Investec sets ball rolling as UK private-banking bid takes shape
INVESTEC is gearing itself up to claim its share of Britain’s £825-billion (R13.9-trillion) privatebanking and wealth-management market, but will continue taking pain in the short-term as it builds a business to rival UK’s oldest banks.
Earnings in the group’s specialist bank for the 12 months to March would be behind the prior year, dragged lower by the UK bank, chief executive Stephen Koseff said at Investec’s customary briefing on Friday ahead of releasing financial results.
Investec is expected to have spent about £25-million (R421-million) over the year on building its UK private bank. Costs were expected to increase ahead of revenue, as Investec “continues to invest in IT infrastructure and headcount to grow the franchise, notably the build out of the UK private client offering”, Koseff said.
Investec’s write-off of billions of rand since the 2008 financial crisis on a legacy book that consists largely of UK property assets has not deterred it from that market, with Koseff, saying it was confident it could crack the private banking scene.
It is not difficult to see the attraction: assets under management and administration in the private banking and wealth management market totalled £825-billion at the end of 2016, up 57% from 2011, according to UK Finance.
The industry, which serves more than 2.2-million people, generated combined turnover of £6billion (R101-billion) in 2016. Notwithstanding Brexit, London remains one of the world’s premier banking centres. With a GDP of $2.9-trillion (R48.8-trillion), the UK is the world’s fifthlargest economy, the World Bank says.
Retail banking is commoditised and crowded, with virtually zero bank fees on personal bank accounts.
Investec knows this full well, which is why it will be targeting a considerably wealthier client in the UK than it targets in SA.
“We are trying to compete in the space where service is important,” Koseff said.
While Investec considers a range of factors when screening potential clients, prospective customers in the UK should be earning a minimum of £300 000 (R5-million).