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Investec steady in uncertain markets

The specialist financial group benefited from rand's appreciation against sterling
November 17, 2017

An uncertain political and economic backdrop in its core geographies did not hamper Investec’s (INVP) performance during the first-half. Admittedly the specialist financial group benefited from a 15 per cent appreciation of the Rand against Sterling, but even after stripping this out operating profits ticked up marginally to £315m.

IC TIP: Hold at 503.5p

The specialist banking business enjoyed a 13 per cent uplift in operating profit, driven by its South African operations. Lending was up 7 per cent, while its corporate treasury and advisory businesses also grew fee income. This offset a reduction in UK investment banking activity. The group’s annualised credit loss also increased to 0.28 per cent of gross core loans, from 0.19 per cent, but crucially remained at the lower end of its long-term target range.  

Despite lower performance fees in South Africa, the asset management business managed marginal operating profit growth. Positive market movements and net inflows of £2.1bn pushed up assets under management to £98bn. The wealth and investment business also gained net new business of £1.5bn, driven by UK demand. Operating profit for the business was up 15 per cent, despite lower brokerage volumes in South Africa.

Analysts at Numis expect adjusted pre-tax profit of £697m for the 12 months to March 2018, giving EPS of 51.2p (from £619m and 48.7p in 2017).

INVESTEC (INVP)   
ORD PRICE:503.5pMARKET VALUE:£4.91bn*
TOUCH:503-503.5p12-MONTH HIGH:631pLOW: 495p
DIVIDEND YIELD:4.7%PE RATIO:10
NET ASSET VALUE: 618pLEVERAGE:14.1
Half-year to 30 SeptTotal operating income (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20161.0129126.510
20171.1332625.810.5
% change+12+12-3+5
Ex-div:06 Dec   
Payment:20 Dec   
*Includes UK-listed and South Africa-listed shares