Johannesburg - Dual-listed Investec saw its share price increase 5.04 percent yesterday to a three-month high on the JSE after the group reported its profit grew 5.1 percent, despite macro uncertainty in its key operating markets.
Investec, which is also listed on the London Stock Exchange, later closed at R89.59, 0.21 percent higher on the day.
Investec reported a rise of 5.1 percent in profits before tax to £290.7 million (R5.2 billion) for the six months to September, from £276m in the prior corresponding period, while operating profit was up by 0.7 percent to £281.4m.
Diversity
The chief executive, Stephen Koseff, said: “These results show the long-term strength and diversity of our business, delivering sustainable recurring client driven income streams amid high levels of macro uncertainty.”
Total operating income, before impairment losses on loans and advances, increased by 6.1 percent to £1.05bn, while net interest income increased by 10.6 percent to £314.2m driven by strong book growth in the 2016 financial year, as well as sound levels of lending activity in the current period.
Investec said the asset management and wealth and investment businesses had benefited from higher funds under management supported by a recovery in equity markets and net inflows of £1.8bn.
Net fee and commission income increased by 14.7 percent to £608.6m, from £530.6m reported last year.
Asset management operating profit rose 16.6 percent to £82.3m, from £70.6m. The business benefited from higher average funds under management supported by a recovery in equity markets and net inflows of £1.1bn; and higher performance fees in South Africa. Funds under management amounted to £89.8bn.
Client activity
The wealth and investment business saw its operating profit rise by 14.1 percent to £43.2m; supported by higher average funds under management and net inflows of £0.7bn. Total funds under management amounted to £51.3bn.
But specialist banking operating profit decreased by 7.1 percent to £212.8m due to a decline in investment income, despite the business continuing to experience good levels of client activity supported by a deepening of the franchise.
Meanwhile, the South African business reported a decrease in operating profit by 9.2 percent, which the group said was due to the change in accounting treatment related to the assets transferred to Investec Equity Partners.
Third-party assets under management rose 16.5 percent to £141.8bn from £121.7bn at the end of March. The company declared a dividend of 10 pence a share as compared with 9.5p a year earlier.
Looking ahead, Investec said uncertainty persisted in the macro environment as the UK prepared for Brexit, the US adopted a new presidential administration and South Africa deals with economic, political and social volatility.
Richard Hasson, a fund manager at Electus Fund Managers, said Investec released a good set of results with strong growth in net interest income, fee income and customer-related trading income, as well as strong cash inflows into their asset management and wealth management businesses.
“Offsetting this good operational growth was a write-off in their Hong Kong investment portfolio, as well as a change in accounting policy in their Investec Equity Partners associate, which negatively impacted the reported profit growth.”
He added: “The quality of the lending book remains good with a low credit loss ratio. The stronger growth in capital light activities such as asset management and wealth management ahead of capital heavy banking businesses has resulted in an improving trend in the quality of earnings.”
BUSINESS REPORT