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Send  Print  Share  RSS  Twitter  18 Nov 2010

FOCUS: Koseff Confident Euro Crisis Won't Hurt

 
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Johannesburg, Nov 18 (I-Net Bridge) - While impairments are more elevated
than Investec (INL, INP) CEO Stephen Koseff would like, he is confident that a
glimmer of hope lies on the horizon, though a tough six months does lie
ahead.

He told I-Net Bridge on Thursday that he believes the European crisis
would be dealt with by regulators, as they would not let the situation spiral
out of control.

His own operation in Ireland is too small for his whole company to be
affected, but he points out that it does make up 17% of the defaults of the
global group and 58% of its book is in default.

Koseff believes he is in an ideal position to look at acquisitions
- there are a lot of opportunities from a number of different sources .

We pulled in a lot of new money under management in the last 18
months, he says.

One area he is looking at closely is India, where he says he wants to set
up a small office.

We are seeing ourselves as a bridge between the developed and developing
world, he says.

Investec's footprint does seem to tie in with these ambitions. It has
operations in the UK, Australia, SA, Hong Kong, and soon India.

There are good transactional flows between those countries, says
Koseff.

On the SA market, Koseff says he would be very surprised if there was
no rate cut.

He says there is low demand for credit, rather than an unwillingness of
banks to lend. People are nervous and are saving.

There is a bit of a pick up, but not at the level from which we can grow
books properly, he says.

He says while impairments have gone from 134 million to 123 million
pounds, defaults have picked up.

It will take a good few years to work out and we need recovery in
residential markets, he says.

We had the exit and we are now stuck with the defaults.

Koseff says there is still uncertainty around Basel III, especially as
what will qualify as capital.

But he says the bank stuck to our task in the UK asset management
business despite all the criticism .

Koseff admits he does want to grow the global property business.

Back onto impairments, he says his sense is the impairment charge has
peaked, though there is still stuff to come at us .

But it is coming down at a faster pace - it will still be elevated for
six months and then come down faster after. If the economy improves, it will
come down faster, he says.

We are certainly moving through the cycle, but we are not there yet.

Investec said in its results release that the uncertain pace of economic
recovery has slowed the improvement in the level of non-performing loans and
defaults have continued to increase.

Impairment losses on loans and advances have increased from GBP94.3
million to GBP98.2 million (excluding Kensington). The credit loss charge as a
percentage of average gross loans and advances is 1.02%, marginally lower than
the 1.16% reported at 31 March 2010.The percentage of default loans (net of
impairments but before taking collateral into account) to core loans and
advances has increased from 4.0% to 4.6% since 31 March 2010. The ratio of
collateral to default loans (net of impairments) remains satisfactory at 1.35
times (31 March 2010: 1.33 times).

Impairment losses on loans and advances relating to the Kensington
business amount to GBP24.7 million (2009: GBP40.0 million). The total Kensington
book has reduced to GBP4.4 billion from GBP4.7 billion at 31 March 2010.

Investec on Thursday reported a decline in diluted headline earnings per
share for the six months to September 30 to 18.6 pence from 19.5 pence in the
year earlier period.

The company explained that adjusted earnings per share decreased by 7.9%,
largely as a result of more shares in issue following the acquisition of
Rensburg Sheppards plc and a cash placing.

The rand equivalent dividend amounted to 90 cents this time from 100
cents a year ago.

Shareholders will breathe a sigh of relief that the credit loss ratio
fell from 1.16% to 1.02%, but the company admits that impairments remain at
elevated levels and improvement in the level of non-performing loans has been
slow.

The group, however, maintained a strong capital position with Tier 1
ratios of 12.1% for both Investec plc and Investec Limited.

Liquidity remains strong with cash and near cash balances amounting to
GBP10.0 billion.

The group's operating profit excluding the GBP46 million profits earned
on the repurchase of the group's debt in the prior period increased by 34.2% to
GBP228.2 million (2009: GBP170.0 million).

Investec says it has seen further progress during the period with its
strategy of growing revenues from non-lending businesses.

Third party assets under management increased 4.9% from GBP74.2 billion
to GBP77.8 billion.

Asset Management saw further strong net inflows of GBP 1.9 billion in the
six month period from 30 March 2010 - assets under management rose 6.7% to
GBP49.5 billion.

We have continued to invest in our capability and franchise and are well
positioned to capture the increasing number of opportunities we are now seeing.
We have maintained excess levels of liquidity and capital until the regulatory
picture is clearer. This does have a negative impact on short-term earnings and
return on equity but the Board believes that this achieves the right strategic
balance for the group, concluded Koseff.

End

I-Net Bridge, Tel: +27-11-280-0832, newsdesk@inet.co.za

Copyright 2010 I-Net Bridge. All Rights Reserved


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