Specialist bank and wealth manager Investec has flagged a rise in profit despite a tough economic environment, the weaker rand against the pound sterling and the credit losses being at the higher end of its range.
The company listed in Johannesburg and London said in a trading update on Friday that headline earnings per share (HEPS), a common profit measure in SA that excludes certain items, will advance 6%-12% to 33.8p-35.8p and total adjusted operating profit before tax 5.9%-11% to £428.7m-£449.6m (R9.9-trillion to R10.4-trillion) in the six months to end-September.
Some of the drivers behind the latest performance were new clients, the upside for banks from higher interest rates and the growth in its average lending books.
Breaking it down by region, Investec believes the adjusted operating profit in SA will grow by “at least” 5% from the R4.6bn reported in the same period last year and 25% for the UK business from last year’s £174.4m.
The group, started in 1974, offers various services including private banking, wealth management, corporate and investment banking, and investment services in two principal markets. Its two biggest markets are SA and the UK.
The rand was down about 19% against the pound sterling in the five months to end-August covered in the trading statement.
Investec foresees that its credit loss ratio (CLR), which calculates the amount of loan losses it experiences relative to its total loans, will be 0.25%-0.35% and 0.2%-0.3% in SA.
“The expected credit loss experience to date reflects the higher interest rate and inflationary environment. We have seen idiosyncratic client stresses with no evidence of trend deterioration in the overall credit quality of our books,” the company said.
During the five months to end-August, the funds under management of Investec’s wealth and investment business grew 1.3% to £61.3bn.
“The positive net inflows of £325m from discretionary funds under management reflect the uncertain economic backdrop which is characterised by the cost of living crisis and higher interest rates which negatively impacted discretionary inflows from our UK business,” the company said.
“In the Southern African business, net discretionary inflows of R7.5bn were partly offset by net outflows of R1.9bn in non-discretionary funds under management.”
The interim results are expected to be published on November 16.
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