Banks discussing coordinated action with government, says Investec CEO

Investec CEO Fani Titi says different industries, including the banking sector, are in discussion with government on how they can assist the economy in coping with the impact of coronavirus and the social distancing that has slammed the brakes on the operations of some businesses.

During Investec’s pre-close briefing, in which the company warned that the 11 months to February 2020 have shown that its adjusted profits would be 7% to 14% behind the prior year, Titi said as the country faces “unprecedented times”,  concerted and coordinated action is required.

To this effect, discussions are taking place between government and different industries, including the banking industry, and President Cyril Ramaphosa will make announcements about any kind of coordinated action agreed upon in due course.

“Discussions are on-going as to how the banks could be of assistance. But for that to happen, you have to have a far broader level of cooperation and coordination. In the next number of days and weeks, the president will make whatever announcements are necessary,” said Titi.

Helping clients

Investec also joined an increasing number of banks who say they will assist their clients where possible.

The group’s financial director, Nishlan Samujh, said it is still early days to assess how the virus will affect Investec clients’ demand for credit and other services offered by the bank. But the group expects its trading and investment income to be lower, and impairments to increase. He said the bank will monitor the situation on how it affects clients’ ability to honour their debt.

"We understand that businesses are under pressure and we will do everything we can to assist our clients."

He said Investec’s lending book is well diversified in terms of exposure to different sectors, and areas of concern account for a small proportion of the group’s overall credit exposure.

As for impact on the group’s operations, Samujh said the company has recorded a handful of coronavirus cases in different geographies in which it operates; however, it remains resilient operationally to continue without disruptions. He said 80% of its workforce in the UK and 50% in South Africa is now working remotely.

"We haven’t seen any infections that affect operations within the buildings themselves. However, we have very strict protocols across all of our locations. I think it’s worth noting that we are not a branch network. So, the impact across our geographies is limited," he added.

Financial results already impacted 

Investec, whose financial year ends on 31 March, is expected to publish its results in May. Titi said because trading conditions worsened considerably in the last few weeks, the group expects its adjusted full-year profit to be up to 14% lower than in 2019 and adjusted earnings per share to be 16% to 23% behind last year’s, as operating income will be lower than the £2.5 billion the group generated in 2019.

The only key metric that is expected to not worsen is the group’s credit loss ration, which Titi said will likely be in line with 2019’s.

"We will be able to report more fully on this period in May, but it is clear that we have already felt the impact in line with the market," said Titi.

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