Our finance correspondent profiles one of the most original and dynamic banks in South Africa and says that the secret of its success lies in its treatment of employees.
It has been said that Investec's head office in Sandton, Johannesburg's smartest suburb, would put the architects of the notoriously lavish EBRD offices in London to shame. But no one can accuse Investec of indulgence in building the eighth wonder of the world - after all, there is no tax payers' money involved.
Investec, an independent banking group, is an unusual breed among South African financial institutions and it has carved out a phenomenally successful niche for itself over the past years.
A quick glimpse at key figures speaks volumes. For the fiscal year ending March 1998 (FY 1998), headline earnings increased by 52.5% to R572m, with diluted headline earnings per share (EPS) registering a 36.8% increase to 782.4 cents. Diluted headline EPS have actually grown at a staggering annual compound growth rate of 30.4% over the last 10 years. This high rate should go on for at least another couple of years, predicts Standard Equities.
At FY 1998, Investec had a market capitalisation of R17,918m and an annual share return of 41.6%. Among South Africa's top six banks (others being Absa, FirstRand Nedcor, Stanbic and NBS Boland), Investec is the only one, together with Stanbic, to have attracted an 'overweigh' recommendation from Standard Equities for both the short and the long-term.
It would seem that a star is born with Investec, South Africa's sixth largest bank. With only 4.2% of assets and 3.1% of advances, the group is strategically positioned within the banking sector thanks to its niche approach both locally and internationally.
Compared with the top five banks, Investec is the only one with no credit card advances, with the lowest percentage of instalment sale and lease finance (8%) and with a relatively low volume of mortgage advances (31.8%). Inversely, the bank has the second highest volume of preference shares and debentures (3%), the highest volume of bills and acceptances (13.6%, more than double the next bank) and the highest percentage of overdrafts to the private sector (42.6%). Investec also boasts the highest percentage of growth in advances for the six months to 30 June 1998 (about 43% on an annualised basis).
Dynamics of success
South Africa's high interest rate environment, by pushing down interest margins, has tended to favour Investec, which is the only major South African bank where non-interest income...