By Edward West

Cape Town - Investec was experiencing a turnaround in all its activities, which were under pressure a year ago, the investment banking environment had improved and "we are feeling a lot better about life", Stephen Koseff, the chief executive, said yesterday.

Investec reported for the past financial year its first headline earnings decline in a decade, but Koseff told analysts at a presentation yesterday that Investec was beginning to reap benefits from a substantial realignment and restructuring done last year.

He said Investec would also benefit from tax losses relating to Fedsure and from other parts of the group.

"The revenue environment is still difficult, but is improving and we are feeling a lot more upbeat about our ability to generate revenue ... we are in a better space," he said.

In the UK there was a turnaround in the structured finance and treasury divisions. Private banking was performing well. There was some pick-up in investment banking activities and the asset management business continued to make inroads into the market.

In Australia, there was solid activity across the board. The economic environment remained difficult in Israel and restructuring was complete in the US.  

In South Africa, private banking continued to perform well. Foreign exchange and balance sheet activity was below expectations, while there was a strong deal pipeline in investment banking.

Andy Leith, the joint global head of investment banking at Investec, said equity capital market volumes remained depressed in South Africa and significant overcapacity in investment banking meant that there was strong competition for deals, with pressure on fees.

There was a strong focus on black empowerment, but a characteristic of these deals was that normally only one side could pay fees, which meant either split fees or lower fees.

It was also becoming difficult to find fresh capital sources for these deals, which meant innovative deals had to be structured.

Other factors affecting investment banking deal flow was that the rand volatility had created investor uncertainty, the pace of privatisation had been slow and with the approaching election, it was possible that it could slow even further.

Investec shares closed R3.50 up at R104.50 on the JSE Securities Exchange yesterday.