Investec split carries hefty price tag

● Investec’s plans to separate from its asset management division, and Britain’s decision to divorce the EU, will weigh on the results of the private bank this half-year.

Headline EPS are expected to be between 15% and 18% lower in the five months to endAugust than in the corresponding period last year, Investec said in a statement on Friday.

Investec announced a year ago that is was spinning out its asset management business in a bid to unlock value and to position the division to attract better talent and accelerate its growth.

“The proposed demerger and separate listing of Investec Asset Management is on track,” Investec said.

After a strategic review earlier in 2018, the company found that its specialist banking and wealth and investment operations fit together well but do not have as many lucrative linkages with the asset management business.

But the split carries a price tag. Pretax earnings will be affected by £42m (about R784m) due to costs related to the demerger and other restructuring expenses, the company said.

This compared to a £22m drag the prior year.

Last month Investec cleared all the regulatory requirements for the split from its asset management business.

Apparently, Investec will retain custody of the zebra on its logo.

This amount includes the cost of restructuring Investec’s Irish operations, as Ireland will remain in the EU when the UK exits.

“Interest income has been impacted by the additional liquidity required to pre-fund the exit of Irish deposits as a result of Brexit.” The exit, possibly without a customs union deal with the EU, is expected by the end of October, but nothing is set in stone. And it has had an effect on Investec’s bread-andbutter business in the UK.

“Market variability and persistent uncertainty relating to Brexit and global trade wars has negatively impacted investment banking fees and trading income,” the company said.