Investec adds more clients and provides more loans to lift interim dividend

Investec CEO Fani Titi.

Investec CEO Fani Titi.

Published Nov 17, 2023

Share

Bank and wealth management group Investec lifted its interim dividend 14.8% to 15.5 pence (R353) per share in its first half after successful client acquisition strategies, loan book growth and benefits from the high interest rates.

The lender also yesterday announced it intended to launch an equities trading platform called Clarity, with the aim of competing in a market currently dominated by EasyEquities, and which would offer competitive fees, but a launch date has so far not yet been provided.

CEO Fani Titi said the macroeconomic backdrop had been difficult characterised by high inflation, elevated global interest rates and persistent market volatility.

“Our client franchises reported solid performance while the results also reflect the conclusions of the strategic actions over the past 18 months. Our balance sheet remains strong and highly liquid, positioning us well to support our clients in the uncertain macroeconomic backdrop and achieve our financial targets,” he said.

He said based on the macroeconomic outlook for the UK and South Africa, the lender’s two core markets, revenue momentum would likely continue to be underpinned by moderate book growth, elevated interest rates, client acquisition and activity levels.

The cost-to-income ratio was forecast to be below 55% by the end of the financial year, while the credit loss ratio was expected to remain within the “through-the-cycle” (TTC) range of 25 basis points (bps) and 35bps.

In South Africa the credit loss ratio was expected to normalise to the lower-end of the TTC range of 20bps to 30bps.

However, the UK was expected to report a ratio of between 50bps and 60bps. Group return on equity was expected to be above the mid-point of a target range of 12% to 16%.

About R6.8 billion was spent on a share buy-back and repurchase programme, in the past six months, in line with strategy to optimise capital in South Africa.

Investec’s revenue benefited from double-digit growth in net interest income driven by strong corporate loan growth and rising global interest rates.

Non-interest revenue from the banking and South African wealth and investment businesses increased, supported by increased client activity.

This was partially offset by the effects of the cessation of equity accounting of Ninety One post distribution and The Bud Group, following the restructure in 2022, and the deconsolidation of IPF (Investec Property Fund).

The cost to income ratio improved to 53.3% (55.6%) as revenue grew ahead of costs. Total operating costs grew by 4.1% and increased by 12.3% in neutral currency.

Pre-provision adjusted operating profit increased 14.3% to £487.7 million. Asset quality remained solid with exposures well covered by collateral.

Expected credit loss impairment charges increased to £46.3m from £29.4m, resulting in a credit loss ratio (CLR) of 32bps (16bps), towards the upper end of TTC range of 25bps to 35bps.

Net asset value per share increased to 556.7p from 510.3p, reflecting the strong earnings generation in the period and the net gain recognised on completion of the IW&I UK combination with Rathbones.

Tangible net asset value (TNAV) per share declined to 470.4p from 474.6p due to a decision to adjust the carrying value of the strategic investment in the Rathbones Group to reflect the proportionate share of tangible equity in Rathbones.

Net core loans increased 4% annualised to £31bn; largely driven by corporate lending in both core geographies and private client lending in South Africa. Customer deposits increased 1.9% to £39.9bn.

Funds under management (FUM) in southern Africa increased 2% to £20.2bn, mainly driven by discretionary net inflows of R7.3bn and foreign exchange translation gains on dollar denominated portfolios, partly offset by non-discretionary net outflows of R2.6bn.

Completion of the all-share combination of IW&I UK with Rathbones had created a scalable platform that was expected to result in future growth for the group in the UK Wealth segment.

BUSINESS REPORT