South Africa’s most exclusive bank walking a fine line

Investec could see its valuation re-rate significantly, provided it can effectively meet its targets amidst an increasingly uncertain market.

The banking and wealth management group was founded in Johannesburg in 1974 as a small finance and leasing company, acquiring its banking licence in 1980.

In 1992, Investec entered the UK market after purchasing London-based Allied Trust Bank, the company’s first foreign acquisition.

The group now holds a dual-listing on both the Johannesburg Stock Exchange and the London Stock Exchange, and has operations across Europe, Asia and the United States.

In its latest year-end results for the 2025/26 financial year, Investec reported operating income of approximately £2.28 billion, or close to R50 billion.

This represented revenue growth of around 4.2% from the previous year in pound terms, or around 4.0% in rand terms.

The group’s adjusted earnings per share increased by 4.8% to 82.9 pence, or around R18.22 at current rand-pound exchange rates.

Non-adjusted earnings per share saw a slightly higher increase of 5.9% in pound terms from the previous year, up to 77.1 pence (or R16.95).

A final dividend of 21 pence (around R4.62) per share was also declared, bringing Investec’s total dividend for the year to 38.5 pence (or R8.46).

Investec Group CEO Fani Titi said the company was on track to meet the upper end of its returns target range by the 2030 financial year.

“The Group delivered a resilient performance in an uncertain macro-economic environment, reflecting the strength of our diversified business model and balance sheet,” Titi said.

“We do not take for granted the trust our clients continue to place in us. We are making good progress with our strategy to enhance our platforms, leverage our franchises, and deliver long-term value for stakeholders.”

Navigating foreign market uncertainty

While Investec’s growth remained steady and resilient over its last financial year, the real test will be meeting its return on equity (ROE) targets in the coming years.

In a recent episode of BusinessDayTV’s Stock Watch series, FNB Wealth and Investments Head of Investment Research Chantal Marx said this could see Investec be re-rated.

“I think they’ve got a good balance between South Africa and the UK,” Marx said. “I think that they are doing the right thing strategically. The growth isn’t exciting, but it is coming through.”

“If we can get some sort of momentum behind that growth, this could be one that can re-rate quite comfortably because it has lagged behind the other banks.”

Marx explained that Investec had been operating in the UK for a long time, which has allowed it to grow a sizable yet highly specialised private banking operation in that region.

She said that many of the issues the group faced in its first few years in that market were now behind them, and that the quality of its books posed minimal investment risk.

However, she stressed that operating in the United Kingdom meant Investec was valued at a lower price-to-book multiple, which put pressure on the business as it continued to grow.

This is because UK banks generally trade at a discount to their book value, while South African banks tend to trade close to or at a premium.

Appearing alongside Marx on the Stock Watch episode, Umthombo Wealth Chief Investment Officer Alex Duys expressed a more cautious outlook on Investec’s prospects.

“Currently, the bank is trading roughly at book value,” Duys said. “If they can achieve those ROE targets, I think there could be a re-rating to around one-and-a-half or so.”

“But the UK economy is under a lot of pressure, and that might not enable them to achieve their targets. So that’s one thing to consider.”

Duys said lower UK interest rates and higher returns could see a re-rating, but warned that the opposite was also possible, which would justify leaving the current rating as is.

Investec share price over the last year