Financial services firm Investec estimates earnings to plunge by 29%, shares decline

SOUTH AFRICA – Anglo-South African international banking and wealth management group Investec group has flagged that its full-year earnings could decline by as much as 29 percent, an announcement that saw its share price fall by more than 6 percent on the Johannesburg Stock Exchange on March 19, 2021.

The group said in a trading update that it expected its adjusted earnings per share from continuing operations for the year to end March between 20 and 29 percent weaker compared to the same period last year.

The group also unbundled asset management company Ninety One last year and has been reported as a discontinued operation in the upcoming results.

Its adjusted operating profit from continuing operations in southern Africa is expected to fall by between 16 and 24 percent, below the US$395.7 million amount reported a year earlier while the UK is expected to decline by between 15 and 26 percent, down from US$184.9 million  reported last year.

However, Investec said that its business had shown recovery in the second half of the financial year, with the second half adjusted operating profit and earnings expected to be ahead of comparable numbers reported in the first half of the financial year, reflecting an improving trend, particularly in the last quarter.

“We are encouraged by the momentum we are seeing across our business, the continued recovery of markets and the positive developments related to Covid-19 vaccines”

Fani Titi – CEO, Investec

Chief executive Fani Titi said the group’s operating results were expected to be in line with the guidance released in their interim results in November.

“We are encouraged by the momentum we are seeing across our business, the continued recovery of markets and the positive developments related to Covid-19 vaccines. Our expected performance demonstrates the strength of our underlying client franchises, the continued execution of our strategic objectives and the resilience of our people in what has been an unprecedented year,” Titi said.

Investec share price declined to US$2.85 in the morning, closing the day at US$2.82.

Investec has been knocked by lower interest rates, higher costs related to the hedging of their UK structured products book, reduced client activity and a 14 percent depreciation of the average rand against the pound.

Titi said the underlying performance had been resilient despite the challenging operating environment and the elevated risk management and risk reduction costs associated with hedging their UK structured products book.

“While the general outlook is improving, the long-term impact of the pandemic is uncertain. Investec remains well capitalised, highly liquid, and well provisioned for impairments. With the simplification of the group now substantially complete, we are positioned to pursue long-term growth,” he said.

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