JOHANNESBURG – Specialist bank and asset manager Investec (JSE: INL) has its sights set on the UK, where it wants to grow its core private banking franchise and obtain a decent share of a market with five million target clients, chief executive Stephen Koseff said on Friday.
“It’s about ten times the size of here [South Africa],” Koseff said of the UK market, speaking at Investec’s Sandton office after a pre-close briefing, before the bank presents results for the six months to September 30.
Koseff said Investec would target graduate professionals in key professions in the UK, similar to the way it has in South Africa. Investec tries to bank newly minted graduates in professions like accounting and actuarial science as soon as they start articles. This strategy, employed 30 years ago and ongoing, has paid off. “These people are today running companies, some are in government and that’s what we haven’t yet built in the UK,” Koseff pointed out.
He said Investec would also concentrate on winning daily banking partners from professions such as investment management and private equity.
The bank will face stiff competition in the UK, both from the private banking units within large High Street institutions, such as Barclays and HSBC, as well as established private banks like Coutts.
“It will be difficult to take on old, established private banking in the UK, but if anyone can do it, it’s this crowd,” commented Chris Gilmour, analyst at Absa Wealth and Investment Management. He said that Investec understands the UK market and its brand is visible in a big way through advertising. With assets under management of around £74 billion (R1.3 trillion), Gilmour said the bank is a “huge force to be reckoned with”.
Leaner and meaner
“The key theme for Investec is we’ve got rid of the baggage. There’s still a bit of legacy left, but it’s coming to minutia,” Koseff emphasised. “We’re back to innovation. We’re back to being an Investec with the zebra without a thorn in its foot.”
Having significantly simplified its business already – chiefly by selling most of its Australian interests, its UK mortgage business, Kensington, as well as the Start mortgage business in Ireland – Koseff expects the legacy to be completely cleared in three to four years. Sales of Kensington and Start, for £180 million (R3.3 billion) and £540 million (R9.8 billion) respectively, are subject to regulatory approval.
Most of the surplus capital will be used to grow its UK business, rather than grow in new markets. “We still have platforms that aren’t at scale, like our Swiss and Irish banking platforms. As we move with time those margins will improve,” Koseff said. He said Investec is hiring select investment professionals in its wealth and investment business in the UK and driving closer alignment with the private bank.
Investec Ltd.’s share price was up 0.42% at 13:18 to reach a 52-week high of R102.32.