Excess cash pains Investec

Johannesburg - A strong performance by its asset management division has proven to be a kicker for dual-listed financial services group Investec , but excess cash on its balance sheet is becoming a headache for the firm.

This is according to Investec CEO Stephen Koseff at a pre-close briefing on Thursday, ahead of the release of the group's full-year results for the 12 months to end-March 2010.

"The economy is still in a fairly tough space, even though the world is coming off life support," said Koseff.

He highlighted the improved performance of Investec's asset management business, which recorded inflows in excess of £4.5bn during the year - with the figure likely to near £5bn at the end of the financial year - totalling £69.4bn in managed assets.

Deposit inflows at Investec's banking operations have also increased by 37% to £20bn during the year. This has helped the group to exceed the higher levels of capital UK banks will be expected to hold.

Koseff admitted Investec now has more cash than necessary at both its South African and UK operations, saying the group has battled to identify specific opportunities where it could commit its funds. ""Too much cash burns holes in one's pocket," he said.

Banking favourite

Longer-term Investec shareholders have had reason to smile over the last 12 months, with the firm outperforming all other major South African banking groups. Investec Plc and Investec Ltd have grown by 100% and 82% respectively, with third-placed Nedbank coming in at 71%.

Shareholders may soon have more to be happy about, with the possibility of a bigger dividend being mooted if Investec is not able to deploy its excess cash.

Investec has traditionally been a good dividend payer. While it has cut back during the financial crisis, it could return to its higher-yielding ways if it continues to accumulate cash.

By midday on Thursday, shares in Investec Limited were down 55c (0.9%) to 6 230c, while Investec Plc was down 5c (0.1%) to 5 990c.

- Fin24.com