Investec admits Steinhoff exposure could make 3pc dent in profits

Investec said it has "immaterial exposure" to South African retail giant Steinhoff International, which caused alarm for its lenders after its shares fell 80% last week, though though some derivatives exposure could put a dent in profits.

Investec explained that it does have credit exposures to the Steinhoff Group but that this is mostly to Steinhoff Africa and represents less than 3.0% of South Africa subsidiary Investec Bank's total tier-one capital and so less than 1.5% of the Investec Plc's capital.

Steinhoff, the retail giant listed in Frankfurt and Johannesburg, saw its shares lost most of their value last week after revealing it was investigating accounting irregularities, leading chief executive Markus Jooste to fall on his sword. Banks and other creditors have almost €18bn of exposure to the acquisitive owner of various retail chain including Poundland and Bensons for Beds, as of the end of March.

Profits at the South African banking arm could be at risk through various derivative exposures linked to the Steinhoff share price, which could result in trading losses of as high as 3% of the Investec group's post-tax operating profit or "could be zero".

Investec South Africa also holds Steinhoff convertible bonds in its 'available for sale' portfolio with a carrying value of less than 0.3% of the group's consolidated tier one capital.

"Investec manages credit exposures within strict risk parameters to avoid any specific concentrations in its credit portfolios," the financial services group said in the statement on Monday. "Thus, any one particular exposure would represent a small portion of the group's total credit and counterparty exposures, as is the case with the group's exposure to Steinhoff."

"Exposures to client share covered loans where reliance is placed on value being accorded to the Steinhoff share price to support repayment is negligible."