The Investec building in Cape Town. File photo: Michael Walker
Nicola Mawson
Private bank Investec, which has operations in South Africa and the UK, continues to co-operate with German authorities over a long-standing matter in which some of its staff were allegedly involved in historical involvement in German dividend tax arbitrage transactions.
The transactions, also known as cum-ex transactions, are a way of “exploiting a loophole on dividend payments that enabled several parties to claim the same tax refund. It has also been called dividend stripping”, UK law firm Rahman Ravelli explains on its website, which also contains an example trade.
Rahman Ravelli says the dividend stripping, which took place before 2012, could have cost it €10 billion (R196bn) in lost revenue.
“But there may be more than ten other European countries affected; with estimates saying around €55bn may have been lost to those nations’ treasuries,” it says.
Speaking during a pre-close conference call on Friday morning, Investec CEO Fani Titi said the bank took a provision through its books about four years ago, which it deemed sufficient to cover any potential liability.
“We did not indicate the exact amount of the provision for the simple reason that this matter is under litigation, and it is pretty standard practice that when a matter of this nature is under investigation, that we would not give the specifics of the provision we have made because that would undermine our legal position.”
Titi added that the issue did not affect its numbers.
For the six months to end-September, Investec expected pre-provision adjusted operating profit to be between 6.7% to 12.9% ahead of the previous period, or between £520 million (about R12.16bn) and £550m.
Adjusted earnings per share should be between 4% lower and 4% higher, while headline earnings per share were anticipated to be between 1.4% behind to 3.5% ahead year-on-year, which “includes the cost of executing strategic actions, and the amortisation of intangible assets associated with the Rathbones combination in the current period”, the bank said in a statement.
Investec Wealth & Investment became part of the Rathbones group last September.
Investigations into the cum-ex transactions are ongoing and no formal proceedings have been issued against Investec Bank plc by the Office of the Public Prosecutor.
“Investec Bank plc is co-operating with the German authorities and continues to conduct its own internal investigation into the matters in question,” it said in its latest annual report.
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