Investec’s UK specialist bank was the only drag on full-year profit
The UK specialist banking arm — the group’s second-biggest profit generator — suffered a 9% fall
All of Investec’s divisions other than its UK specialist banking arm contributed higher operating profit in its 2018 financial year, helping the group’s overall operating profit rise 5.6% to £701m.
Investec declared a final dividend of R2.32, taking its total for the 2018 financial year to R4.32, an increase of 7.2% from the prior year’s R4.03.
Thursday’s results presentation marked the last by CEO Stephen Koseff and MD Bernard Kantor before they hand their roles to Hendrik du Toit and Fani Titi in October.
"Operating performance during the year was underpinned by sound growth in loans and funds under management and a solid recurring income base, despite a challenging backdrop in SA and the UK," Koseff said in the result statement.
The group’s largest operating profit contributor was its Southern African specialist banking arm, which grew operating profit by 12.4% to £320.5m, contributing 46% of the total.
"The South African specialist banking business reported an increase in operating profit in rand of 6.9%, supported by sound corporate and private client activity levels as well as an increase in associate earnings from the IEP Group," the results statement said.
"This was partially offset by lower investment income. Core loans and advances increased 8.7% to R256.7bn.
"The credit loss ratio on average core loans and advances amounted to 0.28%, remaining flat at the lower end of its long-term average, despite the business reporting an increase in impairments."
Its UK specialist banking arm suffered a 9.3% decline in operating profit to £153m, but remained Investec’s second-biggest profit generator, accounting for 22% of the group’s total.
Its drop in operating profit was blamed on a "particularly strong investment banking and client flow trading activity levels in the prior year".
Investec’s UK asset management division reported the highest operating profit growth of 14%, taking it to £104m or 15% of the group’s total.
But its South African asset management unit only achieved a 0.8% rise to £74m in operating profit, contributing 11% of the group’s total.
Steinhoff International's crash cost Investec R220m, "less than the estimate referred to in the December announcement".
"The wealth and investment and asset management businesses generated substantial net inflows, with asset management exceeding £100bn of funds under management for the first time," Koseff said.