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00:00So Fani Titi is joining us now from London just after the earnings.
00:04Fani, nice to speak with you again. Thanks so much for joining us.
00:08So let's just start here with the earnings, full-year profit climbing to a new high.
00:13What is the highlight for you from the performance over the past few months?
00:20I think the period that is under review was characterized by a lot of uncertainty.
00:26So I'm quite pleased that we were able to report increased profits on the back of increased support from our
00:36clients.
00:36And they continue to put their trust in us to partner them to reach their financial goals.
00:42So we saw a strong growth in funds in the management.
00:46We saw growth in deposits and we saw growth in loans and advances.
00:52And on the back of that, we were able to report increased profits.
00:58And especially in your South African business, can you talk about the performance of the South African business
01:06compared to what you're seeing in the UK where you are right now?
01:11I think in South Africa, we saw an improving macro environment because South Africa is largely a self-help story.
01:20We saw some reforms that were put in place by a government that supported economic growth.
01:26So generally, activity was better, although towards the end of our financial year in March,
01:32we began to see the effects of the war in the Middle East beginning to temper both activity and confidence.
01:39In the UK, we reported results that were in line in terms of profit in the banking business,
01:47much higher in our wealth associate Rathbones.
01:52And overall, the performance was acceptable, but the environment is much tougher.
02:00I think the local economic environment is much tougher, given the uncertainty in the politics,
02:06but a strong and resilient performance for our business there as well.
02:11Right. And of course, more recently, we have seen that amplify in the UK.
02:15But if we're looking at the period, what are some of those challenges that you're facing in the UK?
02:23I think while the UK has seen muted growth from an economy standpoint,
02:29we've had some changes in taxes over the last 18 months or so.
02:35And those taxes generally affect higher net worth individuals.
02:40We have seen in some cases some exits from clients.
02:45But in general, that environment remains a positive one for us to invest in.
02:50And you may remember that we are investing in our corporate mid-market capability.
02:56We are also expanding our private clients business in the UK.
02:59So while the environment in the short term is challenging,
03:02we continue to be an investor in that economy.
03:05Our market shares are low.
03:07So there's a lot of opportunity for us to grow.
03:11Where do you see the opportunity, though, Fani,
03:14especially if you consider some of the challenges that we're seeing more recently,
03:18especially with the premiership?
03:22I think the challenges in the political environment are short term.
03:28We invest in the long term.
03:30So we laid out a plan that we will be executing over the next four years or so.
03:36That plan sees us investing significantly in transactional banking capability on the private client side,
03:43where we will be taking a more direct control of the relationship with our clients offering seamlessly both banking and
03:53wealth.
03:54We intend to grow our client base quite significantly and funds in the management and the loan book, particularly mortgages.
04:02So we see that opportunity being a real opportunity.
04:05We will be launching H2 next year, our corporate banking solutions.
04:15So we are hiring people at the moment, both with respect to relationship managers, with respect to people on the
04:23credit side.
04:24So we see opportunity even in a challenged environment like this.
04:30And that is even despite what we got from the UK financial regulator just a few weeks ago.
04:37It sounds like the bank is still doubling down on the UK as an investment destination.
04:42Is that fair to say?
04:44Yeah, very much so.
04:46We are investing heavily in this market.
04:49But clearly, there has been some disquiet about some of the outcomes, particularly with respect to the motor finance sector.
05:01Thankfully, we were very small in that sector.
05:04Our provision was the sum total of 30 million pounds.
05:08And we haven't revised that provision because we were conservative in the first place.
05:14So for us, while regulation is quite tight, we've always placed our clients at the center.
05:21And as a consequence of that, we haven't really been affected as severely by the tightening of regulation, particularly around
05:31customer duty.
05:33So we see opportunity here and we will continue to invest in our private client capability despite those recent developments.
05:41And as I said, they don't affect us as severely.
05:46Fani, you mentioned you're looking at hiring.
05:49Is that just related to the UK or could that potentially be related to other ambitions that the bank has
05:57across Europe?
