Thursday 21 May 2020 7:26 am

Investec takes £105m hit to profit as coronavirus affects trading income

Investec has said the impact of the coronavirus pandemic on its operating profit of the year was £105m, as trading income fell 7.5 per cent.

The figures

Investec’s adjusted operating profit for the full year was 16.8 per cent behind the prior year, at £608.9m. Adjusted operating profit from continuing operations of £419.2m was 24.1 per cent lower than in 2019. The bank and wealth manager said the impact of coronavirus on adjusted operating profit was £105m.

UK and other operations, which is mainly comprised of Investec’s UK specialist bank business, reported a 44.3 per cent fall in adjusting operating profit of £106.7m. The wealth division contributed an additional £63.0m to operating profit.

Total operating income fell 7.5 per cent to £1.8bn.

Core loans and advances were broadly flat at £24.9bn, while customer deposits increased 2.9% to £32.2bn. Funds under management recorded net inflows of £599 million.

Operating costs fell seven per cent to £1.185bn, driven by “cost containment across the business” which has resulted in a continuing operations cost to income ratio of 68.2 per cent.

As per the regulatory guidance for banks, Investec will not declare a final ordinary dividend, resulting in a full year dividend of 11p per ordinary share.

Why it’s interesting

Investec completed the demerger of its asset management business this year, now called Ninety One. The firm said the value of the distribution of Ninety One’s shares to shareholders amounted to 73.4p per share.

The wealth manager anticipates a challenging year as the economic recovery from the crisis is likely to be protracted. “Client activity is likely to be muted, interest income impacted by lower interest rates and impairments likely to be elevated.”

Investec added that it would focus on controlling costs in light of the Covid-19 crisis, while managing oversight of the loan portfolio with ongoing stress tests.

What Investec said

Chief executive Fani Titi said:

“In the course of the last two months, the social and economic impact of the Covid-19 pandemic on our customers and the markets in which we operate has affected the performance of the group.

Earnings were characterised by growth in client-related revenues and much tighter cost containment. This was more than offset by significantly lower investment and trading revenues, and higher expected credit loss charges given the economic backdrop.

Group adjusted operating profit of £608.9m was 16.8 per cent behind the prior year and adjusted earnings per share of 46.5p was 23.6 per cent behind the prior year.

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