- Investec plans to distribute a stake of 15% in Ninety One directly to shareholders.
- The group will be left with only a 10% stake in the asset manager.
- Investec reported a strong earnings performance in the six months to end-September - even higher than in the same period in 2019.
Investec wants to distribute a 15% stake in Ninety One to its shareholders. Investec was the parent company of Ninety One, before the two businesses demerged in 2020.
Investec currently holds 25% shareholding in Ninety One. After distributing the 15% stake, the group will still hold on to 10% of the asset manager's stock.
The distribution of shares will be subject to regulatory, shareholder and other approvals.
Investec initially intended to sell 10% of its stake in Ninety One before it demerged with Investec Asset Management. It wanted to use the proceeds to raise more capital for its UK business.
But Investec later abandoned that sale since Ninety One listed in the middle of the market turmoil in the early days of the Covid-19 pandemic.
It chose to hold on to the 10% in the long term. But it always had an option to let go of the other 15%.
"It was always clear that the 15% was excess to [Investec's capital] requirements," said Investec CEO Fani Titi.
He said the banking group has generated more capital than it needs since the demerger. And because it is in the process of reducing its investment portfolio in the South African business, Investec is generating even more surplus capital. Titi said the group has now come to a point where it needs to distribute the Ninety One stake as it had promised shareholders that it would return excess capital.
Titi said after this distribution of shares, Investec shareholders would have received a 70% return from Ninety One, since the demerger in March 2020.
At that time, each Investec ordinary shareholder got one Ninety One share for every two Investec shares they held at the time.
"That [return] is equivalent, at current market value to about £1.7 billion, or approximately R34 billion. So, we're really pleased that we can get this capital back to our shareholders," said Titi.
Also on Thursday, Investec reported its results for the six months to 30 September.
Credit impairment charges fell by 84.5%, indicating that most Investec clients' financial health is back to pre-pandemic levels. The group's credit loss ratio fell to just 7 basis points from 47 basis points at the end of September 2020.
The group grew revenue by 30.5%.
This helped to push Investec's adjusted earnings per share to 26.3 pence, 134.8% higher than in September last year.
The adjusted earnings were even higher than the comparable pre-Covid-19 period in September 2019.