Investec has set aside funds to pay for possible compensation and other costs linked to its auto finance business in the UK as regulators continue with an industrywide probe into whether such loans were sold in a way that treated customers fairly.
The South African lender will provide an exact amount for the provision when it reports its annual results in May, Chief Executive Officer Fani Titi said on a media call on Wednesday.
Still, the bank expects profits for the year ending in March to be between £866,9 million (US$1,1 billion) and £909,6 million, which would be up from the £818,7 million it posted in the same period a year earlier.
“As you can see, the results are quite strong even after factoring in a provision,” Titi said. “We remain comfortable that we were compliant, but clearly there is an investigation on the go. And we have looked at the number of different scenarios of potential outcomes, and, on a prudent basis, we have made a provision.” Shares of Investec rose as much as 3,8 percent on Wednesday in London.
The stock trades both in London and Johannesburg.
The UK’s probe focuses on a practice known as discretionary commission arrangements, which allowed car dealerships to earn thousands of extra pounds for themselves, and the bank, by pushing up the interest rate they offered buyers.
The system, which the regulator banned in 2021, ultimately incentivised dealers to pick a higher rate for customers.