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Investec to pay dividend after exceeds first-half expectations

Chief Executive Fani Titi said its businesses had remained resilient as Investec declared an interim dividend of 5.5 pence.
Image: Brian Bahr, Getty Images

South Africa’s Investec broke rank with other financial services firms on Thursday by saying it would pay a dividend after a better-than-expected first-half year.

However, Investec’s shares were trading 2.5% lower at 0952 GMT as analysts scrutinised the underlying numbers reported by the group, whose adjusted earnings per share (EPS) was down 50%, a less dramatic fall than it had previously forecast.

Chief Executive Fani Titi said its businesses had remained resilient as Investec declared an interim dividend of 5.5 pence.

Titi said during a media call that Investec declared the dividend on the back of expectations of a reduction in credit losses during the second half of the year and confidence that the company had enough capital to resume payouts.

Rival firms in South Africa and Britain, where Investec is also listed, have yet to return to dividend payouts after suspending them during the coronavirus crisis to preserve capital following guidance from regulators.

“We entered this crisis from a position of strength and continue to have a strong capital, funding and liquidity position,” Titi said, adding that Investec was well placed to navigate its way through the current environment.

Investec reported adjusted EPS of 11.2 pence in the six months to the end of September, compared to 22.4 pence a year earlier, a figure restated to reflect the demerger of asset management business NinetyOne.

It had previously forecast adjusted EPS of between 8.3 pence and 10.5 pence.

Revenues were down 24%, versus a 14% reduction in operating expenses, and operating profit at its UK specialist banking arm fell almost 84% to 12.9 million pounds mainly due to costs related to hedging.

The unit had already been a drag as Investec struggled with tough economic conditions in both of its main markets, even before this year’s Covid-19 pandemic.

Investec’s Johannesburg-listed shares underperformed the local banking index which was 1.22% lower on Thursday, with the benchmark index and the bank index both in the red after a strong showing on Wednesday.

Read: Investec Ltd’s interim results on Sens

 

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These shocking results go way beyond COVID 19 and are a result of:
1. Ninety One leaving the fold-well managed, low capital intensive business model.
2. Management issues-UK Banks CEO “retiring” early, Mauritius CEO “retiring” early, Head of UK Treasury left, Hong Kong CEO “retiring”, Wealth management UK CEO left etc.
3. Senior management are not entrepreneurs like Messers Koseff and Kantor. Far from it-the senior leadership are no competition for RMB or SBK top management.
4. Wealth management South Africa is led by the elderly, outdated and tired Henry Blumenthal. Over traded space with little growth potential.
5. Card product not competitive compared to RMB private bank and Standard Bank

End of comments.

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