Investec management statement

Investec released an interim management statement for nine months to December. The performance overview pretty much sums up everything you need to know about diversified banks: "Against a backdrop of volatile markets and low levels of activity the third quarter of the group's 2012 financial year has proven to be challenging. The asset management and wealth management businesses continued to see net inflows however overall assets under management pre the acquisition of Evolution Group plc declined. The Specialist Banking businesses benefited from growth in both margin and fee income but earnings from principal activities decreased substantially."

Investec refreshes your memory when it comes to what it is that they do, and this is important for us when making our decision about which area of finance to invest in. "Investec focuses on delivering distinctive profitable solutions for its clients in six core areas of activity namely, Asset Management, Wealth & Investment, Property Activities, Private Banking, Investment Banking and Capital Markets." It is mostly the last one that is the issue for us. I suspect it will be a long time in banking terms before we see some fancy financial engineering, or let me rephrase, before banks see themselves able to engage in high risk activities as they did in the past. It is starting to tell already: "Income from principal transactions was 31.3% behind the prior year."

Eish, I guess we know how they feel, last year was a tough old year. Perhaps we are wrong on this, and like we used to say, the Wright Brothers did not get their flying machine off the ground on the first attempt. Financial engineering will continue to evolve. And the "mistakes" of the past will be learnt from. For the time being financial institutions (of this sort) are on the wrong side of regulators, politicians and many ordinary folks as having been the ones that led to the great financial crisis of 2008.

I say that everyone is to blame. The regulators who were overseen by government. Where were the lawmakers to oversee the regulators? Nowhere, telling you how great it all was that fewer people were unemployed as a result of their genius. Yip, and then the wheel turns and now the clever bankers are greedy bankers. Fred the shred Goodwin is just plain Fred. So, as a result of higher capital adequacy ratios, lower risk taking and more regulation on some very profitable banking activities, we are going to avoid the sector for the time being. Still, I like the company, they are the Austin Powers of banking South Africa.