Investec Banking On Australia

The Age

Monday May 19, 2008

Vanessa Burrow

BOUTIQUE investment bank Investec will continue with expansion plans in Australia, despite challenging conditions.

Investec, which operates mainly in South Africa, Britain and Australia, reported #420 million ($A860 million) net profit in the year to March 31.

Just over $63 million was derived from Australia, where Investec Bank has been operating since 1997.

"We are very happy with the result," said Investec Bank (Australia) chief executive Brian Schwartz. "It has been a difficult year and probably will continue to be for a while."

Even so, Investec Bank plans to expand in Australia, by increasing existing business and through acquisitions. It will focus on Melbourne, Brisbane and Perth.

"There are a lot of opportunities around in the market at the moment," Mr Schwartz said.

"We always look at acquisitions that make sense . . . clearly it has to make sense financially, and we are very selective, but it also has to make sense from a people, cultural-fit perspective."

Mr Schwartz said deals such as the proposed merger between Westpac and St George banks could benefit Investec Bank.

As there was more consolidation in the sector, banks were more likely to stay clear of mid-capitalisation companies where Investec Bank made its money, he said.

Investec Bank already operates private banking, capital markets, investment banking, property and private equity and asset management divisions in Australia.

Unlike many Australian retail banks, which have reported a decline in funds under management in the six months to March 31, Investec Bank's funds under management have increased by 52% to $600 million over the past year.

However, the rapid increase can be explained by several successful capital raisings in the six months to December, as the bank established its Property Opportunity and Global Aircraft funds.

Impaired loans have risen from 0.3% of gross loans to 0.7% of gross loans over the year to March 31.

However, globally, Investec's gross default loans have risen to 1.7% of core loans and advances to customers, or about #222 million. This is up from about #133 million pounds the previous year.

Investec is listed on the London and Johannesburg stock exchanges, and has market capitalisation of about $4.7 billion globally.

KEY POINTS

? The bank plans to continue Australian expansion, with "acquisitions that make sense".

? CEO Brian Schwartz believes Investec can gain from bank sector consolidation.