Professionals and their businesses bouncing back much faster, says Investec

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Investec CEO, Fani Titi says banks will also need to support large businesses and others not covered by government's relief packages.
Investec CEO, Fani Titi says banks will also need to support large businesses and others not covered by government's relief packages.
  • Investec's interim results show a 48% decline in adjusted operating profit and 50% drop in earnings.
  • However, the bank says things are looking up as more people are getting off repayment holidays.
  • Investec says its professional clients have bounced back much faster since the lifting of hard lockdown restrictions.

More and more professional businesses in South Africa are getting back on their feet, repaying their loans again, says Investec.

The banking group which predominantly serves professionals and high-income individuals said at the peak of repayment relief requests from clients in June, 23% of its loan book in South Africa was under some form of relief. That has since decreased to just 2.2% at the end of September.

In the UK where 13.7% of Investec's loan book was under payment relief at the peak of requests, this declined to 6.3% at the end of September.

Richard Wainwright, the chief executive of the banking operations, Investec Bank Limited said what happened in SA was that clients panicked because of the very strict restrictions that came with the hard lockdown

"We had our clients, particularly in the professional space, come to us very quickly to ask for relief. But they were able to bounce back quite quickly when the restrictions on lockdown were lifted," said Wainwright.

But Investec's client base may not exhibit the same trends as ordinary retail banking clients that other groups have. Wainwright said these professionals who have quickly bounced back generally have access to wealth and other forms of cashflows.

In the UK where a relatively higher percentage of the client base still had payment holidays in place at the end of September, Ruth Leas, the chief executive of Investec Bank plc, said they are seeing very different repayment patterns compared to the first lockdown in March. The UK is now on a second lockdown.

"It was very, very busy at the beginning of the initial lockdowns and we had a flurry of requests for payment holidays," said Leas.

Payment holiday requests during the initial lockdown had predominantly come from SMEs. But this time even they seem to be coping.

"Even now in the middle of November, we have not seen any noticeable uptick in payment holidays. Actually, we have seen very encouraging signs of people coming off payment holidays and reverting to their previous contractual terms without issues," added Leas.

Investec, which announced its interim results for the six months ended on 30 September booked an impairment charge of £66.0 million and its annualised credit loss ratio increased to 47 basis points from 23 basis points in September 2019 because of these payment holidays and the expansion of its loan book.

The group's South African specialist banking business reported a decrease in adjusted operating profit of 22.9% in Rands. Adjusted operating profit for the overall UK & Other Specialist Bank declined by a hefty 83.8% to £12.9 million compared to £79.4 million in the first half of 2019.

Southern Africa Wealth & Investments operations also performed better than the UK's, recording a 2.3% increase in adjusted operating profit in Rands. Adjusted operating profit for the UK and Other Wealth & Investments declined 5.2% to £28.9 million.

"We actually did see notable growth in the UK. If you look at our high net-worth and prime client lending which is really the mortgage book, we experienced growth of 11% since March," said Investec Group FD, Nishlan Samujh.

Investec Group CEO, Fani Titi, said operating profits in the UK operations was however affected by hedging its losses given its exposure to the structured products book. These hedging costs contributed £53 million to the profit reduction in the UK & Other Specialist Banking operations.

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