Rand keeps Investec profits in check

Rand keeps Investec profits in check

2013-11-21 12:10

Cape Town - The international specialist bank and asset manager Investec's South African operations posted a strong performance from the majority of businesses, with operating profit for the six months to the end of September 2013 increasing 45.4% in rand terms.

Investec SA, however, posted a 0.7% decline in first-half earnings after a weaker rand negatively impacted profit.

The rand has lost 20% against the dollar so far this year.

Investec plc [JSE:INP] incorporated in England and Wales and Investec Limited [JSE:INL] incorporated in SA, issued its unaudited combined consolidated financial results in Pounds Sterling for the six months to September 30 2013 on Thursday.

Operating profit before goodwill, acquired intangibles, non-operating items and taxation and after other non-controlling interests increased 13.8% in rands to R3.394m.

Asset management reported results in rands 23.9% ahead of the prior year and investment's results increased by 56.3% in rands, with both divisions benefiting from higher levels of average funds under management and combined net inflows in excess of R27bn.

The specialist banking business reported an increase in operating profit of 2.0% in rands.

In the UK specialist bank the ongoing business reported an operating profit of R1.144m, whilst the legacy business reported a loss of R740m.

In Australia a review of the business was undertaken and a number of businesses subsequently closed down.

Continuing operations reported an operating profit of R110m.

The group maintained a sound capital position with core/common equity tier one ratios of 9.1% for Investec plc (per Basel II) and 9.5% for Investec Limited (per Basel III).

Liquidity remains strong with cash and near cash balances amounting to R140bn.

The headline earnings per share for the period was 15.6p (compared to 15.8p for the six months until the end of September 2012). In rand terms it was R2.38 compared to R2.07 in the previous period.

Dividends per share was 8.0p, the same as for the six months until the end of September 2012. In rand terms it was R1.31 compared to R1.12 in the previous period.

The cost to income ratio for the period was 67.5% compared to 64.8% for the six months until the end of September 2012.

According to Stephen Koseff, CEO of Investec, the company delivered results at the top end of what it anticipated, despite a sharp fall in the rand.

"Without the sharp fall in the rand we would have shown a 13% increase in earnings," he said.

"We have worked hard to deal with many of the legacy issues within the group and will continue to take decisive action in order to ensure Investec is in the right shape to take advantage of the recovery in the world economy and markets."

Investec had flagged that its adjusted earnings per share would drop as much as 10% due to its struggling Australian unit where it has cut 80 jobs.

About a tenth of its revenue last year was from Australia, where it is restructuring to focus on bigger businesses.

Net interest income, the measure of earnings from lending, totaled £318.4m, a 9% decrease from a year earlier.

Income from fees and commissions rose 5% to £484.9m.

Impairments on loans and advances fell to £83.1m from £115.6m despite an increase in bad debt charges in Australia.