06:00We have an increasing presence in Europe.
06:03We have applied, for instance, for a banking license in Ireland that will allow us to work a lot more
06:12front footed in Europe, given that with Brexit, UK banks were not able anymore to operate as freely as they
06:22did before.
06:22So we will be doing more in Europe, following our clients and supporting them.
06:27We have a wealth business in Switzerland, for instance, that supports our South African wealth business.
06:34We are hiring there and investing more in our capability.
06:39In fact, we had a small Bolton acquisition last year in Switzerland.
06:43We have started to operate in the Middle East, in Dubai, on the wealth side.
06:50Obviously, with the war in the Middle East, we've had to scale down our plans in the short term.
06:58But in the long term, we continue to be interested in that region.
07:02So overall, we are on our front foot.
07:04We are investing, we are expanding, and we are hiring.
07:08Obviously, we are also investing in technology to augment the work that we do for our clients.
07:16When you talk about Ireland, have you already applied for that license?
07:20What does the timeline look like?
07:23Look, we've been in discussions with the regulator there for quite some time.
07:28It takes a bit of time to to go through these processes.
07:32We do expect that in the immediate future, we we will be successful.
07:38And we are quite excited about the opportunity that that opens for us in Ireland, in the rest of Europe.
07:44So it is a short term outlook in terms of when we will be able to operate with a fully
07:52granted license.
07:56So perhaps by the end of the year, I want to know how short term we're thinking.
08:00Yeah, we hope so. We hope so. We hope so.
08:02That would be expectation for sure.
08:06Are there any other markets that that you're considering?
08:09Because as you mentioned, it seems like there's quite a bit of opportunity that you are seeing in Europe at
08:14this at the current moment.
08:18I think we're very happy with the markets in which we operate.
08:22We've got a South African base that covers the Southern African opportunity.
08:28We've got a presence in Mauritius.
08:31We indicated that we will be doing more for our clients on the African continent.
08:36So that's the South African hub from our European hub.
08:39We are based here in London.
08:43We cover Europe.
08:44We have a presence in India on the equity capital market side, on the energy and infrastructure finance side and
08:51fund solution side.
08:52We also have a presence in the U.S.
08:56So we're comfortable with where we are now on the wealth side.
09:00That's where we have some some very attractive plans.
09:05I spoke about Switzerland.
09:07I spoke about Dubai.
09:08We have a distribution agreement in Latin America that would enable us to distribute solutions and products that we have
09:17manufactured in South Africa and other parts of the world.
09:21In the U.K., as indicated, we have a private banking opportunity that will be augmented by a wealth opportunity.
09:31Fani, if we think about the corridor between the Middle East and Africa, you were mentioning the opportunities in Dubai.
09:38Given the developments over the past few months with the war, have you noticed a scaling back or a rethinking
09:45or the discussions changing with some of the investors in Dubai or in the region?
09:51I think if you look at the short term, that level of uncertainty occasion by the war would necessarily lead
10:00to both clients and investors taking a much more cautious approach to the region.
10:09But there's no doubt in our minds that in the long term, the region is a very important one.
10:14Dubai, for instance, is an attractive financial center.
10:17The whole of the Middle East is a growing region of the world and really a good center.
10:26If you look at flow of business and investment from the Middle East, from places like India into the continent
10:33of Africa.
10:35In fact, our equity capital markets business, particularly an investment bank on the advisory side, has seen significant deals between
10:44India, the Middle East and Africa and also Europe for that matter.
10:49That's why we have an investment banking capability that covers those regions and can capture those flows that come from
10:58that corridor.
11:01So perhaps we see that increasing over time, not necessarily stalling, as some people were concerned about.
11:11Yeah, we always look at the long term. I think in the short term, the fork can lead to postponing
11:18of decisions, can lead to a lot more concern.
11:21But if we control the things that we can control, we have our investment plans, we have our strategies.
