Investec will report a solid financial performance for the year to March 31, based on diversified revenue streams and the success of its client acquisition strategies.
The international bank and wealth manager in the UK and South Africa said in a trading statement on Friday that the average rand/pound exchange rate depreciated by about 15% for the 11 months to February 2024, resulting in a big difference between reported and neutral currency performance.
In addition, the comparability of the results with a year before was affected by corporate actions.
These included the merger of Investec Wealth & Investment (UK) (IW&I) with Rathbone Group, R6.7 billion share buy-backs to optimise capital in South Africa, disposal of property management companies to Investec Property Fund (IPF), the restructure of Bud Group Holdings to facilitate Investec’s exit, and the distribution of the 15% shareholding in Ninety One in the prior year.
“Successful strategic execution since the 2019 capital markets day has allowed the group to support clients and achieve the 2024 and medium-term financial objectives,” chief executive Fani Titi and chairman Philip Hourquebie said in the statement.
Investec’s adjusted earnings a share for the 2024 financial year were expected to be between 76 pence (R18) and 80p, or 10% to 16% ahead of the prior year.
Basic earnings a share were expected to be between 102.9p and 106.8p, or 19.9% to 24.5% ahead of the prior year. Headline earnings a share were expected to be between 70 pence and 74 pence, or 4.8% to 10.6% ahead.
In the UK, including Rathbones Group, adjusted operating profit was expected to be at least 15% higher than the prior year. Specialist Bank expected to be at least 30% higher than prior year’s £,303.4 million, with the guidance incorporating a provision for the potential impact of the recently announced Financial Conduct Authority (FCA) review into past motor finance commission arrangements and sales
The Southern African business' adjusted operating profit was expected to be at least 10% ahead of prior year’s R8.98bn. Specialist Bank expected to be at least 5% higher than prior year’s R8.67bn.
Revenue growth was supported by balance sheet growth, progress in incremental growth strategies and a rising interest rate environment.
Net interest income benefited from growth in average lending books and higher average interest rates. Non-interest revenue (NIR) growth reflected the diversified nature of the business model.
Continued client acquisition, improved client activity levels and higher trading income underpinned NIR growth. The first-time consolidation of Capitalmind as the group sought to extend into continental Europe, also supported NIR growth.
The cost to income ratio was in line with the first half of the year, as revenue grew ahead of costs. A credit loss ratio around the mid-point of the through-the-cycle (TTC) range of 25bps to 35bps was expected.
In South Africa, the expected credit losses (ECLs) benefited from recoveries from previously written off exposures and the credit loss ratio was expected to be below the 8bps reported in the interim results.
The UK was expected to report a credit loss ratio within the guided range of 50 basis points (bps) to 60bps.
“There has been no evidence of trend deterioration in the overall credit quality of our lending books,” directors said.
The full year results were expected to be released on May 23, 2024.
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