Diversification works for it
INVESTEC EMPHASISES the resilience of its diversified business structure, spanning six major divisions and three main geographies around the world. This emphasis has at times been treated with scepticism – is the group trying to get away from the “investment bank” tag that has possibly become the most unpopular investment after last year’s record number of banking failures?
Analysing the divisional performance in the latest annual results to end-March does, however, support the diversified business model argument. It appears to work best under the difficult economic and trading conditions Investec experienced through its financial year, particularly in the second half. CEO Stephen Koseff says while many activities are under pressure and will remain so in the short term, the model also presents Investec with some unique opportunities.
Private client activities – Investec private bank and private client portfolio management and stockbroking – used to be the main contributor to operating profit, worth £193,7m in financial 2008. That changed in 2009 as operating profit from this division declined by 46% to £104,6m. But the gap was partly filled by the capital markets division, which saw a 22,3% increase in operating profit to £141,4m.
The biggest decline came in investment banking with operating profit down 61,6% to £28,2m. But once again this was partly offset by a strong gain (off a low base) in
Benefiting from the disarray at other banks. Stephen Koseff