Investec has reported a steady first-half performance and expects adjusted earnings per share to be similar to the previous period and in line with its guidance.
The niche private banking and wealth management group said on Friday it expects adjusted earnings per share (EPS) of 37.2p-40.2p for the six months ending September, which is 4% behind to 4% ahead of the previous year’s 38.7p.
The group said revenue momentum from its diversified client franchises continued, though the initial months of the period were characterised by low levels of activity ahead of elections in both its anchor geographies.
The latter part of this period has seen a more positive economic outlook reflecting increasing certainty on global interest rate cuts.
Its first-half pre-provision adjusted operating profit is expected to come in at £520m-£550m, 6.7%-12.9% ahead of the prior period.
Headline EPS are seen at 35.3p-38.2p compared with 36.9p before, which includes the cost of executing strategic actions, and the amortisation of intangible assets associated with the Rathbones combination in the current period.
It expects the credit loss ratio to be about the upper end of the through-the-cycle range of 25-45 bps. The overall credit quality remained strong, in line with the position at the end of the 2024 financial year, with no evidence of trend deterioration.
Cost to income ratio is expected to be below the 53.3% reported in the prior period, benefiting from revenue growing ahead of costs.
Group adjusted operating profit before tax is expected to be £450m-£482m.
The group’s Southern African business is expected to report adjusted operating profit at least 15% higher than a year ago in rand. Specialist Bank’s adjusted operating profit is expected to be at least 11% ahead of the prior period.
The UK business, including Rathbones Group, is likely to report adjusted operating profit 5%-11% behind the prior period. Specialist Bank’s adjusted operating profit is expected to be flat to 9% lower.
Group return on equity will be 13%-14%, within the upgraded medium-term target range of 13%-17%.
Investec said revenue growth was supported by balance sheet growth, increasing contribution from its various growth initiatives and the elevated interest rate environment.
Net interest income benefited from the growth in average lending books and higher average interest rates which was partly offset by the effects of deposit repricing in the UK. Southern Africa also benefited from lower cost of funds as the group implemented strategies to optimise the funding pool.
Non-interest revenue (NIR) growth reflects the diversified nature of the group’s business model, it said. Continued client acquisition and higher activity levels underpinned NIR growth.
The positive net inflows into SA Wealth & Investment discretionary funds under management in the prior year and the current period contributed to the NIR growth.
Trading income was behind the prior period due to reduced client flows in corporate foreign exchange and interest rate trading desks as well as lower risk management gains in hedging the remaining and significantly reduced financial products run down book in the UK.
Equity trading income arising from client flow was strong as markets trended upwards, it said.
The consolidation of Capitalmind also supported NIR growth as it became a group subsidiary in the second quarter. Investment income contributed to the revenue growth given the improving global markets backdrop, it said.
For the five-months ended August, Specialist Banking reported core loans increased by 6.1% annualised to £31.7bn, driven by private client lending in both geographies and corporate client lending in the UK.
Funds under management in Southern Africa increased by 10.7% to £23.2bn, while Rathbones Group, a 41.25% held Investec associate, reported funds under management and administration of £108.9bn at end-June.
The group will release interim results on November 21.
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