Investec expects to report first-half earnings in line with the previous year, notwithstanding the challenging macroeconomic backdrop and market volatility that have characterised the period to date.
The group said on Friday that for the six months to end-September is expected adjusted earnings per share of 38.7p-41.5p from 39.5p a year ago, while headline earnings per share (HEPS) were expected to be 35.2p-38.0p from 36.6p before.
Pre-provision adjusted operating profit was expected to be between £509.4m and £540.3m from £541.6m, the group said.
The credit-loss ratio is expected to be within the through-the-cycle range of 25-45 basis points (bps).
Adjusted operating profit before tax is seen between £451m and £481.8m from £474.7m.
Group return on equity is expected to be between 13% and 14%, within the group’s medium-term target range of 13%-17%.
Investec said revenue was supported by increased activity levels, higher average advances and positive net inflows in discretionary and annuity funds under management (FUM). This was counterbalanced by the negative effect of lower average interest rates and the reduced income from the group’s investments portfolio.
Net interest income reflects growth in average lending books, and success in its strategic execution to optimise the funding mix in Southern Africa. This was offset by the endowment effect of declining interest rates, it said.
Non-interest revenue (NIR) growth was underpinned by strong fee generation from the group’s banking businesses, as well as higher annuity fees from its SA wealth and investment business.
Southern African investment and trading income were behind the previous period, which benefited from the positive sentiment after the formation of the government of national unity (GNU). NIR benefited from growth in the group’s share of Investec associate Rathbones’ post-tax underlying profit attributable to shareholders.
Within specialist banking, core loans increased by 4.7% annualised to £33bn and increased by 5.5% in neutral currency in the five months to end-August, driven by growth across the corporate lending books, as well as private client lending in both geographies.
FUM in the Southern African wealth business increased by 7.8% to £25.2bn. Rathbones reported FUM and administration of £109bn at the end of June.
“Our solid performance and strong capital generation have enabled us to continue supporting our clients while accelerating investment in identified growth initiatives,” the group said.
It continued to make progress on its strategic objectives, notwithstanding the challenging macroeconomic backdrop and market volatility.
“We are on track with our strategy to build scale, leverage existing client franchises and execute plans to enhance our proposition,” it said.
As part of capital management, the group has repurchased about R1.1bn of the R2.5bn share buyback programme announced in May.
“We remain committed to advancing returns towards the upper end of our target range by [the 2030 financial year],” it said.
The group will release interim results on November 20.
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