biggest early backers for Atlas
Mara. Clough Capital, based in Boston with $4.7 billion in
assets, has a 10.8 percent stake, and Owl Creek Asset
Management, a $4 billion hedge fund based in New York, has an 8
percent stake, according to regulatory filings.
Diamond's co-founder Thakkar runs conglomerate Mara Group
with IT, manufacturing and real estate businesses across 19
African countries, and Atlas Mara Chairman Arnold Ekpe was CEO
of Togo-based Ecobank Transactional between 1996 and
2001 and from 2005 to 2012.
Diamond has also poached John Vitalo, a former U.S. marine
who has headed Barclays' Middle East and North Africa region for
the past five years and previously led its African investment
bank arm, to become chief executive.
Atlas Mara shares were suspended after its purchase of
BancABC was treated as a reverse takeover, and are expected to
relist in the next two months, probably with a market value of
about $800 million. The shares last traded at $11.40, up from
their December IPO price of $10.
Barclays, Standard Chartered and Citigroup
are the biggest overseas banks in sub-Saharan Africa, although
others are active in selling government bonds and catering to
companies - which will remain the main focus of most
New technology has encouraged several domestic banks to grow
regionally, including South Africa's Standard Bank,
Nigeria's United Bank for Africa and Ecobank.
Chinese lenders also stepped in to fund infrastructure
projects when some European lenders retreated during the
financial crisis, and ICBC has taken a 20 percent
stake in Standard Bank.
Ecobank, which operates in 35 countries, has been seen as a
possible target for Diamond, although industry sources said he
is more likely to be attracted by smaller banks that would be
less of a turnaround task and could be integrated with BancABC.
Jenkins, meanwhile, is keen to increase the slice of revenue
that comes from outside South Africa.
Barclays, which has 45,000 staff and 12 million customers in
Africa, made a 1 billion pound profit there last year. Although
its returns are short of target, the Africa business required 4
billion pounds of capital, or 8 percent of the group total,
while it accounted for 16 percent of profit, adding to its
attraction at a time when capital is scarce.
(Editing by Anna Willard)