Investec PLC sinks as bank flags hefty profit drop in trading update

(LON; INVP ) shares sank as it said underlying earnings for the year to March will between 20-29% down on the previous year even with a recovery in the second half.

Fani Titi, group chief executive of the South Africa-based bank, said he was encouraged by the momentum and the continued recovery of the markets after the COVID-19 shock but there was no guidance for beyond the current year to end-March.

Investec has already taken a £55mln charge impairment charge for its UK structured products book and said lower interest rates and the weakness of the rand against the pound had also affected profits.

The second-half performance was better than the first six months, it said, reflecting an improving trend particularly in the last quarter.

Losses in the UK structured products book were in line with guidance, while bad debts also improved said the bank with a reduction in clients seeking COVID-19 relief over the period.

Currently, 2.3% of UK and an immaterial portion of South Africa’s exposures are under some form of COVID-19 relief compared to the peak of 13.7% and 23% respectively.

For the financial year ending March 31, the company expects adjusted operating profit to be between 16% and 24% lower than 2020’s £610mln with adjusted earnings per share in a range of 24p and 27p from 33.9p a year ago.

Investec said that following the lifting of the restrictions on dividends by the it will consider making a final payment.

Separately, Investec said Perry Crosthwaite will step down as Investec’s chair at the annual general meeting on August 5 with two other non-executive directors (Mark Malloch-Brown and Charles Jacobs) also stepping down.

Shares fell 7% to 214.3p.