Investec reports 20% interim profit decline amid economic headwinds

Investec shares (LSE: INL) remained flat on Thursday, unfazed by the financial services firm’s interim profit drop. The FTSE 100 company attributed this decline to inflation, rising interest rates, and persistent market volatility.

Pretax profit from continuing operations fell 20% to £404.3 million for the six months ending September 30, down from £508.4 million a year earlier. Investec’s UK Wealth & Investment unit was reclassified as discontinued following its merger with Rathbones Group PLC, resulting in Investec holding a 41% stake in Rathbones.

Impairment charges surged by 57%, reaching £46.3 million compared to £29.4 million. The credit loss ratio stood at 32 basis points, approaching the upper end of the through-the-cycle range of 25bps to 35bps.

Net interest income, driven by robust corporate loan growth and rising global interest rates, increased by 12% to £682.6 million from £607.8 million.

Funds under management in Southern Africa grew 2% to £20.2 billion as of September, driven by discretionary net inflows of R 7.3 billion and currency translation gains, partly offset by non-discretionary net outflows of R 2.6 billion.

Investec declared an interim dividend of 15.5 pence, up 15% from 13.5p. Earnings per share rose 38% to 69.6p, including a gain of £361.8 million from the Investec Wealth & Investment UK and Rathbones combination. Headline EPS increased by 15% to 36.9p from 32.0p.

Since November last year, Investec has repurchased about 64.7 million shares, amounting to 6.4% of shares in issue, totalling R 6.8 billion or £300 million as part of its R 7 billion, approximately £350 million, share buyback initiative.

Investec CEO Fani Titi stated, “The group has delivered strong results against a difficult macroeconomic backdrop characterized by high inflation, elevated global interest rates, and persistent market volatility.”

Investec anticipates its credit loss ratio to remain within the range of 25bps to 35bps. Year to date, Investec shares have seen an almost 10% increase, with a 26% rise year over year.