Credit crisis shakes Investec - but foundations stable
September 18, 2008
Johannesburg - Specialist banking group Investec on Thursday said operating fundamentals across the group continue to be impacted by the global credit and capital market crisis and volatile equity markets.
However, the group has continued to benefit from its recurring revenue base and geographical and operational diversity, it said in a trading update for the first half of the current financial year.
Investec chief executive officer Stephen Koseff said: "Although the reporting period has not yet ended, at this point the group expects to report normalised operating profit in line with the prior year, with the South African and UK operations recording an increase and the Australian operations a decline in operating profit."
He added that since 31 March 2008 core loans and advances grew by 14 percent to £140.8 billion, customer deposits grew by 15 percent to £13.9 billion and third party assets under management increased by 10 percent to £58 billion supporting the group's growing base of recurring income.
"The group expects to record strong growth in net interest income, growth in net fees and commissions receivable and a marginal decline in principal transaction income.
"Disciplined risk and financial management remain important elements of Investec's sustainable growth strategy. The group continues to maintain a high level of liquidity and capital in excess of regulatory requirements," Koseff said.
The group currently has approximately £5.8 billion of cash and near cash available to support its activities.
"As a result of the weaker credit cycle we have seen a decline in the performance of the loan portfolio. Impairment losses on loans and advances have thus increased year on year, although they are expected to be at a lower level than that recorded in the second half of the 2008 financial year," Koseff added.
Koseff said the operating environment remained challenging and the uncertain outlook was not conducive to growth.
"The group's strategy remains to build a diversified and balanced portfolio of businesses. The group will continue to develop its existing platforms, seek to create additional operational efficiencies, contain costs and take advantage of opportunities that may present themselves across core geographies.
"As a specialist bank concentrating on niches the group knows and understands, Investec has a core level of sustainable earnings that should enable it to navigate through varying cycles and support the group's long-term growth objectives," Koseff stated. - I-Net Bridge
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