Investec profits rise through improved cost efficiency
By Josh White
Date: Thursday 21 Nov 2024
(Sharecast News) - Investec reported a 7.6% rise in adjusted operating profit to £474.7m for the six months ended 30 September on Thursday, driven by revenue growth of 5.6% to £1.1bn and improved cost efficiency.
The FTSE 250 company said its cost-to-income ratio improved to 50.8%, down from 53.3% in the prior year period, as operating costs rose by just 0.8%.
Pre-provision adjusted operating profit rose 11.1% to £541.6m, reflecting positive momentum in net interest income (NII) and non-interest revenue (NIR).
NII benefitted from balance sheet growth and elevated interest rates, partially offset by deposit repricing pressures in the UK.
NIR meanwhile saw gains from increased capital-light income in the Banking business and strong fee growth in the South African wealth and investment division, although trading income declined due to non-repeat factors.
Investec said credit quality remained robust despite an increase in the credit loss ratio (CLR) to 42 basis points, at the upper end of the group's through-the-cycle range, as expected credit loss impairments rose to £66.9m from £46.3m.
Return on equity (ROE) stood at 13.9%, within the group's medium-term target range but slightly below the 14.6% reported a year earlier.
The group declared an interim dividend of 16.5p per share, up from 15.5p, reflecting a payout ratio of 41.7%.
Net asset value per share rose 3.9% to 575.7p, while tangible net asset value per share increased by 5.1% to 491.6p, supported by strong capital generation and foreign exchange gains.
Customer deposits grew 4.7% annualised to £40.4bn, with robust growth in Investec plc deposits offsetting a decline in shorter-term wholesale deposits at Investec Limited.
Net core loans increased by 5.4% annualised to £31.7bn, driven by growth in private client lending across geographies.
Investec highlighted continued execution of its strategic priorities, including reducing its investment in Bud Group Holdings and integrating its UK wealth and investment business into Rathbones, where it now held a 41.25% stake.
Funds under management in southern Africa rose 11.9% to £23.4bn.
Looking ahead, Investec said it expected full-year ROE of around 14% and ROTE of approximately 16%, supported by revenue momentum from book growth and increased client activity.
However, the group said it anticipated continued inflationary cost pressures and a credit loss ratio within its through-the-cycle range of 25 to 45 basis points.
Investec added that it remained well-capitalised, with CET1 ratios of 14.8% for Investec Limited and 12.6% for Investec plc, adding that it was well-positioned to support clients and scale growth opportunities in an improving economic environment.
"The group has delivered a solid performance in the first half of the 2025 financial year in an evolving environment," said group chief executive officer Fani Titi.
"Adjusted operating profit grew 7.6% to £475m, demonstrating continued momentum from our differentiated client franchises.
"We are pleased to report a ROE of 13.9% putting us on track to achieve the group's full year ROE guidance."
Titi said the group maintained strong capital and liquidity levels, positioning it to support clients and pursue disciplined growth in an "improving" operating environment.
"We remain committed to our purpose of creating enduring worth for all our stakeholders."
Reporting by Josh White for Sharecast.com.
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