11:27And if we execute on those in the long term, I think we make more progress than would would seem
11:34to be the case when you look at short term uncertainty.
11:37Capital is about the long term.
11:41If we think about the long term here in South Africa, President Ramaphosa has some ambitious targets in terms of
11:47growth for the country.
11:50How achievable is that, especially if you look at where the fiscus is at this point?
11:56Do you see that in the short term? How far out could could we get to some of his targets?
12:03As I said earlier in the interview, South Africa is a self-help story.
12:08There are things we can do that would significantly improve our progress.
12:13The work we've done as a country on the energy and electricity sector has borne fruit.
12:19The work that the country is doing around network industries, transnet, in terms of rail and ports, we're seeing better
12:27throughput and therefore an opportunity for us to export both our minerals and some of the products that we produce
12:37in the country.
12:37Obviously, in the short term, the impact of the price of oil will dampen prospects.
12:46We've heard of the potential for interest rate hikes in the short term as a consequence of the war in
12:53the Middle East.
12:54But the long term trajectory looks positive.
12:58It may be that there will be some delay in some of the growth that we would have foreseen in
13:03the shorter term.
13:04But I think the prospects for South Africa look better today.
13:07I think integration into the African continent through the African free trade agreements is important.
13:15Africa as a whole has a young population, which in the long term should lead to a dividend of growth.
13:21Obviously, governance has to be better.
13:23Obviously, investment flows has to come into the continent on the back of improving governance.
13:31Are you noticing investors being more selective in terms of where they're channeling their own investments, given some of the
13:38needs of the continent and even of South Africa?
13:43I think investors look for growth.
13:47They look for security of their investments.
13:50And that means that the policy environment has to be a lot more stable.
13:57And from an African perspective, obviously, resources are important because we do have an abundance of natural resources and the
14:06ability to to exploit those resources, to be able to export them into the international markets.
14:14That's that's an area that is important.
14:17That is important. We have a young population and where education systems are much better.
14:21I think we can participate much more in the revolution that we are seeing that is brought about by technology
14:27in South Africa.
14:29For instance, we have seen a substantial amount of investment going into data centers.
14:34We have seen that also across the continent.
14:37So there are a number of sectors that we can benefit from as a continent where we will be competitive,
14:45for instance, relative to the rest of the world.
14:49Maybe, Fani, we just end on that because we have been hearing from a number of banking executives on the
14:55impact they see for AI and data centers more broadly on the banking industry.
15:01What is your perspective on that?
15:04How do you see this maybe in the short term affecting your workforce and even the product productivity of the
15:11business?
15:13I think at Investec, we've had a wide level of adoption of AI at an individual level.
15:21Our colleagues are doing some interesting things.
15:24But in this stage of our work, we are seeing tasks being performed, whether those tasks are around onboarding of
15:34clients, whether they are around assisting our private bankers and wealth managers to be more productive in serving our clients.
15:43In the next stage of development, we will see a lot more industrial type impact on our business.
15:51So what we would expect is that we wouldn't see mass retrenchment of our people.
15:59We will see natural attrition.
16:01We will see more investment going into agents alongside our people.
16:06Obviously, we hire very qualified individuals, graduates and the like.
16:11Those individuals will be able to adapt much more quickly to being augmented by AI and using AI to improve
16:20both productivity, but more importantly, client experience.
16:23So we're investing heavily in it.
16:25We see it as a tool that will improve our efficiencies.
16:31But as I said, improve our way of serving clients in the long term.
16:37So we embrace AI and we see it as a tool for the future that will be beneficial to industry.
16:46Will there be some cases in emerging markets where we will see some impacts in terms of job growth being
16:57lower?
16:57Of course, there will be. But economies generally do adjust over time on the African continent, specifically in South Africa.
17:06The level of education, making sure that education is directed at those industries that will be much more relevant in
17:14an AI affected world.
17:18We'll leave it there with you.
17:20Fani Titi, CEO of Investec.
17:22Fani, always great to speak with you.
17:24Thank you so much for your time.
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