Investec Reports Strong Second Half Results – But Warns Of Emerging Third Wave In South Africa
On Friday, May 21, financial services firm Investec released financial results for the year ended March 2021, showing a strong recovery in profits in the second half of the year.
As a result, the group’s board of directors proposed a final dividend of 7.5 pence, i.e. a total dividend of 13 pence for FY2021 with a net payout rate of 45%.
Adjusted earnings per share from continuing operations for FY2021 of 28.9 pence was 14.7% year-over-year, with second-half profit 58.1% ahead of the first half, noted the general manager of the group, Fani Titi.
The tangible net asset value per share rose 12.7% to 425.7 pence.
“Fiscal year 2021 was a story in two halves. The first half performance was characterized by difficult and volatile market and economic conditions, mainly attributable to Covid-19.
“The second half showed a strong recovery in earnings, supported by our resilient customer base, a rebound in economic activity and a greater sense of optimism fueled by the global vaccination campaigns. We are continuing this momentum in the 2022 financial year ”, declared Titi.
“We are delighted to report record funds under management and operating profit in our wealth management business. The South African Specialist Bank performed well in a challenging environment with stable rand earnings.
“This performance underscores the quality of our customer franchises and our commitment to exceptional customer service. UK Specialist Bank client franchises performed strongly, demonstrating continued traction in our client acquisition strategy across the company, recording loan book growth of 8.7%. “
Investec said the investment in its UK private banking business is paying off and exceeding expectations.
Business in Southern Africa
For Southern Africa Wealth & Investment, Investec reported aAdjusted operating income up 10.6%. WUF rose 32% to 333 billion rand (FY2020: from 252.4 rand billion), with good net discretionary inflows of 7.6 billion rand (nodiscretionary outflow of 8.5 billion rand).
Turnover increased by 7.8%, supported by increased levels of trading activity (given market volatility), discretionary MAF and higher average annuity and market performance, he said.
Operating costs increased 6.6% due to inflation increase and increase in spending on information technology. the the activity achieved an operating margin of 31.2% (2020: 30.4%), Investec said.
Adjusted operating income from the specialized banking business in Southern Africa decreased by 1.2%. “We have had good momentum since December 2020 with higher levels of activity, growth in books of credit, good customer acquisition and improved point-of-sale activity from private customers as well as more activity. increased business, ”Investec said.
“The positive impact of higher trading revenues, lower markdowns on investments year-over-year and a lower ECL charge was offset by the effect of allowance for interest rate cuts and lower overall commission income due to reduced client activity in the first half of the year. ”
Net interest income was down 4.2%, mainly due to rate cuts of 300 basis points since January 2020. The increase in trading income was negatively impacted by an overall decline in loans and business. transaction compared to the previous year and by a decrease in investment income due to negative fair value adjustments, lower realizations and dividend income given the current economic context, said the specialist banking group.
The private client loan portfolio increased 2.2%, while the business loan portfolio declined year over year due to higher repayments and lower net new creations.
Looking ahead, Investec said it remains encouraged by the dynamics of the business.
“The short-term outlook depends on progress made in containing the pandemic and the extent of the economic recovery in the geographic areas in which we operate. While vaccine deployment programs in the UK and other advanced economies are satisfactory, slow progress in South Africa leaves the country vulnerable to the emerging third wave, ”he said.
If the economic recovery currently underway persists throughout fiscal 2022, Investec said it expects the revenue momentum seen in the second half of the year to continue; supported by the growth in customer activity and the resumption of non-interest income flows which were negatively impacted by Covid-19 in 1H2021.
The group said it remains committed to achieving a 12% to 16% ROE over the medium term.
Read: Business Talk – In conversation with Richard Wainwright from Investec Bank