Investec sinks on disappointing Specialist Banking performance

17th Sep 2013 09:25

Investec shares took a hit on Tuesday after the group warned about the performance of its global Specialist Banking and Australian businesses.The investment bank and asset manager said the business is expected to report half year results behind the prior year after the Australian business was negatively affected by significant strategic restructuring and the UK Specialist Banking business was hit by low levels of activity. Operating profit is set to be "marginally" behind the prior year, although it delivered an increase of around 8% in Rands. For the period bwtween the end of March and the end of August, third party assets under management decreased 4% to £106.2bn, customer accounts (deposits) decreased 5% to £23.4bn and core loans and advances decreased 6% to £17.4bn. The group also announced plans to reduce its Australian workforce by 70.Investec blamed the problems on volatility in the macro and geopolitical environment, which caused the average Rand: Pound exchange rate to depreciate by 16%.Looking ahead it said revenue was expected to be in line with the prior year, and that recurring income as a percentage of total operating income was forecast to be approximately 70% (2012: 69%).Impairments were set to be around 25% lower, while expenses would most likely show a moderate increase. Adjusted earnings per share in pounds were expected to be between 0-10% lower than the prior year, and 4-16% higher in Rands. In a statement the group said: "Markets and economic conditions around the world remain mixed and it's difficult to predict the direction in which they are moving. The developed world economies seem to be improving but the air of optimism will only sustain if the broader geopolitical issues are resolved and the US and Chinese economic outlook continues to show improvement. "The challenge for the Investec group remains right sizing its Specialist Banking businesses and realigning these business models to generate the appropriate shareholder returns. The group is comfortable with the progress made in its South African banking operations and has recently made significant adjustments in Australia, with the process in the UK banking operations ongoing. "Overall, prospects still depend on an increase in levels of activity and the sustainability of economic recovery. Whilst the group feels more positive about the trend and news flow it remains cautiously optimistic given the 'stop start' nature of the recovery thus far."NR