Investec’S first-half profit fell 5 percent amid loan impairments, rising costs and a weaker rand

, the bank and money manager said yesterday.

Net income dropped to £168.5 million (R2.38 billion) in the six months to September from £179m a year earlier, the London- and Johannesburg-based bank said in a statement yesterday. Adjusted earnings a share fell to 19.7p from 20.6p last year.

The operating environment was expected to be “challenging” in the next six months, chief executive Stephen Koseff said. The company incurred £115.6m in impairments on loans and advances in the period, while interest income fell 4 percent to £1.13 billion. Investec has been hurt by a stagnant UK economy and impaired mortgages in Australia, while a series of acquisitions have increased the company’s cost base.

“The results are all about bad debt impairments and there is no top line growth,” Sanlam Investment Management head of equities Patrice Rassou said yesterday. “They have not cut headcount aggressively, which could be the next area of focus.”

Investec’s share price was little changed at R52.37 as of 11.52am on the JSE, but it closed 1.57 percent up at R53.16 yesterday, having peaked at R54.87 earlier on.

Investec’s South African share price gained 18 percent this year, compared with the 19 percent average increase of the six-member JSE banks index.

Having made three all-stock acquisitions in Britain in a decade, including brokerage Evolution Group and investment manager Rensburg Sheppards, Investec’s return on equity fell below its South African peers. First-half return on equity was 9.3 percent, Koseff said.

“Driving the growth in return on equity remains our main focus,” he added. Investec planned to improve efficiency by eliminating duplication and taking on more clients, Koseff said.

The company said it would “consolidate gains” in asset management and “broaden the distribution of the wealth management offering”.

Investec Asset Management recorded net inflows of £1.5bn in the period, taking total funds under management to £62.4bn. That is less than the £65.6bn the company said it managed a year earlier.

Investec’s reported earnings have shrunk as the rand declined against the pound. South Africa’s currency has lost 11 percent against sterling this year, dragged down by a slowing economy and slump in mining output.