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Investec H1 profit up

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Investec, South Africa’s fifth-largest bank, posted a near 6% rise in its half-year operating profit on Thursday, helped by growth in the asset management business.

The investment bank and asset manager said the regulatory environment remained challenging, but activity levels were starting to improve.

Investec, which operates in South Africa, Britain and Australia, has attempted to counter the grim outlook for lending and investment banking by building up its asset management business.

It took over British wealth manager Rensburg Sheppards in June and its chief executive said in September he might consider buying a similar business in Australia.

“We will continue to grow organically unless something comes along that is reasonably priced and that will fit with the strategy of the executives that run the asset management business,” managing director Bernard Kantor said.

Analysts said the results showed Investec’s strategy of building up its wealth management business was paying off.

“In an environment where lending is going to be quite constrained for some time it’s probably a wise move to focus on expanding non-interest revenue,” Afrifocus Securities banking analyst Johann Scholtz said.

Investec, which is also listed in London, last month became the first bank since the credit crisis to return to the securitisation in the UK of non-standard mortgages, including some subprime loans, selling £128 million of securities backed by residential mortgages.

“As demand builds up from the business we will go to the market with another securitisation,” Kantor said.

The bank said operating profit totalled £228,15 million in the six months to end-September, up 5,6% from £215,9 million a year earlier, or up 34% excluding a 46 million-pound profit made in the same period last year on the repurchase of its debt.

“Our strategy of building income from less capital intensive, fee earning businesses has made good progress,” Kantor said in the results statement.
“Looking ahead there are, of course, reasons for caution but we are encouraged by the overall levels of activity we see in our businesses.”

Investec said in September it expected a “marginally higher” group operating profit, citing sluggish demand for credit and a slow recovery in bad debts.

The bank said net interest income totalled £321,17 million, compared with £297,36 million a year earlier.
Bad debt charges totalled £122,85 million, compared with £134,29 million a year earlier.

Asked about Investec’s exposure to Ireland’s debt woes, Kantor said the group was fully covered in terms of its impairments and provisions.

“Our Irish exposure is exactly £270 million, which is 1,6% of our total book, and we have impaired about £160 million pounds to £170 million and provided £86 million,” he said.

Shares in Investec were up 0,4% at 59,14 rand in Johannesburg by 0935 GMT, when Johannesburg’s Top-40 index was up 1%. At the same time the London-listed shares were up 1,4% at 507 pence.

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