Investec will survive Brexit fallout — CEO
STEPHEN Koseff, the CEO of Investec, dedicated nearly one third of his pre-close presentation on Friday to demonstrating that the specialist bank, with a primary listing in London, would withstand the effects of Brexit.
“I don’t think this is anything like the 2008 period, where you had the whole banking system collapse and every major global bank needing a government bailout. This is just a bump in the road,” Koseff said.
Investec’s diversified business model provided resilience in times of uncertainty and the group had significant liquidity and strong capital ratios, having increased cash balances ahead of the EU referendum, he said.
Investec Plc was among the biggest losers on the JSE all share index in the days following the EU referendum. It gave up 17.4% in two days of trade and remains about 16% below its preBrexit level.
Perhaps unsurprisingly, then, at Investec’s customary briefing before it releases its financial results, Koseff spent considerable time and energy persuading shareholders that Investec was well-positioned to handle the fallout from Brexit.
In particular, he went into great detail about the bank’s property exposures in the UK and Europe, which is where asset quality might be expected to deteriorate.
Koseff provided detail on the size of its commercial and residential property books, as well as information on geographic exposures, average loan-to-value ratios, average loan sizes and gross defaults.
“We do not expect imminent defaults in this portfolio, but are monitoring underlying exposures regularly,” he said.
Investec has an £890m commercial property book, of which 65% is exposed to London and its surrounding areas, with most of the rest in Germany and Switzerland. Its default rate is 0%, down from 4% in 2011.
Its high-net-worth and highincome residential mortgage book is a healthy £1.2bn. The book had defaults of £13m at August 31, with loan-to-value ratios of about 40%, Koseff said. “We’re not worried about this at all,” he said.
On Investec’s ability to access the European single market, Koseff said Investec would get whatever licences it needed.
“We don’t know what new licence we’ll require to take deposits on the UK balance sheet,” he said.
Currently, banks based in the UK enjoy “passporting” rights, enabling them to sell products and services across the EU without needing a separate licence for every country. This may change as a result of Brexit, challenging London’s status as a global financial sector hub.
Investec had a licensed financial services business in Dublin, which gave it licensing rights across the EU, Koseff said.
Its asset management unit has funds on offer in the UK and Luxembourg. The latter is managed by a Luxembourgdomiciled entity, enabling it to distribute its funds to the rest of Europe and globally.
It was difficult to predict what the effect of Brexit would be, as the exit process still had to be negotiated, Koseff said.
“We are forecasting a slowdown in economic activity, not a collapse,” he said.
“I would have voted to remain [in the EU],” Koseff said, explaining that he preferred a more open economy. “I was very disappointed.”
I don’t think this is like the 2008 period, where you had the whole banking system collapse