Investec reinstates dividend despite tough first half


Investec reinstates dividend despite tough first half

Published Date: 2020-11-20 | Source: Stephen Gunnion | Author: Stephen Gunnion

Investec reinstates dividend despite tough first half

The banking group held back on a final dividend for its 2020 year following guidance from banking regulators.

Investec has declared an interim dividend despite a halving of first-half earnings as Covid-19 took its toll on the business. That's after holding back on a final payout for the year to end-March following guidance from the banking regulators in SA and the UK.

The banking group, which operates mainly in the two countries, said its client franchises remained resilient despite the challenging economic backdrop in the six months ended September, with Wealth & Investment reporting net inflows of £336 million and growth in funds under management of 15% since the end of March to £51.1 billion. Its Specialist Banking business saw good client acquisition in both geographies. Net core loans grew 1% to £25.2 billion, with strong loan book growth in the UK Private Banking business offset by subdued corporate lending activity in SA and the UK and higher repayments.

Operating income before expected credit losses fell 24% to £729 million over the six months, with net interest income dropping 16%, primarily due to lower interest rates. Non-interest revenue declined by 31% impacted by lower lending fees, subdued client transactional activity, and lower investment and associate income. Its credit loss ratio doubled to 0.47% from 0.23% a year earlier. Adjusted operating profit declined by 48% to £143 million. Basic earnings per share (EPS) dropped 50% to 9.6 pence, with headline EPS down by 46% to 9.2p. It's halved its dividend to 5.5p.

Investec said it expected a better full-year performance due to improving revenue trends as client activity picked up. However, trading income from client flow would continued to be negatively impacted by risk management and risk reduction costs on hedging its structured products book. It also expected to report lower expected credit loss provisions for the remaining six months of the year.

Investec Limited shares fell 6.1% to R38.12 yesterday while Investec Plc declined by 6.4% to R38.68.

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