Financial services group Investec has delivered what it has characterised as “resilient results” in a challenging first-half environment and expects revenue to be supported by book growth in the second half of the year.
Revenue declined 0.6% to £1.096bn in the six months ended September, though this was up 2.4% when expressed in rand.
The group said revenue was supported by ongoing client acquisition, client activity, growth in average lending portfolios, and continued net inflows in discretionary and annuity funds under management (FUM).
Headline earnings per share (HEPS) were flat at 36.7p from 36.6p a year ago. The group declared an interim dividend of 17.5p per share, compared with 16.5p a year ago.
Net interest income benefited from growth in average lending books and lower cost of funds in Southern Africa as a result of the group’s strategy to optimise the funding pool. This was offset by the effect of lower average interest rates.
Non-interest revenue growth reflected a strong increase in fee income generated by the UK banking business and higher annuity fees from the SA wealth and investment business.
Trading income and investment income are behind the comparative period’s, which benefited from the positive sentiment that followed the government of national unity formation in South Africa, it said. This was augmented by an increase in the group’s share of post-tax profits from associates.
Pre-provision adjusted operating profit decreased by 2.6% to £527.4m. The group experienced good levels of lending origination with strong fee generation, which was counterbalanced by the negative effect of declining interest rates and lower income from the South African group’s investments portfolio.
The credit loss ratio on core loans was 35 basis points compared with 42 bps a year ago, within the group’s through-the-cycle range of 25 bps to 45 bps.
Expected credit loss impairment charges decreased to £59.3m from £66.9m a year ago. Overall credit quality remained strong, with no evidence of trend deterioration, it said.
Return on equity was 13.6%, within the group’s medium-term 13%-17% target range.
Funds under management in the Southern African wealth business increased by 13.4% to £26.5bn, while associate Rathbones reported funds under management and administration of £113bn.
“The group delivered resilient results in a challenging macroeconomic environment characterised by geopolitical uncertainty and ongoing market volatility,” said CEO Fani Titi.
“Our commitment to supporting our clients and the diverse nature of our revenue streams underpinned our financial performance,” he added.
Over the past 12 months, Investec has returned about £376m to shareholders, equivalent to 7.4% of the group’s average market capitalisation, through ordinary dividends and share buybacks.
“We are progressing well with our strategy to build scale and leverage existing client franchises, allocate capital optimally and drive investment to enhance our proposition. We have a clear path to achieving an incremental return on equity of about 200 bps by financial year 2030,” he said.
Titi said the global macroeconomic environment continued to face heightened uncertainty, creating volatility in economic forecasts and financial markets.
“We are continuously monitoring the evolving environment.”
Full-year revenue is expected to be supported by “book growth, ongoing client activity and continued success in our client acquisition and entrenchment strategies, partly offset by the impact of lower average interest rates,” he said.
“We expect group performance in the second half of the financial year to be broadly in line with the current period,” he said.
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