Investec painted a much positive picture of the direction the world financial system was taking currently after having been battered by subprime crisis, global economic downturn and Eurozone debt crisis since 2007.
The JSE and London-listed private and investment bank, said the financial system had started to show signs of increased stability as global capital structures of the major global banks began to improve.
Stephen Koseff, the CEO of Investec, told a media and analysts presentation in Johannesburg that the global business climate was “feeling a lot better now.”
Investec was the only South African bank which had its fingers burnt during the 2007 sub-prime crisis.
This was after Investec bought Kensington Group, a UK company that extended loans to people with poor credit records for £283 million ($448 million). It wanted to boost its mortgage-backed securities business before global banking stocks fell on concern funding would become more expensive amid record US mortgage defaults.
“However, I believe we are well-placed to benefit from the current stability right now. And we are ready for the world when it starts taking up,” Koseff said, adding the volatile global economic environment and some unresolved macro risks remained a significant feature.
“Investec’s business model has been substantially realigned and the focus going forward is to consolidate the gains made in its asset management business and broaden the distribution of the wealth management offering.”
The group would continue its focus on building on the progress made in clearing legacy issues and improving returns in its specialist banking business.
Overall, Investec’s balanced business model positions the group to adapt to an uncertain and changing environment and ensures it is well placed to benefit from an improvement in market conditions.
Investec reported a 15 percent decline in headline earnings per share (Heps) to 15.9 pence for the six months ended September 2012 from 18.7p a year ago.
Adjusted earnings per share before goodwill‚ acquired intangibles and non-operating items decreased 4.4 percent from 20.6 pence to 19.7 pence. Its interim dividend was unchanged at 8p/share.
Its operating profit before goodwill‚ acquired intangibles‚ non-operating items‚ taxation and after non-controlling interests was 2.6 percent higher at £229.4 million ($363 million) and adjusted earnings before goodwill‚ acquired intangibles and non-operating items grew 3.5 percent to £168.6 million ($267 million).
The company said its South African business reported an increase in operating profit of 6.6 percent in rand terms, benefiting from growth in revenue and cost containment.
The Australian business returned to profitability as a result of a significant decline in impairments‚ but the UK business reported results marginally behind the prior period due to lower investment income.
The group’s low-capital intensive asset and wealth management businesses were supported by continued net inflows‚ with these businesses accounting for 39.3 percent of the group’s operating profit.
Overall results have been impacted by the depreciation of the average rand/sterling exchange rate of approximately 15 percent and low activity levels given the volatile economic environment‚ it said. The shares of Investec slid 1.8 percent on the JSE during early trade.
