Cape Town - Shares of Absa Group, the South African subsidiary of Barclays, extended their slide following a profit warning and because of troubles facing its parent company.
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The share ended down another 0.2% at R136.85 on Tuesday - a drop of over 12% since the lender flagged last week that first-half earnings would drop by as much as 10% due to an increasing numbers of bad mortgages.
"That puts them on the back foot," said Nilan Morar, head of trading at Global Trader.
In an analysis piece on Tuesday, Business Day newspaper pointed out that currently little more than R9bn separates Absa’s market capitalisation from that of Nedbank, the smallest of the big listed banks.
The woes at Absa's parent Barclays are also not helping. Barclays chief executive Bob Diamond resigned on Tuesday, followed a few hours later by the bank's chief operating officer, in a deepening scandal over the rigging of a key global interest rate.
The latest resignations took to three the number of senior Barclays executives to have quit in the last two days, described by some analysts as a bloodbath.
Diamond and chief operating officer Jerry del Missier stepped down the day after Barclays chairperson Marcus Agius resigned on Monday, and amid an intense and deepening political row over standards in the City of London financial sector.
Both were previously senior figures at investment banking arm Barclays Capital. Del Missier only took up his new job last month.
Diamond, high-profile and highly paid, caved in to heavy political pressure even though it was thought that he might hang on to his job after Agius took the first wave of outrage by resigning on Monday.
Business Day quotes head of equities at Sanlam Investment Management Patrice Rassou as saying: "The Barclays issue is not helping the general crisis of confidence."
But Adrian Cloete, an equity analyst at Cadiz Asset Management, said the resignation should have no direct affect on Absa shares. "The [price-fixing] issue is a concern for Barclays shareholders and does not affect Absa or other South African banks in any way."
Faizal Moolla, banking analyst at Avior Research, said the fall in Absa’s shares on Monday might have been worsened by subsequent full-year earnings downgrades by analysts.
Cloete said Absa's trading update was a "big negative surprise" and the continued weak share price reflected selling pressure as the earnings prospects were downgraded.
"Investors wanting to possibly buy Absa shares are probably sitting on the sidelines until they get greater clarity once the actual results get released," he said. - fin24