Johannesburg - South African bank Investec warned on Tuesday its first-half earnings may fall as much as 10 percent, hit by a loss at its struggling Australia unit where it is cutting jobs and scaling back business.
Investec, which reaped 11 percent of its revenue last year from Australia, said it was restructuring the unit to focus on private banking, corporate advisory and property funds and would cut 70 people, or 15 percent of its Australian staff.
The investment bank and asset manager said it was hobbled by poor deal flow in the United Kingdom. Its shares fell more than 2 percent.
“There is practically no growth. The market was pricing in at least some modest improvement in operating performance,” said Khaya Gobodo, portfolio manager at asset manager Afena Capital.
“If Australia was bad but other bits were very good, we would be fine. Australia is a bit of a surprise and the fact that the UK has gone backwards is also not good.”
The bank took a $9 million hit on one loan in Australia, chief executive Stephen Koseff said. Koseff has despatched his head of private banking, Ciaran Whelan, to Australia as interim chief after the departure of David Clarke, which was announced in April.
“We know we have to get our costs and revenue aligned, we have to get shareholder returns up,” Koseff said at an investor briefing.
“There are drags from legacy and it takes a long time to clear that legacy, you need a booming economy and the economy is still limping.”
Investec, which reports in pounds because is also listed in London, said in a trading update that lending fell 6 percent to 17.4 billion pounds in the five months to end-August.
Assets under management declined 4 percent to 106.2 billion pounds.
Impairments are likely to fall by 25 percent, it said.
Its shares fell as much as 6.4 percent in Johannesburg before recovering some losses.
The stock was down 2.1 percent at 67.63 rand at 16:14 SA time.
The stock, which is up 14 percent this year, has outperformed bigger rivals such as Standard Bank and FirstRand, even as Investec has taken a bigger hit from the weak global economy. - Reuters