Banking and wealth management group Investec expects its UK business to ensure earnings growth but warned that credit losses will be towards the higher end of expectations.
In a trading update for the first half of the year, the bank forecasts its headline earnings per share to be between six per cent and 12 per cent ahead of last year.
Adjusted operating pretax profit meanwhile will be between £428.7m and £449.6m, compared to £405m last year.
A strong performance in the UK in particular is expected to boost performance, with its UK arm expected to be 25 per cent higher than last year while South Africa will be at least five per cent.
Investec has benefited from higher interest rates and and growth in its loan book. But it also pointed to revenue growth in its wealth and investment businesses despite “significant economic headwinds”.
However, the firm expects to report a credit loss ratio “closer to the upper end of the through-the-cycle range” of between 25 and 35 basis points.
While the loss ratio in South Africa will be towards the lower end of the range, the UK will be higher reflecting the higher interest rate environment.
“We have seen idiosyncratic client stresses with no evidence of trend deterioration in the overall credit quality of our books,” it said.
Investec confirmed it was well capitalised and could support clients through the “uncertain and complex” environment.
Fani Titi, Investec chief executive said: “Investec Group expects to deliver strong earnings growth for the six months ending 30 September 2023, despite the difficult macroeconomic backdrop.
“This performance was underpinned by the continued success in our client acquisition strategies, loan growth and a higher interest rate environment,” he continued.
During the period Investec also announced that its wealth and management division would combine with Rathbones in a £839m tie-up. The deal will create an “enlarged Rathbones Group” with £100bn in assets under management, making it one of the UK’s top money managers.
The deal was completed only yesterday and will see Rathbones shares issued in exchange for 100 per cent of Investec W&I UK’s share capital.
Interim results will be announced on 16 November.