Social, economic impact of Covid-19 pandemic takes toll on Investec
The group reported a 16.8percent decline in adjusted operating profit to £608.9m, down from £731.9m, while adjusted operating profit from continuing operations of £419.2m was 24.1percent lower compared with £552.5m reported to last year.
Its adjusted earnings per share (Eps) declined by 23.6percent to 46.5pence a share and the group said, in light of regulatory guidance provided to banks in both South Africa and the UK, the board had decided not to declare a final ordinary dividend.
This resulted in the full year dividend of 11p an ordinary share, down from last year’s 24.5p. The group said the financial year was characterised by weak economic fundamentals like Brexit-related uncertainties in the UK, geopolitical tensions and persistent economic weakness in South Africa.
The conditions worsened as a result of the Covid-19-related dislocation in global markets during the last quarter, impacting its trading income, investment income through fair value adjustments and expected credit loss charges.
Chief executive Fani Titi said in the course of the past two months, the social and economic impact of the pandemic on their customers and the markets had affected the performance of the group.
“Earnings were characterised by growth in client-related revenues and much tighter cost containment. This was more than offset by significantly lower investment and trading revenues, and higher expected credit loss charges given the economic backdrop,” Titi said.
However, Investec said its client franchises showed resilience during the period despite the core loans remaining broadly flat.
In specialist banking, the South African business generated adjusted operating profit of £276.4m, a decline of 10.9percent while in the UK, the division reported that adjusted operating profit declined by 44.3percent to £106.7m.
In the wealth and investment, the group said net inflows and higher average assets under management supported stable revenue. As a result the South African adjusted operating profit increased by 2.3percent to £26.8m while in the UK adjusted operating profit declined by 10.8percent to £63m.
Titi said the outlook remained fluid and difficult to forecast with the Covid-19 pandemic uncertainty.
“We expect the year ahead to be challenging as the economic recovery from the devastating effects of Covid-19 is likely to be protracted. Client activity is likely to be muted,” he said.