Johannesburg - Investment bank and asset manager Investec
[JSE:INL] said on Thursday it expects flat first-half earnings, following
declining investment and trading income and despite a recovery in its home
loans business in Australia.
Investec has been the worst hit of major South African banks
by the global economic meltdown, given its exposure to Europe and Australia.
Bigger rivals - Standard Bank Group [JSE:SBK], FirstRand
[JSE:FSR] and Nedbank Group [JSE:NED] - have reported profit increases but No.
3 bank Absa Group [JSE:ASA] saw profit shrink in the first half as a result of
bad mortgages.
Dual-listed Investec said in a trading update it expects
pre-tax operating profit for the six months to end-September to come in line
with last year.
Lower investment and trading income are expected to cut
earnings in the United Kingdom, but Investec's South African business is seen
showing an improvement in local currency terms.
Investec said lending fell 3% to £17.7bn, which caused a
marginal decline in net interest income.
The lender said its Australian unit was profitable once more
as impairments, or bad debt costs, fell away.
The $5.7bn bank has turned its focus to wealth management
and other fee-earning businesses to compensate for low credit demand and as
tougher regulations demand more capital.
It is trading at a trailing price earnings ratio of 13.2
times, compared with a peer median of 11.7 times. Profitability is also lagging
that of counterparts with return on assets at 0.5% and an average of 1.9% for
competitors.
Investec shares are down 0.3% at 08:19 GMT, but have gained
18% so far this year, compared with an 10% rise in Johannesburg’s index of blue
chips.
*Follow Fin24 on Twitter, Facebook,
Google+ and Pinterest.