Revenue, profits rise at newly-expanded Investec

23rd May 2024 10:38

(Sharecast News) - Investec reported a 5% rise in revenue in its final results on Thursday, to £2.09bn, driven by a strong performance from its corporate client franchises and the Investec Wealth & Investment division in South Africa.

The FTSE 250 company said adjusted operating profit increased 8% to £884.5m, while adjusted earnings per share rose 13.4% to 78.1p.

Its return on equity (ROE) improved to 14.6% from 13.7%, and its return on tangible equity (ROTE) increased to 16.5% from 14.7%.

Investec completed several strategic actions during the year, including the combination of Investec Wealth & Investment UK with Rathbones Group, resulting in an equity-accounted investment.

The company also finalised a £300m share buyback programme and disposed of its property management companies to Burstone Group, reflecting those as discontinued operations.

Its cost-to-income ratio improved to 53.8%, from 54.7% in the prior year, as revenue growth outpaced cost increases.

Operating costs rose 3.2%, including a £30m provision for potential impacts from the Financial Conduct Authority's review of historical motor finance commission arrangements in the UK.

Excluding that provision, fixed operating expenditure remained flat, benefiting from a weaker ZAR-GBP exchange rate.

The credit loss ratio on core loans was 28 basis points, at the lower end of the group's through-the-cycle range, with expected credit loss impairment charges decreasing slightly to £79.1m.

Net asset value per share increased 11.2% to 563.9p, driven by strong earnings and the net gain from the IW&I UK and Rathbones combination.

Tangible net asset value per share rose to 477.5p.

Investec maintained strong capital levels, with a CET1 ratio of 13.6% for Investec Limited and 12.4% for Investec plc.

The group's liquidity levels remained robust, well above board-approved minimums.

Its board proposed a final dividend of 19p per share, bringing the total dividend for the year to 34.5p, an 11.3% increase.

Looking ahead, Investec said it expected continued revenue momentum, supported by book growth, strong client activity levels, and successful client acquisition strategies, despite anticipated interest rate cuts.

The group forecast a ROE of about 14% and a ROTE of around 16% for the 2025 financial year.

Costs were expected to be well managed, with a cost to income ratio of about 54%.

The credit loss ratio was projected to remain within the through-the-cycle range of 25 to 45 basis points, with Southern Africa at the lower end and the UK and Other geography remaining elevated in the short term.

"The group has delivered strong financial performance notwithstanding the uncertain operating environment that prevailed throughout the financial year," said group chief executive officer Fani Titi.

"This performance demonstrates the continued success in our client acquisition strategies which underpinned the increased client activity and loan book growth, supported by the tailwind from the high interest rate environment.

"This performance underwrites our commitment to create enduring worth for all our stakeholders through our market-leading client franchises in our chosen markets."

Titi said the balance sheet remained "strong and highly liquid", positioning it well to support clients in navigating an uncertain macroeconomic backdrop.

"Today we announce new medium-term targets, resulting from the structural improvement in group performance following the execution of the strategy announced at the February 2019 capital markets day (CMD)."

At 1017 BST, shares in Investec Group were down 1.62% at 545.5p.

Reporting by Josh White for Sharecast.com.