UPDATE: Investec Looks To Private Wealth For Growth This Year

30th Jul 2010 08:50

(Adds analyst comment.) By Margot Patrick Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Investec PLC (INVP.LN) Friday said net profit rose 2% in the three months to June 30, a "satisfactory performance," as an 11% rise in operating income was offset by bad loans and a higher tax rate. In an update on its first fiscal 2011 quarter, the Anglo-African asset manager and investment bank said core loans and advances dipped 2% since the end of the last fiscal year, to GBP17.5 billion, and that third-party assets under management also fell, by 4%, to GBP70.9 billion. But the company said it's continuing to focus on building its private wealth and investment businesses, an effort that includes having last month bought the shares it didn't already own in investment manager Rensburg Sheppards PLC (RBG-LN). Investec shares initially traded up 2% but at 0740 GMT had fallen 3 pence in a broadly lower London market, to 504 pence. "Increased savings levels in the developed world should continue to underpin growth in both the wealth and asset management businesses whilst the banking and advisory revenue streams remain dependent on the sustainability of economic recovery and the normalization of economic activity," it said. Investec's main business lines include private banking, investment banking, capital markets, property services and asset management. Its operations span South Africa, the U.K. and Australia. The company said loan impairments are still at elevated levels, with its annualized credit loss charge as a percentage of gross loans and advances running at 0.83%. The figure was 1.16% in fiscal 2010. It said its tax rate rose to 26.3% from 22.5%, without giving details. Overall, the U.K. business had "strong results" in asset management and capital markets, while South African and Australian operations were hit be weak equity markets and low levels of economic activity compared to last year's first fiscal quarter. Analysts at Numis Securities said the stock should be attractive to both growth and value investors, and kept a buy rating and 606 pence price target. It said Investec's earnings have been "substantially more resilient than all the major U.K. focused banks through the credit crunch," and that post-tax returns on equity are forecast to reach 20% next year. -By Margot Patrick, Dow Jones Newswires; +44 (0)20 7842 9451; [email protected] (END) Dow Jones Newswires July 30, 2010 03:50 ET (07:50 GMT)