Investec diversifies into retail banking

Investec Bank Australia will launch its brand into the retail deposit market later this year as part of a diversification of its business away from its traditional property base.

The bank has suffered a high level of impairments as a result of its property exposure, which used to account for 60 to 70 per cent of its loan book.

Investec's financial report for the year to March 2010, released on Friday, shows that the Australian business had impairment losses of $62 million on a $2.9 billion loan book in 2009 and charges of $51.3 million on loans worth $3.03 billion in the latest year - bad debt charges of 2.1 and 1.7 per cent of loans respectively.

Over the past couple of years the bank has bought a specialist professional finance business, Experien, and it has started a corporate lending division. It has also launched an institutional broking business.

Investec Bank Australia deputy chief executive Alan Chonowitz says the professional finance division, servicing medical practitioners mainly, now accounts for 45 per cent of lending.

The bank has also beefed up its treasury operation and raised $50 million for investment in the Investec Global Aircraft Fund.

The bank reported a net profit of $23 million for the year to March, a turnaround from a loss of $2.4 million in the year to March 2009.

Net interest income fell from $125 to $101 million but fee income rose from $52 to $83 million and income from principal transactions jumped from $7 to $37 million.

The bank has a strong balance sheet, with a Tier 1 capital ratio of 16.5 per cent and a core liquidity ratio of 44.4 per cent. Chonowitz said he expected to be able to tap into growing demand for finance from the bank's business and high net worth customers.

Within the next few months the bank will launch its brand into the retail deposit market. Chonowitz said Investec would be able to offer premium rates.

Chonowitz said: "We don't compete with the big banks for loans. We go for business with high margins. We can pay a premium for deposits."

In the UK, Investec offers a deposit product called High Five, which is priced according to a benchmark of top rates offered by other deposit takers.

Chonowitz said the bank was looking at introducing that product here. "It saves the customer having to shop around," he said.