Investec chief Samios welcomes bank branch status

Investec has reactivated its bank branch status in Australia as it seeks to ramp up lending and move back into deposits.

Investec Australia CEO Milton Samios. Picture: Britta Campion

Investec has reactivated its bank branch status in Australia as it seeks to ramp up lending and move back into deposits, after selling its specialist loan and leasing arm five years ago.

Local Investec chief Milton Samios said the branch status was signed off by the banking regulator and would go live next week, after several years of operating as a non-bank subsidiary of parent group Investec.

“I definitely think the branch is a far superior structure for us,” he said. “We have always punched above our weight but this gives us more financial muscle.

“This structure for us is really the best way forward to access a larger balance sheet.”

The branch structure allows Investec locally to draw on the balance sheet of the dual listed London and Johannesburg parent. While the local division will initially draw on funding from the bigger group the new structure also stipulates it must move to being self sufficient.

That means Investec will — in about 12 months time — start taking deposits from high net worth individuals and companies.

With the Reserve Bank this month cutting the official cash rate to a new record low and further reductions expected, the timing may not be ideal.

“For us in Australia it is not much of a concern but I can understand why banks are worried,” Mr Samios said.

He added that it was “too early” to make any calls on potential deposit pricing, despite debate about retirees and savers rushing out of term deposits and cash in search of better returns.

On the proliferation of digital banks domestically, Mr Samios said Australia would continue to be a competitive market but some new players would not pass muster in the highly regulated environment. “I don’t think everyone is going to survive, it’s going to be interesting,” he added.

Investec’s Australian business divisions include corporate advisory and finance, property funds management, markets and direct investments.

In 2014, it sold its professional, asset finance and leasing unit to Bank of Queensland.

Mr Samios is upbeat on Investec’s local prospects, noting a record amount of activity in corporate lending and a busy period in the resources market and private equity.

Investec Holdings’ latest local accounts lodged with the corporate regulator for the year ended March 31 2018, showed net profit fell to $23.6 million from $41.7m a year earlier.

The accounts need to be interpreted with caution as they exclude asset management and local revenue that is booked offshore. The group is due to lodge 2019 accounts with the Australian Securities & Investments in the coming week.

“It’s been another solid year, with net profit after tax in line with previous year. The real positive is the change in revenue mix with a lower dependence on investment gains and an increase in annuity income as our lending book grows,” Mr Samios said.

He also tips a healthy 2020, despite a slowing in the domestic economy. “All the signs are that it is going to be just as busy,” Mr Samios said. “The country is in relatively good shape.”

Investec advised Morgan Stanley Infrastructure on its joint purchase of PEXA and is working with the West Australian government on a sale of WA TAB.

Investec has also pushed forward on a number of investment vehicles including raising capital for an emerging companies fund.

The listed Investec Australia Property Fund started trading on the ASX last month and remains about its issue price. Globally, Investec is in the process of spinning off its asset management unit — which spans the UK, South Africa, Australia and the US.