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Investec battles Brexit, weak SA economy

Investec’s adjusted earnings per share rose 3.6% in the year to March 31, as it undergoes new leadership.

Financial services group Investec said on Thursday a rise in annual earnings showed its resilience in the face of a weak South African economy and Brexit, which has put clients off making big decisions in one of its two major markets.

The group, which is reorganising under new leadership, said its adjusted earnings per share rose 3.6% in the year to March 31.

“We have franchises that are very resilient given how tough the markets that we operate in are,” said joint CEO Fani Titi.

“No doubt there is uncertainty in the (British) economy and clients are generally not going to make long-term decisions… so we’ve seen that in some slowing down of activity,” he said, adding the mergers and acquisitions market had also been quiet.

Despite Brexit, results at Investec’s UK specialist bank improved thanks in part to lower impairments. Investec has been for years working to clean up a portfolio of bad corporate and property loans at its UK arm.

That helped offset a much weaker performance in South Africa, where a slow economy and weak rand has hit its business.

Its asset management arm, which Investec is spinning off and listing in London in an overhaul aimed at adapting to an environment of falling fees and rising costs, also saw net inflows of 6.1 billion pounds ($7.8 billion), boosting assets under management and annuity fees.

The demerger follows the departure of three of Investec’s founding members, including long-time CEO Steve Koseff, who handed over to Titi and Hendrik du Toit, formerly head of Investec’s asset management business, in October.

The strategy shift surprised analysts even though similar moves had been taken by Prudential, Old Mutual and Deutsche Bank.

Investec also said on Thursday it would close its automated advice platform Click & Invest after it made an underlying operating loss of 12.8 million pounds, potentially puncturing the hype around such products among big banks trying to keep pace with digitisation and fast-changing customer demands.

“We went into the space believing the market was ready and we would have significant support,” said Titi.

Investec took a 6 million pound write down as a result, and around 54 jobs are at risk.

Overall, the group reported annual adjusted basic earnings per share of 55.1 pence, up from 53.2 pence a year earlier. The adjusted figures reflect profits realised in the course of ordinary operations.

Its London-listed shares were up 0.9% at 0730 GMT, while its Johannesburg-listed stock was down 0.46%.

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This company really seems to be drifting nowhere fast. UK business nothing special and South Africa constrained by no economic growth. Management is a bit confusing-Asset managements boss is the CEO and a former non executive the other CEO. It looks cheap but I guess that the market is not incorrect(again).

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