Investec Plc, which owns a bank and money manager in South Africa and the U.K., declined the most in more than four years after it said fiscal first-half operating profit will drop on rand weakness and market turmoil.
Adjusted earnings per share for the six months ending Sept. 30 are expected to be as much as 10 percent lower than a year earlier, the Johannesburg- and London-based lender said in a statement today. Investec, which reports results in November, fell as much as 8.6 percent in London trading.
“The returns are not acceptable,” Chief Executive Officer Stephen Koseff said in a presentation in Johannesburg. “We’re firing on two and a half cylinders out of three. There’s an element of the business that is still a work in progress.”
Investec earnings came under pressure after the rand depreciated 14 percent against the dollar this year, making it the worst performer of the major currencies tracked by Bloomberg. Profit at the company’s global private banking business won’t match the year-earlier period, weighed down by the performance of its U.K. and Australian units, Investec said.
Lending growth and fee income “are slightly behind our full-year estimates,” Greg Saffy, an analyst at RMB Morgan Stanley in Johannesburg, said today. “It appears the momentum at Investec Asset Management has also slowed, with lackluster inflows.”
Investec shares slid 3.6 percent, the most since June 5, to close at 425.80 pence in London, falling more than the FTSE 350 Banks Index, which dropped 1.8 percent. The stock lost 3.1 percent, the most in almost three weeks, to 67 rand by the close in Johannesburg.
The U.K. private bank was hurt by low levels of activity, while the Australian business was affected by “significant strategic restructuring,” Investec said in the statement. “The period under review was again characterized by volatility in the macro and geopolitical environment, all of which will have an impact on the group’s expected results,” the bank said.
Impairments are expected to be about 25 percent lower than a year earlier, while expenses will increase “moderately,” the bank said. Investec’s asset management unit recorded 1.2 billion pounds in inflows through the end of August, while third-party assets under management declined 4 percent.
“Investec is one of our top picks, behind FirstRand and Nedbank,” said Saffy, who recommends buying Investec shares. “We continue to believe that Investec’s quality of earnings is still improving.”