Saturday 18 November 2017

'Markets have fallen off the cliff - it can become a self-fulfilling philosophy'

Specialist bank Investec is confident, and growing in the Irish market with the opening of a Cork office. Executive Ciaran Whelan tells Colm Kelpie there's an element of investor panic in the current market jitters

‘We are nimble ... we do have specialist skills,’ says Ciaran Whelan, pictured at the recent opening of Investec’s office in Cork. Photo: Provision
‘We are nimble ... we do have specialist skills,’ says Ciaran Whelan, pictured at the recent opening of Investec’s office in Cork. Photo: Provision
Colm Kelpie

Colm Kelpie

Note to the folks in Investec: Ciaran Whelan, your Global Head of Specialist Bank, doesn't like to be referred to as "Irish-born". The Wexford native took umbrage at the description in the bank's recent announcement highlighting the opening of Investec's Munster office.

As far as he's concerned, he's Irish. Describing him as Irish-born suggests he was whisked away after birth to a foreign land where he spent the rest of his days, he says.

"I felt a bit aggrieved by that," he confesses to the Irish Independent.

"I was born and raised in Ireland and I lived in Ireland until I was 23. I left at the age of 23 in 1986 because of work, so I regard myself as Irish first and foremost.

"I was quite upset about it when I saw it. It was as if I was born there and left before I could walk. I was educated there, my family still live there. My mum lives in Wexford and I have two sisters there. I come over quite a bit."

So, Investec bosses, when you're about to open your next office in Ireland, remember this warning.

Because for Whelan, further expansion is a possibility. But not quite yet.

At present, Investec's focus outside of Dublin is going to be in Cork, where it has just opened its first regional operation outside of the capital, employing 10.

The Munster office will be staffed by a local team adding to the 240-strong Investec team at its Dublin office - a headcount which has doubled in the last few years.

"Our initial plan will be Cork and we'll see how that goes. In future, some of the other cities, Galway and Limerick, but for now we will focus on Cork and see how we can make that a success," Whelan says.

The specialist bank and wealth and investment manager is moving into a development at the One Albert Quay site, and is joining fellow tenants Tyco and PriceWaterhouseCoopers in committing to the office block. Whelan is keen to point out that Investec has been significantly boosting its presence in Ireland in recent years, growing its client base and staff numbers.

The move outside of the capital to the south-west is an obvious one for the company, which points out that the second city and its surroundings make a sizeable contribution to GDP.

"There is a lot of activity going on there at the moment. There are a lot of international firms there," Whelan says.

"But there is also a huge amount of home grown firms, a lot of entrepreneurs are living there, so we see it as a good extension of our business in Ireland and our business in Ireland is mainly on the corporates, treasury solutions, corporate finance and wealth management side," he adds.

"We will be looking at the extension of all our business activities that are supported out of Dublin, which again is corporate treasury solutions to small and medium-sized enterprises, and looking at wealth management. We manage about €2bn worth of assets in Ireland.

"We bought NBC stockbrokers in 2012, so we're a sizeable institution here and we would hope to be able to grow those assets under management over the next few years."

Whelan is full of praise for Ireland's recovery, pointing to the rapid economic growth rates and reduction in the numbers on the dole.

But amid market turbulence and fears over the health of the global economy, it feels like Ireland's in a little bubble of its own. Consumer and business confidence is up at home, but international market volatility, fears about a slowdown in China and the imminent prospect of a British vote to pull out of the European Union is weighing on sentiment elsewhere.

"I really struggle when I open the newspapers and you see varying analysis from different people, some positive, some negative, but at opposite ends of the scale," Whelan says,

"So it's very difficult to try and work out what's going on and why the markets have taken such a dramatic turn to the negative since late last year where the raising of interest rates in the US was a signal that things were going well and that inflation was on the up.

"And then since January, markets have just fallen off the cliff.

"It can become a self-fulfilling prophecy. We believe in the highs and we believe in the lows of the markets at times. But sometimes investors panic and then they start to think afterwards. I think that's probably what's going on at the minute with the sell-off."

But Whelan says volatility brings with it opportunity for some. "Particularly in firms like ours," he says. "We are nimble, we do have specialist skills in many areas so when volatility exists… there are opportunities that can come. I'm cautious, but there's no point in reacting in a panicked way to what's happening."

Whelan says Investec's clients tend to be high net worth individuals and entrepreneurs whom he describes as skilled at being able to ride out the market ups and downs. "There are possibilities of buying businesses, combining with their own, buying up troubled assets, and that's where we can assist," he says. So does Investec prefer economies that are on the down, where opportunities can be snapped up at a good price, or the up?

"We would always prefer to be in economies that are doing well. We have a very big wealth management and asset management business that accounts for about 32pc of our group's profits. They are very exposed to markets and they earn more money in rising markets than falling markets. From a banking point of view, we see good opportunities in Ireland."

That sense of panic, that sense of uncertainty and volatility looks set to continue internationally for the coming months, at least as far as sterling's concerned, thanks to the upcoming 'Brexit' vote.

The pound took a battering against the dollar this week in the aftermath of Boris Johnson's support for the leave campaign, and has been weakening since November against the euro.

Companies are often asked if they're planning for the possibility of a British withdrawal. But is that even possible given the extent of the unknowns?

"It's difficult to make concrete plans," Whelan says. "The sooner they [the UK] get it over with, the better, but it can only bring certainty if they vote to stay in. But if they vote to go out, it raises all sorts of other questions around what does it mean and how can you go about it.

"It's very difficult to contingency plan. We look at possible scenarios as to what can happen. Our business is a UK business and that's where we're looking to grow. We're dependent on a strong economy in the UK, which looks reasonably strong.

"But even if they vote to go out, how do you implement it? It would be exceptionally difficult. You'd have to renegotiate trade contacts, and those can take a long time to do. The whole issue of borders and visas. It's creating uncertainty, but I'm not sure how it could be practically implemented and therefore what it means.

He says a UK outside of the EU would lead to further weakness in sterling, which hit a seven year low against the dollar this week, and that Britain would have its own monetary policies entirely divorced from Europe.

Between Brexit, the US election and tomorrow's vote here, political uncertainty is dominating the news agenda.

Although he was quick to emphasis his Irishness, Whelan seems to take an almost outsider's view of the politics here. "What's interesting is that Ireland is strange in the sense that the Fine Gael government posed the austerity measures much to the outcry from certain parts of the economy. But they're probably going to get voted back in. They're probably the only austerity party in Europe who's getting strong support."

If anything, it's what's happening across the Atlantic that seems to be engaging him more.

"Who would ever have thought it [US election run] would go the way it is going," he says.

Which would Investec prefer - a Trump or Sanders White House?

"I think I would get into trouble by making predictions like that. If people get in that are reasonable and commercial rather than being completely radical, then we would be happy."

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