News Column

Investec Reports Pretax Profit Increase But Rand Weakness Hurts

May 22, 2014

Samuel Agini

LONDON (Alliance News) - Investec PLC Thursday reported an increase in pretax profit, buoyed by its wealth and investment business's performance, though the group continued to suffer from the depreciation of the South African rand against sterling.

In a statement, the specialist bank and asset manager said it made a GBP425.4 million pretax profit in the year ended March 31, compared with GBP386.5 million a year earlier. Net interest income fell to GBP651.7 million, from GBP703.6 million, while fee and commission income was broadly flat at GBP1.1 billion. Impairment losses on loans and advances fell to GBP166.2 million from GBP251.0 million, with drops in the UK and South Africa more than offsetting an increase in Australia. Operating costs were flat at GBP1.3 billion, due to an increase in growth in the asset management and wealth management businesses.

Asset management's operating profit increased by 2.4% to GBP143.8 million, benefiting from higher average funds under management and net inflows of GBP2.6 billion, Investec said. Total funds under management amounted to GBP68.0 billion, slightly down from GBP69.8 billion a year earlier.

The wealth and investment business's operating profit increased by 30% to GBP66.1 million, supported by higher average funds under management, net inflows of GBP1.4 billion, and improved operating margins. Total funds under management amounted to GBP41.5 billion, an increase over the previous year's GBP40.4 billion.

Specialist banking operating profit increased by 2.8% to GBP241.9 million. The South African side to the business was boosted by growth in net fee and commission income driven largely by an increase in corporate and property fund management fees, Investec said, adding that the unlisted private equity portfolio performed well. Investec said it continued to grow its private banking business, and the investment and trading property portfolios delivered a "sound" performance. While the ongoing business in the UK reported higher operating profit, its legacy business there was loss-making.

Investec has been simplifying and reshaping its business through the pending sale of its professional finance and asset finance and leasing businesses in Australia, the sale of its trust businesses, the sale of lease direct finance, while it has also been mulling over a potential sale of its Kensington business. Meanwhile investment has been made in the asset management and wealth management businesses' distribution platforms, IT and online infrastructure, and experienced portfolio fund managers with the aim of supporting future revenue growth.

In specialist banking, Investec has been winding down legacy portfolios and has been focusing on efficiency and balance sheet optimisation.

"We have made significant strides to reshape and simplify the group to focus on our core businesses with the restructuring and sale of part of our Australian businesses, the sale of our trust businesses, lease direct and strong interest in Kensington," Stephen Koseff, chief executive, said in a statement.

"We are now a very different looking business with a lean, well capitalised, focused specialist bank sitting alongside our strong asset management and wealth and investment businesses," Koseff added.

Managing Director Bernard Kantor said that Investec will continue to take action wherever necessary to ensure that the group and its shareholders benefit from strengthening global economies.

"Strategically, we are now looking at how best to redeploy capital to improve returns to shareholders released through the pending sale of the Australian businesses and the potential sale of Kensington," Kantor said in a statement.

Investec increased its full-year dividend to 19.0 pence, from 18.0 pence.

Investec shares were Thursday quoted at 512.50 pence, down 0.3%.

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Source: Alliance News

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