Impairment charges hit Investec

The banking and asset group - which is listed in London and South Africa - was also saddled with a hefty increase in impairments on its loan portfolio. Bad loans climbed from £76.8m to £134.3m, which included £40m from sub-prime UK mortgage lender Kensington, whose loan book is being run down. Overall, the percentage of default loans to core loans and advances rose from 3.3 per cent to 3.9 per cent. Falling interest rates inevitably had an effect on net interest income which slipped 13.5 per cent to £297.4m, while net fee and commission income was 25 per cent lower at £226.4m.

Meanwhile, operating profits from the private banking division - which lends money to wealthy clients - collapsed by 73.6 per cent to £16.7m as profits were hit by rising bad debt. That was despite an 8.8 per cent rise in the core lending book to £12.1bn. But the capital markets division, which deals with corporate and public sector bodies, saw operating profits up by 2.1 per cent at £73.6m.

The really good news came with a substantial increase in income from principal trading activities, helped by opportunities in credit markets and a general increase in equity values in the six months after the collapse of Lehman Brothers. Revenue from these jumped from £82.3m to £230.8m. This, along with a modest 3.2 per cent increase in total expenses, helped to improve the ratio of expenses to income from 56.1 per cent to 58.0 per cent, comfortably below the bank's target of keeping costs below 65 per cent of operating income.

Investec remains well capitalised, and by increasing the core tier one capital ratio from 9.7 per cent to 11 per cent has achieved it target rate ahead of the originally planned 2010 timetable.

Brokers Numis expects underlying full-year pre-tax profits of £297m and EPS of 26p (2009: £367m/42.2p).

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