Investec expects to report an increase of as much as 12% in its adjusted operating profit as its diversified business model and strong balance sheet allowed it to achieve results within its financial target ranges.
The group said in a statement on Thursday that for the year ending March, it expects to report pre-provision adjusted operating profit of £1.013bn to £1.076bn — 5%-12% higher than the previous year.
Adjusted earnings per share are seen between 75p and 81.2p compared with 78.1p a year ago and headline earnings per share at between 67.2p and 73.5p from 72.9p before.
Group adjusted operating profit before tax is expected to rise to between £888m and £956m from £884.5m before.
The Southern African business’s adjusted operating profit is expected to be at least 5% higher than the previous year in rand. Specialist Bank’s adjusted operating profit is expected to be 2%-7% higher.
The credit loss ratio is expected to remain around the lower end of the through-the-cycle range of 15bps to 35bps, reflecting lower recoveries from previously written off exposures relative to prior year.
The Southern African business ROE is expected to be between 17.7% and 18.7%, within the 16%-20% medium-term target range.
In its UK business, including Rathbones Group, adjusted operating profit is expected to be 4% behind to 4% ahead of the prior year.
“We expect to report a credit loss ratio around the upper end of the previously guided range of 50bps to 60bps, driven by certain specific impairments,” Investec said.
Group return on equity is expected to be between 13% and 14%, within the group’s medium-term target range of 13%-17%.
For the year to date, revenue growth was supported by continued client acquisition, strong net inflows in discretionary and annuity funds under management in the current and prior periods and higher average advances.
Net interest income benefited from the growth in average lending books and lower cost of funds in Southern Africa, partly offset by the effects of deposit repricing in the UK.
Non-interest revenue benefited from year-to-date improvement in fee-generating activities within the group's banking businesses and strong fees from the SA Wealth & Investment business.
Increased market liquidity and the upward trending market resulted in higher trading income from client flow, but this was partially offset by lower risk management gains in hedging the remaining and significantly reduced financial products run down book in the UK
Investec’s share of Rathbones reported post-tax underlying profit attributable to shareholders for their year ended December is £69.1m.
The group will release results on May 22.
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