Fin24

Investec full-year earnings drop

2012-05-17 08:56

Johannesburg - South African investment bank and asset manager Investec [JSE:INL] paid for its exposure to struggling mature economies on Thursday, posting a 26% drop in annual earnings due to bad loans in Australia and weak investment bank results.

Investec, which is also listed in London, said impairments in Australia more than doubled to £67.9m.

Its investment income, meanwhile, declined by more than 30%, hit by poorly performing global markets.

"There are certain things that they have done wrong in the past and that's now reflective in the results," said Safs Narker, a financial analyst at Momentum Investments.

"They got involved in Australia and the UK in frothy property deals and now they are feeling the pain of having to take writedowns in those markets. It's the legacy book coming back to sort of haunt them."

Investec's credit loss charge declined to 1.12% from 1.27% a year earlier, a slower pace than hoped, pointing to the need for further writedowns, analysts said.

Bigger South African lenders such as Standard Bank Group [JSE:SBK], Absa Group [JSE:ASA], and Nedbank Group [JSE:NED] have all reported earnings growth for the past year as credit picks up in their key markets in Africa and rebounding economies boost loan repayments.

Investec warned in March that adjusted and headline earnings per share would decline as much as 27%. Diluted adjusted earnings per share totaled 30.1 pence in the year through March, compared with 40.6 pence a year earlier.

Net interest income, a measure of earnings from lending, totaled £699m up from £681.47m. Fees and commissions jumped over 12% to £884.2m.

Impairments, or bad debt costs, rose 2.2% to £325.1m.

Investec will pay shareholders a 17 pence dividend, unchanged from the previous year, and one analyst, who declined to be identified said the maintained dividend payout was a welcome surprise. Investors had expected a cut given earnings were down significantly

Shares of Investec are down 2.6% at 09:54 GMT, undereperforming a 1.18% drop in Johannesburg's Top 40 - (Tradeable) [JSE:J200] index of blue chips.