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Investec ekes out growth

The specialist financial group's profits were boosted by a strengthened rand
May 18, 2018

Investec (INVP) managed to overcome economic uncertainty in both the UK and South Africa last year. The banking and asset management specialist may have benefited from a 7 per cent appreciation in the value of the rand, but strip this out and it still posted a marginal uptick in ongoing operating profit.

IC TIP: Hold at 574.2p

In South Africa, Investec's specialist banking division grew its loan book 9 per cent to R257bn (£15bn), offsetting lower investment income and driving a 7 per cent rise in operating profit. The average credit loss ratio was also flat at 0.28 per cent of the loan book, staying at the lower end of its long-term average despite a rise in impairments. However, the UK-side of the business suffered a 9 per cent decline in operating profit, with investment banking income down against a strong prior year performance. That was despite a 15 per cent growth in the UK loan book to £9.4bn.

The asset management business continued to pull in funds, generating £5.4bn in net inflows. Operating profit pushed up 8 per cent, thanks to higher assets under management, offsetting the impact of lower performance fees in South Africa. The wealth and investment business also gained £2bn in net new business, with operating profit growth supported by higher equity markets during the year.

Analysts at Numis expect adjusted pre-tax profits of £732m during the 12 months to March 2019, giving EPS of 52.7p.

INVESTEC (INVP)   
ORD PRICE:574pMARKET VALUE:£5.63bn*
TOUCH:574-575p12-MONTH HIGH:649pLOW: 451p
DIVIDEND YIELD:4.2%PE RATIO:11
NET ASSET VALUE:663pLEVERAGE:11.6
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141.7842434.319
20151.8539224.420
20161.8956738.521
20172.2363750.823
20182.3863851.224
% change+7+0.02+1+4
Ex-div:26 Jul   
Payment:13 Aug   
*Includes UK-listed and South Africa-listed shares.