Investec PLC (LON:INVP) has said it could lose up to 3.0% of its post-tax operating profit due to exposures to Steinhoff International Holdings NV, whose shares collapsed last week after the South African’ furniture company’s boss resigned due to accounting irregularities.
Steinhoff, which is listed in both Johannesburg and Frankfurt, said last Wednesday that its chief executive Markus Jooste had resigned, sending its shares plunging and knocking more than US$10.00bn off its market value.
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In a statement today, Investec - a UK listed investment bank - said that its South Africa business does have some derivative exposures linked to Steinhoff's share price, adding that the loss on these could be zero, with a maximum potential loss of 3.0% of the Investec group's post-tax operating profit.
The FTSE 250 listed firm also said it has credit exposures to the Steinhoff group of companies, which represent a "small" portion of its balance sheet, and the company said it is not expected to suffer any loss on these exposures.
Investec said the exposures are mainly lending and overnight facilities and are secured by guarantees from Steinhoff's subsidiaries.
With Steinhoff shares rallying by around 20% today, Investec shares managed to advance 3.6%, or 16.5p to 477.9p in mid-morning trading, having dropped last week on worries over its exposure.
Numis places Investec rating and target under review
In a note to clients today, analysts at Numis Securities placed their rating and target price for Investec ‘under review’ and said they expect to downgrade their forecasts to reflect the Steinhoff exposures.
They pointed out: “The bank continues to be dominated by the South African business where Investec holds a market leading position as a traditional merchant bank.
“The UK bank sits between specialists like Close Brothers and the commodity capital banks as a predominantly SME lender.”
The analysts added: “ The restructuring of the UK business is now largely complete and, while returns have increased, we believe they continue to be well below the bank's COE, despite a CET1 ratio of less than 10%.”