Investec profit declines in tough climate
The London and JSE-listed Investec said the operating profit in September had declined to £373.6 million (R7.14billion), 1.7percent less than the prior period citing a tough operating environment.
Investec joint chief executive Fani Titi told investors during the company’s results presentation in Johannesburg that the weak performance of the UK banking and wealth management sectors, the ongoing Brexit uncertainty and South Africa's lacklustre economic growth had weighed heavily on the group. He said the South African economy was growing at under 1percent and there was a lack of business confidence.
“In the UK Brexit has meant that private and corporate clients are sitting on their hands and sitting out the uncertainty,” Titi told investors.
The group said the return on equity was 13.1percent from 14.2percent in 2018, and it had maintained the cost to income ratio at 67.3percent.
“We are committed to improving these ratios. The Bank and Wealth business remains fully committed to delivering its 2022 financial year targets,” said Titi.
The group said an increase in technology spending to support growth and higher than expected regulatory levies in the UK had resulted in a 10.8percent decline in adjusted operating profit in its Wealth & Investment division.
The UK Specialist Bank’s operating profit fell 18.9percent on lower investment banking fees in weak market conditions, it said.
However, the performance of the South African Specialist Bank unit was encouraging with the adjusted operating profit increasing by 8.5percent in rand terms.
The group said the demerger process was on track to take place in the first quarter of 2020, subject to shareholder approvals.
The group, whose business is focused on high net worth clients, said it had focused on simplifying its Bank and Wealth portfolio and had closed the Click & Invest operations, together with its Irish Wealth & Investment business. It has also restructured its Irish branch, and has sold the UK Property Fund.
Joint chief executive Henrik du Toit said the company's commitment to stakeholder value including shareholders should not be questioned.
“We leave you hopefully with two independent businesses poised for growth. Every action we have taken when we took over the leadership of the business is informed by that to put the business on the right path,” said Du Toit.
On Tuesday Investec announced its new name and branding, Ninety One, which will be rolled out following completion of the firm’s demerger from Investec Group.
Ron Kiplin, an investment analyst at Cratos Capital, said while the group’s return on investment had been underwhelming, he was confident the demerger would boost was a positive move.
Investec shares closed 1.40percent lower at R83.13 on the JSE yesterday.