Investec attributable earnings up 2%

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JOHANNESBURG (Reuters) - Investec (JSE:INL)'s UK business helped fuel an 11 percent rise in first-quarter operating income, confirming the South African banking group's push into asset management was paying off.

South Africa's fifth-largest bank, which is also listed in London, said in a trading statement on Friday it was bolstered by "particularly strong" results at its British asset management and capital markets divisions.

The bank has been cutting its reliance on lending by bulking up in asset management. In March it said it would buy the 53 percent of British fund manager Rensburg Sheppards it did not already own.

Banks in Africa's largest economy have been hit as consumer demand and corporate earnings remain weak even after the country exited a recession last year.

While Investec said bad debts remain at "elevated levels", its losses from bad debts fell in the three months to end-June.

"I was reasonably happy with their announcement, particularly that their bad debt ratio has come down quite some," said Rob Nagel, senior portfolio manager at Cadiz Asset Management.

"Remember the market has risen very strongly in the month of July. Those numbers don't incorporate July. They would have had a very different announcement if it was for the end of July."

EQUITY MARKETS HIT

Major equity markets around the world fell sharply in the three months to June, hit by concerns about a debt crisis in the euro zone. Many have since recovered, spurred in part by optimism about U.S. corporate earnings.

Investec said its UK results helped offset weak performance in South Africa and Australia.

Investec has also been looking to bulk up its African asset management arm by targeting interest in the fast-growing continent. It aims to triple assets under management in Africa outside of South Africa over the next five years.

Its net operating income rose 11 percent in the April-June quarter compared with a year earlier. Attributable earnings, or net profit before goodwill and non-operating items, rose 2 percent. It did not give absolute figures.

Investec's trading update comes days before results from other South African banks. Nedbank (JSE:NED) is due to report its first-half results on Monday.

Absa (JSE:ASA), the South African bank majority owned by Britian's Barclays, is due to report next Friday.

Absa said after the market closed on Thursday it expects first-half profit to fall by as much as 5 percent, hit by slack demand for loans. That profit warning sparked a broad sell-off of financial shares in Johannesburg on Friday.

Shares of Investec were among the decliners, dropping 3.3 percent as of 1044 GMT. Johannnesburg's index of financial stocks was down 1.3 percent.