Covid-19 adds to Investec’s challenges


Covid-19 adds to Investec’s challenges

Published Date: 2020-03-23 | Source: Stephen Gunnion | Author: Stephen Gunnion

Covid-19 adds to Investec’s challenges

The bank and wealth manager will report a decline in full-year earnings, with the pandemic impacting fourth-quarter results.

Investec says the effects of the Covid-19 pandemic on global markets are likely to impact its fourth-quarter performance, adding to an already difficult operating environment for its operations in SA and the UK.

In an update ahead of the close of its financial year at the end of the month, the bank and wealth manager said it had made progress in its strategy to simplify and focus its business, including last week's unbundling and listing of Ninety One (formerly Investec Asset Management) and the restructuring, closure and sale of non-core and sub scale businesses. This had increased capital levels and reduced risk within the group. Due to the current market volatility resulting from Covid-19 and its comfortable capital position, it decided not to proceed with the sell down of a 10% stake in Ninety One.

Adjusted operating profit for the year is expected to be 7-14% down from last year, with adjusted earnings per share 16-23% lower. It blamed this on the challenging market conditions and a normalisation of its effective tax rate. It expected its net asset value to range between 425p and 450p per share, from 434.1p last year, supported by profitability and the Ninety One demerger but negatively affected by the weaker rand.

Group basic earnings per share are expected to be between 135% and 148% higher than last year's 52p, boosted by the £837 million net gain on the demerger and listing of Ninety One. However, headline earnings per share (HEPS) are likely to be as much as 46% lower than last year's 52.6p. HEPS exclude the proceeds from the demerger but include related costs.

In the group's UK Specialist Bank, it expected costs for the year to come in £25 million lower. It said its also made good progress at the UK Private Bank as it added more clients and grew advances in line with expectations. In SA, it said it remained committed to rationalising and optimising the value of its investment portfolio.

Investec's results for the year to end-March are scheduled for release on 21 May. Investec Limited closed 11% higher at R30 on Friday while Investec Plc gained 12% to R28.50.

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