Investec plc (INVP LN) Buy: Will investment in its franchises pay off?

Research evidence excerpt

Investec plc (INVP LN) Buy: Will investment in its franchises pay off?

d Operations) are unlikely

52-WEEK PRICE (GBPp)

to do that, in our view, so should it be flagged as being “investment’?

The main areas in which Investec is investing are private banking in the UK and business

banking in South Africa – both very competitive spaces, so getting returns on investments

will be tough. Its earnings from UK private banking have declined by a cumulative 54% 460

05/25 11/25 05/26

since 2023 – not because of costs but because it is largely just a lending business and Target price: 740 High: 648 Low: 496 Current: 630

loan growth has slowed while NIMs have been under pressure. As a result, further Source: LSEG IBES, HSBC estimates

investment in this area would probably be beneficial. Competition in business banking

in South Africa is intense with new entrants making it even tougher. Henry Hall*

Banks Analyst

Fee and commission income grew strongly, increasing the contribution of capital-light HSBC Bank Middle East Limited, DIFC

revenue to total revenue from 27.3% in FY25 to 30.8% in FY26. We think this bodes henry.hall@hsbc.com +27 11 880 1855

well for Investec’s ability to improve its ROE in future years.

Harish Paliwal*

Associate

Conclusion: We make only small changes to our EPS forecasts post results. We Bangalore

forecast 7.1% EPS growth in FY27 for reasons including the cGBP22m of one-off

revenue in the base and expected NIM pressure in the UK. We continue to value * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is

Investec using a sum-of-the-parts (SOTP) approach. We assign multiples to book to not registered/ qualified pursuant to FINRA regulations

Investec’s two banking operations by benchmarking its ROEs against peers. Multiple