Broker FAQs
Why Investec?
Investec Bank plc is a FTSE company with a market capitalisation of GBP3.978billion as at 21 June 2011. Investec Bank plc is an international specialist bank and asset manager operating in 14 countries. Investec Ireland is the Irish-based branch of Investec Bank plc.
- Investec is regulated by the UK Financial Services Authority (FSA)
- Investec is a member of the UK Financial Services Compensation Scheme
- Last year Investec made an operating profit of £434.4 million*
- Investec has £88.9 billion** of third-party assets under management
For the year to 31 March 2011 before goodwill, acquired intangibles, non-operating items, taxation and after non-controlling interests.
** As at 31 March 2011.
Is Investec affected by the liquidity/credit crisis?
The banking sector globally has been, and continues to be, impacted by the credit and liquidity crisis. Investec’s strategy of maintaining a recurring revenue base; geographical and operational diversity; and strict management of liquidity and risk has enabled it to navigate through the present challenging operating environment.
Strict management of liquidity and capital remain key objectives. As at 31 March 2011 the capital adequacy ratio of IBP was 16.1% and the Tier 1 ratio was 11.3%. The group continues to focus on maintaining a high level of readily available, high-quality liquid assets. At 31 March 2011, IBP had £4.3 billion of cash and near cash to support its activities.
Furthermore, the bank maintains an appropriate mix of term funding, placing a low reliance on interbank wholesale funding to fund core lending asset growth. The Private Bank funds its entire loan book with customer deposits.
As at 31 March 2011, loans amounted to £3.4 billion and deposits were £6.1 billion. Investec targets a diversified funding base, avoiding undue concentrations by investor type, maturity and market source, instrument and currency. Funding costs have increased over the last year but not out of line with the market.
Credit ratings and Investec – what does this tell me?
Clearly it is the credit, rather than the credit rating, that is important. Investors need to fully understand the rating before they use it as a guide for making investment decisions.
Many investors are surprised to learn that credit ratings are not wholly scientific. Rating agencies use a scorecard methodology in their rating process. Their scorecards take into account a number of factors, which can essentially be grouped into three main categories: “hard” financials, “soft” qualitative factors, and a “support” rating based on their opinion of the likelihood of any government-led bail-out. Whilst these scorecards do take into account reported results, they are inherently subjective as a number of stress tests, weightings and forward-looking assessments are applied before ultimately determining the rating assigned.
IBP’s rating reflects a strong score with respect to the “hard” financials, including capital, liquidity, risk management, transparency, asset quality and profitability. For example, on the Moody’s scorecard we would map directly to an A3, a high score relative to our peers. On the “softer” issues such as franchise value, geographical diversification and market share, IBP scores lower. We find this somewhat surprising given how robust our business model has been throughout the banking crisis. IBP’s ultimate rating is further negatively impacted by the subjective assessment associated in assigning a support rating.
Given the current environment, rating agencies are awarding significant rating notch uplifts to banks who have received government support. Many of these banks have failed and yet are afforded high ratings. IBP has not required government support and the FSA has acknowledged its sound balance sheet and stable operating fundamentals resulting in the bank being eligible to issue up to three-year debt guaranteed by the UK Government. Notwithstanding this, IBP has not been awarded the benefit of rating notch uplifts to its final ratings.
We feel ratings are very subjective and investors need to fully “unpackage” any rating. What is key is balance sheet soundness, and on this basis we believe our track record to date speaks for itself.
For information about Investec’s financial, capital and liquidity positioning, please download our factsheet.
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Further Information
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Meet the Team
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Intermediary Account Opening Form
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Trust Pension Scheme Account Application Form
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Approved Retirement Fund (ARM/AMRF) Application Form
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Deposit Account for Charities Application Form
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Partnership Deposit Account Application Form
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Corporate Non-Resident Declaration Form