Niche bank and wealth management group Investec on Friday said its underlying franchises performed well in the five months to August 31, in spite of the challenging economic environment.
The positive trading update saw its share price tick up 2.27% to R110.11 on Friday, that was also a substantial increase on the price a year ago of R74.47.
“Our ongoing strategic execution and strong balance sheet, position us well to support our clients and achieve our financial targets,” the JSE and London-listed lender said.
Headline earnings per share was expected to increase between 6% and 12% for the first half of the 2024 financial year, at between 33.8 pence (R7.76) and 35.8p, which includes the cost of strategic actions.
Adjusted pre-tax operating profit was expected to be between £428.7 million and £449.6m from £405m in the first half of 2023.
The UK business' first half adjusted operating profit was expected to to be at least 25% higher than prior period’s £174.4m. Its Specialist Bank expected to be at least 40% higher than prior period’s 128.6m pounds.
The Southern African business' adjusted operating profit was forecast to increase by at least 5% on prior period’s £230.6m. Its Specialist Bank expected to be at least 12% higher than the prior period’s £202.9m.
Growth in pre-provision adjusted operating profit was driven by continued client acquisition, positive effects from higher global interest rates and growth in average lending books.
Group revenue growth was supported by client acquisition strategies, a higher interest rate environment and balance sheet growth, partially offset some of the strategic actions during the year.
Net interest income benefited from growth in average lending books and higher interest margin given the higher interest rate environment
Non-interest revenue from the banking and wealth and investment businesses increased despite significant economic headwinds, underpinned by increased client activity and diversity of income streams.
The cost to income ratio improved as revenue grew ahead of costs, and was expected to be below 60%.
The average rand/pound sterling exchange rate depreciated by about 19% for the five months to August 31, resulting in a big difference between reported and neutral currency performance.
Corporate actions included the combination of Investec Wealth & Investment UK with the Rathbones Group, about 300m pound share buy-backs, disposal of management companies to Investec Property Fund (IPF) and deconsolidation of IPF, restructure of The Bud Group Holdings to facilitate Investec's exit and distribution of the 15% shareholding in Ninety One in the prior year.
Investec directors said the group remained well capitalised with strong liquidity, and well positioned to help clients navigate a complex operating environment.
“We continue to make progress in the realisation of the remaining assets to facilitate our exit from The Bud Group Holdings,” the group said.