Investec puts out subdued trading update
THE world is still a tough place for banks, Investec CEO Stephen Koseff said yesterday when he released a subdued trading update for the six months to September for the dual-listed group.
Mr Koseff said in the update that operating profit was expected to be in line with that of the first half of the prior financial year, while the performance of the South African business would be ahead in rand terms.
"At some time the world will be a happy place again and we will get a turnaround and maybe we will start making money," Mr Koseff said in an interview.
The eurozone crisis was still a major concern while in SA, unrest in the mining sector was making portfolio investors nervous.
He said Investec was still in healthy shape and continued to benefit from the recovery of previous losses made by its businesses in Ireland and Australia.
The group, which is listed in London and Johannesburg, said it expected to report a marginal decline in investment and trading income in sterling terms. Net interest income was also expected to reduce in sterling although it expected "solid" growth in net fees and commission income.
Mr Koseff blamed the decline in income on currency translation costs as the rand had depreciated against the pound by as much as 15% in the period under review.
"The decline in income in sterling terms is all to do with the rand, which has depreciated, and not necessarily to do with our business performance," he said.
"Investec is recovering from last year’s low base and should recover very strongly as soon as the global economic recovery gains some traction and confidence returns to global markets," Adrian Cloete, an equity analyst at Cadiz Asset Management, said yesterday.
"Revenue generation for (the first half of the 2013 financial year) seems to still be quite slow but Investec should see stronger growth for the full-year results to March 2013 as the second half of 2012 was a very low base."
Investec’s expenses were expected to increase by 1% to 2% in sterling, which would translate into a higher cost-to-income ratio, but this was still in line with the target of below 65%.
Mr Koseff said, without giving figures, that the Australian business had returned to profitability, which he attributed to declining impairments. But the results for the UK business were expected to be behind the prior year’s results because of lower investment and trading income.
Mr Koseff said Investec, which had cash and near-cash balances of £10.4bn, had made a small acquisition in Australia. The group was not in a hurry to make acquisitions but could not rule out bolt-on purchases where they made strategic sense.
The group had been integrating the recently acquired Irish business Williams de Broë, which had been migrated to Investec’s platforms and rebranded as Investec Wealth & Investment.