Investec H1 operating profit seen 'comfortably ahead' despite challenging backdrop

FTSE 250 financial services company Investec said on Friday that its operating profit for the half year is expected to be "comfortably ahead" of the previous year, with revenue also seen ahead despite uncertainty in its key operating geographies.

The Wealth & Investment business is expected to report results "comfortably" ahead of the previous year, with results from the Asset Management division seen in line with the prior period. Both divisions benefitted from higher levels of average funds under management supported by favourable equity markets and sound net inflows.

Meanwhile, the Specialist Banking business is expected to report results ahead of the previous year, while results from the South African Specialist Banking business are likely to be "well ahead". It was a different story for the UK Specialist Banking business, however, with results seen "well behind" the prior period.

Investec said the first half continued to see macro uncertainty in its key operating geographies, with the UK economy growing at a slower pace as rising inflation squeezes household spending and Brexit continues to create uncertainty.

In South Africa, the economy came out of recession in the second quarter but business and consumer confidence remain low and the political environment remains challenging. Investec said this has been offset to a degree by supportive global markets and an improved outlook for the global economy.

Operating profit for the year is expected to be comfortably ahead of the year before thanks in part to the appreciation of the rand against the pound and an improvement in revenue.

From the end of March to the end of August, Investec said third party assets under management grew 6.1% to £160bn, customer accounts were up 1.3% to £29.5bn and core loans and advances rose 4.5% to £23.7bn.

"Activity levels have remained reasonable and the group’s client base has demonstrated resilience under mixed economic backdrops. Positive overall performance has been supported by diverse revenue streams and strong franchise businesses.

"The group continues to focus on execution of strategic initiatives, mindful of the tough macro environment and uncertainty expected to continue into the second half of the group’s financial year."

At 1100 BST, the shares were down 1.7% to 559.50p.