Investec has warned exposure to Poundland owner Steinhoff could hit profits

Investec has warned its exposure to troubled South African retail giant Steinhoff could knock as much as three per cent off its profit.

In a statement aimed at quelling fears from investors, the lender said its exposure to scandal-hit Steinhoff, whose shares collapsed last week after its chief executive resigned, represents a “small portion” of its balance sheet.

It added its exposure is largely to Steinhoff Africa’s subsidiaries, rather than the company itself.

“The exposures to Steinhoff Africa largely comprise lending exposures and overnight facilities, and are secured by guarantees from certain of the Steinhoff Africa and STAR subsidiaries,” it said.

However, although it said it was not expecting to suffer any losses on credit exposures, it added that derivative exposures linked to the Steinhoff share price could hit its balance sheet.

“Investec… does have certain derivative exposures linked to the Steinhoff share price, where a trading loss could materialise,” it said.

“The loss could be zero but the maximum potential loss could be approximately three per cent of the Investec group’s post-tax operating profit.”

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Shares in Steinhoff, which owns Poundland in the UK, fell more than 90 per cent last week after chief executive Markus Jooste resigned amid suggestions of “accounting irregularities”.

On Friday, credit ratings agency Moody’s downgraded the company, saying the irregularities “call into question the quality of oversight and governance at Steinhoff”.

Read more: Owner of Poundland’s shares lose 90 per cent this week after another plunge