Investec shares rose to the highest level in four trading sessions after the banking group announced plans to buy back shares as part of a “capital optimisation strategy”.
The niche bank and wealth manager said in a stock exchange filing on Monday that it had appointed JPMorgan Equities SA to purchase shares on the JSE and London Stock Exchange as well as other trading platforms in the UK on which its stock is listed. The buyback programme, which will be limited to a maximum aggregate market value equivalent to R1.2bn, will start on October 3 and end on or before November 17.
The repurchased shares will be treated as if they are treasury shares in Investec’s consolidated annual financial statements.
The news prompted a rise of as much as 4.4% in Investec’s share price to R74.82, the highest intraday level since September 27, before paring gains to close 3.3% up at R74 in Johannesburg.
“In line with previously communicated strategic priorities and the recent pre-close trading update call, the group intends to optimise its capital base given the capital surplus position in SA,” said Investec CEO Fani Titi. “Today’s announcement is part of the execution of this capital optimisation strategy.”
Titi told Business Day in May that Investec was considering share buybacks or the declaration of a special dividend as two potential options to deal with a surfeit of capital in its SA business. The company’s common equity tier 1 (CET1) ratio, a measure of a bank’s capital against its risk-weighted assets, was at 14% in its SA business at the end of its financial year at March 31 2022.
However, with the bank’s adoption of the advanced internal ratings based (AIRB) approach, a risk management framework used by financial institutions, this would rise to 16% for the SA business after the financial year end. By comparison, the CET1 ratio for the UK business was only 11.7% at end-March 2022.
theunisseng@businesslive.co.za
Updated: October 3 2022
This article has been updated with additional information
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