Investec profit surges 90% on strong growth

INVESTEC’S profit soared almost 91 percent in the year to March 31 due to strong growth in loans, gaining more clients and an increase in funds under management, the lender said yesterday.

The bank, which services higher-income private clients in South Africa, increased adjusted earnings per share to 55.1 pence (R10.92) from 28.9p in 2021, at the top end of previous guidance and ahead of comparable pre-Covid levels.

A final dividend of 14p per share was declared, taking the full year dividend to 25p per share, almost double the 13p of 2021.

The lender has been among the top performing banks in South Africa in terms of share price in 12 months, possibly due to its focus on acquiring quality clients, cutting costs and hiving off its global asset management business, NinetyOne.

Its share price fell 1.55 percent to

close at R91.26 on the JSE yesterday, a percentage decline that was more or

less matched by the other big banks on the JSE. Its share price, however, has increased 55.4 percent higher over 12 months.

“We have strong liquidity and capital to support growth, with significant capital optionality in South Africa. We remain committed to our medium-term targets.

“The group is well positioned to serve its carefully chosen client base and continues to navigate the uncertain outlook emanating from inflationary pressures and the economic effects of the invasion of Ukraine,” chief executive Fanie Titi said in a statement.

He said the performance for the 2022 year indicated the strength of their client franchises, disciplined strategic execution, and commitment of staff.

“With the pending distribution of 15 percent of Ninety One to shareholders, Investec will have returned a value of about £1.6 billion, or R32bn, to shareholders through the demerger and distribution on successful completion,” he said.

Funds under management (FUM) increased 9.2 percent to £63.8bn and core loans increased by 13.2 percent to £29.9bn, its two main business divisions.

Market volatility in the last quarter negatively impacted FUM at year end.

Revenue grew 21.3 percent backed by post-pandemic economic recovery.

The cost to income ratio improved to 63.3 percent from 70.9 percent, with the increase in fixed operating expenditure contained at 1.1 percent.

Operating costs increased 6 percent, largely driven by higher variable remuneration. Investec said it expected revenue growth in the 2023 financial year to be supported by higher interest rates, higher lending and “increased activity levels given expected gross domestic product growth”.

In the past year, expected credit loss impairment charges were 71 percent lower, due to limited default experience in both geographies, and good recoveries in South Africa.

The group had maintained a level of post-model overlays given the uncertain economic outlook.