Investec pulls the plug on Australia after more than two decades, job losses to follow

Investec has decided to leave Australia after 23 years, leaving about 100 staff on tenterhooks.

Milton Samios, Investec’s local CEO, will stay on to oversee the firm’s phased exit from Australia. Picture: Britta Campion

Dual-listed Investec Group is pulling up stumps in Australia after 23 years, as part of a broader strategy to retreat to core markets and simplify its business.

Investec’s local staff and customers were told of the wind-down — which impacts about 100 staff — in briefings and phone calls on Tuesday afternoon. The corporate regulator and the Australian Prudential Regulation Authority have also been informed.

Investec, which is dual-listed on the London and Johannesburg stock exchanges, expects the transition out of Australia will occur over 12 to 18 months as it bunkers down in its core markets in South Africa and the United Kingdom.

The firm’s local chief executive Milton Samios confirmed the exit plan to The Australian and noted it would occur in an “orderly way”. He said it was not a reflection of the performance of the Australian business or its employees.

“It’s a strategy that a lot of banks are applying at the moment,” he said of Investec’s focus on its home markets.

“Investec has been operating in Australia for more than 20 years and has performed strongly, especially over the last five years,” Mr Samios added. “We are working with a number of the businesses to see if we can spin them out or externalise.”

Globally over the past 18 months, Investec has confronted pressure to simplify its model. It has demerged Investec Asset Management, closed its UK robo-advice business Click & Invest, sold its Irish wealth management business, and entered into a joint venture in India, as part of a simplification strategy.

Investec Australia has also undertaken a refocusing in the past four years. In 2014, it sold its professional finance business to Bank of Queensland and more recently it sold its property fund management business.

Investec joins other banks in retreating from Australia including Barclays which pulled out in 2016. But Barclays is starting to dip back into this market, including via a co-investment in new Magellan Financial-backed investment bank Barrenjoey.

Malaysia’s CIMB has also exited Australia, while Deutsche Bank markedly pared its presence as part of a global restructure. Firms including Barrenjoey, Jarden and Jefferies are seeking to scale up in Australia.

Investec’s exit, though, from this market comes as the firm has inked an agreement to spin out its corporate advisory business, via an affiliate arrangement and buyout by senior staff.

Head of Investec’s local corporate advisory unit Ben Smith and managing directors Chris Stefanovski and Peng Ly are spearheading the buyout efforts, which include members of their team. Their new entity will likely come into effect at the end of March.

The retreat from Australia marks a direction change after Investec last year reactivated its bank branch status in Australia to ramp up lending and move back into deposits. The firm’s local website cites a presence across areas including acquisition finance, deal advisory, global resources and infrastructure finance.

Investec is also in advanced discussions to externalise a number of businesses in addition to the corporate advisory division. That includes a potential sale or management buyout of the emerging companies unit.

Accounts lodged with the corporate regulator for Investec Holdings Australia showed the entity posted a before tax profit of $8.56m for the 12 months ended March 31, down from $23.4m a year earlier. The after-tax result — which included recognition of prior year deferred tax assets and benefits — saw profit print at $34.6m for the 12 months ended March 31, 2020 versus $23.1m a year earlier.

Investec Australia has a long list of high-profile alumni including former ANZ chairman David Gonski, who sold Wentworth Associates to Investec in 2001. Scentre Group chairman Brian Schwartz was Investec CEO for four years until 2009.

As part of the latest changes, Investec Australia will transition its loan book, associated derivative positions, and its investment portfolio to the UK, with customers supported by global teams.

“For the clients … the transition will be pretty painless,” Mr Samios said. “Right at this point the plan is to exit fully from Australia.

“My priority now is ensuring our people are supported and there is a smooth transition.”

Among its mandates, Investec advised Morgan Stanley Infrastructure on a joint purchase of PEXA and worked on the sale of the West Australian land titles services unit.

Last month, Investec announced a global interim adjusted operating profit of £142.5m ($257m), a 48.4 per cent decline on the prior corresponding period.

Group CEO Fani Titi said it reflected “difficult and volatile market and economic conditions”, attributed primarily to COVID-19.