One thing former Investec CEO Stephen Koseff would change if he could go back in time

Former Investec CEO Stephen Koseff said that if he could relive one year of his life, it would be 2007 because of the disastrous Kensington Group acquisition.

Koseff shared this information in the first episode of Investec Minds, a video podcast series from Investec Focus Radio SA.

Equity Research analyst Nkateko Mathonsi asked Koseff which year during his tenure as Investec chief executive he would like to relive.

He said 2007 was the obvious year to prevent the mistake they made by acquiring Kensington Group ahead of the financial crisis.

In August 2007, Investec acquired Kensington Group for approximately £283 million through a share swap and special dividend.

Investec wanted to expand its footprint in the UK mortgage market, and Kensington was a pioneer in the subprime sector.

The company was lending to people who didn’t fit the strict criteria of high-street banks, similar to their United States counterparts.

At the time, Koseff said the deal would reinvigorate Kensington and position Investec well for growth in the non-standard mortgage market.

However, the timing was disastrous. The Investec deal closed at the same time as the credit crunch began to freeze global markets.

Kensington was hit by the collapse of the securitisation market, which it relied on to fund its loans.

By 2008, the specialist mortgage market in the UK had essentially vanished, and Investec was forced to stop all new lending through Kensington.

It shifted the business into maintenance mode, focusing on managing the existing loan book rather than growing it.

Investec had to take significant write-downs on the value of Kensington, as the quality of the underlying mortgages was tested by the recession.

In 2014, Investec agreed to sell Kensington to private equity firms Blackstone and TPG Special Situations Partners for £180 million.

“This acquisition gave us a headache for around eighteen months, or maybe even longer,” he said.

“I would like to have 2007 over again so we don’t do some of the stupid things we did, which put us under pressure in 2008 and 2009.”

He added that you sometimes have to do stupid things to learn from them, as long as they don’t sink the company.