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Johannesburg - A major slide in the operating profit of Investec's private client activities has weighed on the dual-listed banking group's earnings.
According to interim results for the six months to end-September reported on Thursday, operating profit decreased by 10.7% to £216m.
Operating profit contributions from private client activities decreased by 62.4% to £28.7m, while the asset management business of the group saw its profit off 14.1% to £28.9m. The bank attributed the private client activities decline to weak credit markets and an increase in bad debts.
The private client lending book increased by 8.8% to £12.1bn, while the retail deposit book grew by 25.8% to £9.7bn. This has been part of Investec's strategy to bolster retail deposits as part of its business model. Group CEO Stephen Koseff told investors that Investec planned to grow its loan portfolio selectively, diversify its deposit base and shift emphasis to increasing the proportion of its non-lending revenue base.
Total expenses increased by 3.2% to £433.5m, with the final dividend being maintained at 8 pence per share.
"Investec has maintained its focus on managing risk, building capital and preserving liquidity," said Koseff in commentary accompanying the results.
Diversification pays off
Koseff said: "This, together with the group's geographical and operational diversity, has delivered a satisfactory first-half performance, significantly ahead of the second half of the 2009 financial year."
Koseff placed particular emphasis on the fact that Investec was profitable in all its trading regions, including South Africa, the UK and Australia.
Banking in the UK has been particularly hard hit, with a number of groups being bailed out by the government. Investec, which received no government support, said it saw this as an opportunity. It was aiming to take advantage of a "much changed banking landscape" and would be looking to grow its presence in these markets.
Despite a recovery in financial markets, group MD Bernard Kantor cautioned that "the pace of economic recovery remains uncertain in our markets".
Investec Limited was unchanged at 5 860c, while Investec PLC was off 0.3% (15c) to 5 630c in early trade on Thursday.
- Fin24.com