SA: Banking group to raise $148m

  1. Posted on Monday 3 August 2009 - 08:31
    Tom Minney
    Image of Tom Minney
    Tom Minney, AfricaNews reporter in Addis Ababa, Ethiopia
    Specialist investment banking group Investec said it would place up to 22 million new shares in the market as South Africa's recession is expected to hit profits. The group said the move is to strengthen its balance sheet and buy back debt at a discount. It is hoped to raise some R1.15 billion (US$148 million).
    hp business 3.jpg
    According to media reports, the share price had climbed by 130% since March, when they were at five-year lows. Initially the share price fell last Wednesday, but it recovered, leaving the price at ZAR52,40 on the JSE (Johannesburg Stock Exchange), according to africancapitalmarketsnews.com. Investec has operations in SA, UK and Australia and is also listed on the London Stock Exchange.

    Investec CEO Stephen Koseff said: "This offering gives Investec the flexibility to prudently repurchase debt as a discount to par and subsequently the opportunity to deliver long-term shareholder value, while preserving a strong tier 1 capital position." Tier 1 capital - the regulatory amount of cash a bank has to hold in relation to the size of its lending book - is important to the capital adequacy of banking in terms of international banking management standards.

    The company said that Merrill Lynch is running the book to accept purchase bids on the share issue and would agree the price with Investec at the end of the book-building process. According to analysts, Investec is prudent to strengthen its balance sheet ahead of likely falls in profit as the South African recession accelerates.

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