Investec’s UK ambitions face tougher road than SA franchise

Investec’s push to broaden its UK private client offering into a full-service primary bank may prove harder than management targets suggest, as the group seeks to win a bigger share of clients’ banking, savings, lending and wealth relationships.

Investec announced its full-year results for 2026 on Thursday, alongside a strategy to intensify its private client proposition.

The group’s share price closed the day around 6% higher at R143.44.

The dual-listed bank and wealth manager intends to increase its South African private banking client base of 128 000 clients by a further 122 000, and grow its UK private banking client base to 13 300 by 2030.

Keagan Higgins, investment analyst at Anchor Capital, says the South African targets appear ambitious but credible, although he is more “circumspect” about the UK targets.

“The UK private bank has clearly improved from where it was a few years ago, but the next phase is harder.

“Investec is trying to move toward a fuller primary banking proposition. That means taking a larger slice of the client’s everyday banking, deposits, FX (foreign exchange), savings and wealth relationship. That is a much more difficult behavioural shift.”

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In the UK, Investec is moving from being a specialist lender to a full-service primary bank – offering current accounts, credit cards, rewards and benefits, supported by digital capabilities, a 24/7 client support model, and access to the wider “One Investec” ecosystem, the group says.

But Higgins notes that the UK market is “very competitive”, with high-net-worth clients “generally well served”.

“The new transactional banking platform can help, but the execution has to be very good. If the client experience is not seamless, the shift to primary banking will take longer.”

SA continues to outperform UK business

The caution comes through in Investec’s latest numbers.

For the year to 31 March, the Southern African business reported adjusted operating profit of £488.3 million (R10.9 billion), up 5.5%, with return on equity (ROE) of 18.2%. Customer deposits rose 13.1% to £22.3 billion (R494.5 billion), while net core loans and advances increased 13.6% to £17.7 billion (R392.5 billion).

The UK & Other business reported adjusted operating profit of £462.7 million (R10.3 billion), up 1.3%, while return on tangible equity (RoTE) declined to 13.7% from 14.5%.

Customer deposits increased 4.7% to £22.5 billion (R503.3 billion), while net core loans and advances rose 5.9% to £17.8 billion (R394.7 billion).

Read: Investec flags flat earnings in SA as wealth inflows support income

Investec noted in its results announcement that the UK business delivered a resilient performance in a volatile and lower-rate environment, but that underlying momentum was counterbalanced by margin compression and continued strategic investment.

Higgins says the South African business is clearly the better-returning franchise currently, while the UK business is still diluting group returns.

UK remains a growth focus

The group, however, remains committed to the UK opportunity.

During a media roundtable later on Thursday, group chief executive Fani Titi said Investec continues to see significant growth opportunity in the UK.

He said the group remains a “net investor” in the UK and pointed to continued spending on corporate transactional banking, digital capabilities, and an integrated private banking and wealth proposition.

Asked about uncertainty around the UK macroeconomic and political backdrop, Titi acknowledged that the group would prefer a “more business-friendly environment” – “as we would in South Africa or wherever we operate”.

“The current levels of uncertainty do make our clients more cautious around committing in terms of investments.

“But we have a small market share in a large economy and we see an opportunity to grow [there],” Titi said.

Another part of Investec’s strategy is deeper integration between banking and wealth, including its relationship with Rathbones.

In 2023, Investec merged its UK Wealth & Investment (IW&I) unit with Rathbones Group. As part of the merger, Investec became a major long-term shareholder, with a 41.25% interest in the group.

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Almost three years after the merger, the partnership with Rathbones is moving from a referral-based model to an “integrated assets-under-advice model”, under which Investec will lead the client relationship and advice, while Rathbones will provide underlying investment capabilities alongside Investec Wealth & Investment International.

Higgins says Rathbones “makes strategic sense”, but adds that the “shareholder value case has not been fully proven yet”.

“The cross-sell opportunity is credible, but the market is still waiting for it to become more visible in the numbers. I would say Rathbones has strengthened the platform, but the earnings and returns benefit still needs to be demonstrated more clearly.”

Listen to Jimmy Moyaha’s interview with Investec group finance director Nishlan Samujh in this SAfm Market Update with Moneyweb podcast:

You can also listen to this podcast on iono.fm here.