Banking » Investec CFO on overcoming challenges

When Investec, the banking and wealth management group, hatched a plan last year to split out its asset management arm, the signs looked good.

In a benign environment, Investec CFO Nishlan Samujh and the rest of the group’s senior leadership team reckoned that by hiving off the arm to become Ninety One, maximum value could be created for shareholders.

But the timing could not have been more challenging. Ahead of the of the split on 13 March with trading set to start three days later, the coronavirus epidemic began to speed mercilessly across the planet. If things couldn’t have been difficult enough for Samujh, he had the group’s 2020 financial year results to close by the end of the month, ahead of reporting in May.

Things looked bleak- Investec’s London share price that stood at 347p (an adjusted share price that excluded the asset management business) on February 21 had slumped to 128p by 23 March- reflecting market concerns. However, Samujh says he was unfazed, as the share price fall reflected two important factors: “Banking stocks the world over were feeling the pain and we had just demerged,” he says.

Most importantly, Investec put into place emergency plans to bolster Investec’s defence – starting with boosting the group’s dollar funding levels. “We made sure that we had sufficient resources available on our balance sheet,” says Samujh, who has been Investec’s group CFO since the start of 2016.

“As the world was taken over by market volatility we had to effectively navigate and transition to a new way of interacting. Those decisions were made on the fly, and all of that happened in the space of two weeks,” says Samujh.

“It was encouraging to see how seamlessly banks and regulators were able to work closer together to ensure banks remained active, markets didn’t seize up and that capital tools were available for those who needed them.

“All of the tool sets we had started to operate as intended, and we started to see what needed to be tweaked. It helped that regulators were alive to ensure markets didn’t cease up and that banks could remain active,” he says.

Samujh, who has been at Investec for over two decades, says he never felt a sense of panic, but was aware of the importance of the share price slide. “We tried not to over emphasise it but we remained very conscious as to what it was telling us,” he adds.

A critical step was explaining the resilience of the balance sheet to the market, he says. “We needed to re-iterate the resilience of the organisation,” he says.

Through the course of 2020 the efforts of Investec’s leadership team began to pay off as the bank took drastic action to offset the impacts of the pandemic. A reorganisation launched in 2019 to “simplify and focus” the business, that included redundancies in the UK business was accelerated in response to the pandemic.

“As we moved to September, some of the losses that we took on our structured deposit book, were felt in our results, says Samujh. “We were able to tell the story as it unfolded, we could say we are experiencing these impacts but if you look at us, we remain resilient,” he says.

Investec’s London share price recovered to over 200p by the start of December, pushing its market cap through the £2bn threshold. As for Ninety One (named after its launch year 1991) its stock has risen from a launch price of 155p to reach 221p by December, giving the business a value of around £1.4bn, justifying Samujh calling the split “a celebratory moment” despite the challenges at the time.

Life struggle

Getting through difficult times is nothing new to Samujh. He was brought up in a single parent family in Durban, where his mother- who left for work at five in the morning and returned at six in the evening- “dedicated her life to ensuring he and his older brother had the background to venture into the world.”

Despite experiencing at first hand the cruel nature of apartheid when he and friends “strayed into the wrong section of the beach,” he was able to feel secure in the strong Indian community of the city on South Africa’s KwaZulu-Natal region. “I think the environment was tough, but I never felt toughness,” he says.

Samujh studied accounting at University of Durban-Westville, financially supported by his brother and mother, and scholarships for being a straight A student “which took away some of the financial pressure,” he says.

Receiving a bursary from South African energy and chemical group Sasol for his third year at university also helped. After completing articles at KPMG’s Durban office. Samujh gravitated to Johannesburg to work in the finance department of Sasol, a corporate that had a large R&D spend and was an audit client of the firm.

But the tenure proved short-lived as he “felt very much in the background” so Samujh looked elsewhere. After a first interview with Investec, the process seemed to stall, but he was hired after another five interviews in one day once it became apparent he was being courted by a rival financial institution.

So began a 21-year career at the bank in which Samujh says he was supported by mentors from who he says “I learned so much more than finance”. From roles in financial reporting to becoming head of finance for Investec’s South African operations, Samujh progressed quickly at Investec, including forging a strong bond with then CEO Stephen Kosseff, who returned to the group’s board this year.

Along the way Samujh says he became familiar with tax in the banking world, the regulatory framework and areas of clients’ work including transactions of various kinds. He also became involved with deal making for Investec. “We undertook a listing of the group (in London in 2002), disposals of key subsidiaries, a couple of acquisitions including one at the height of the financial crisis,” he says.

At the time of the GFC Samujh was financial controller of the group’s South African business, “so very much involved in preparation of financial statements and therefore interpretation of the outcomes from a group wide perspective.

“It was fascinating to watch the group’s navigation [through the GFC] and understand how we dealt with risk, how we dealt with our balance sheets, how we dealt with capital, regulators and operating geographies.

“Although not directly linked to the subprime lending crisis in the US, the economic effects were felt by South Africa and the financial institutions in South Africa,” says Samujh.

 Moving forward

Although 12 years ago, the lessons learned from the GFC had a profound impact on how Investec and peers were able to manage through the crisis of 2020, says Samujh. He says this been felt in the capital adequacy buffers put in place by financial regulators worldwide that have ensured banks have been able to withstand the tremors brought by the pandemic.

But it also reinforced the need for rigorous processes to ensure that banks could grow with an appropriate risk weighting, he says. In Investec. Samujh says he set about ensuring finance became a tighter partner to the business when he became group CFO.

“After 17 years in finance I had been exposed to the strategy of the organisation, understanding the businesses that we run and understanding their needs. I could be in any part of the organisation and understand the detail,” he says.

The onus was on growth and value creation, which led to the decision to split out the asset management arm, says Samujh.

Approaching a complex global picture in which a downbeat economic outlook is offset by the positive impacts of a global vaccine rollout, Samujh has put in place a more flexible approach to budgeting. “We redid the budgets and delivered them to the board in July and we rechecked in on October, post the half year. We’ll do that continuously,” he says.

More broadly, Samujh says the pandemic has necessitated an approach that is in tune with the continual changes to the macroeconomic outlook, to “the effect on profitability and to where as an organisation you’re heading,” he says.

It also demands a tighter relationship with shareholders and stakeholders, regulators, employees and clients. “There is no place to not be real. There is no place to not be able to execute on what you committed to. And there is no place to be complacent in terms of  adapting to meet new challenges,” he says.

This approach extends to understanding the wider impacts of the pandemic and the responsibility that organisations like Investec have to staff, especially in a crisis. “It brought back to home who we are, what we are in control of and what we are not in control of,” he says.

“It really focused on what matters when it came to our own organisation, the need to be closer to each other and to listen to each other. For example, gaining access to wifi was vitally important for some of our younger employees working from home, where many staff have to work in shared accommodation.

The sense of responsibility also extends to wider society, reflecting the challenges of Samujh’s early years. “This came through in a very simple line relating to our relationship with society: ‘We live in it, not off it,’ which resonated so strongly throughout the organisation.

“We make sure that we spend responsibly and effectively in every front that we remain involved in and also recognise gender violence and other issues that are flaring up across society. We need to be having a conversation, listening and reacting, and being real to the situation.

“In challenging times, if you remain true and respect your environment, everything else will fall into place,” he adds.