Investec yet to recover from its Brexit blues
SPECIALIST banking and asset management group Investec has yet to recover from the impact of Brexit, which saw its share price dropping by 17.4 percent within just two days of the British vote in June to leave the EU.
Almost three months have elapsed, but the share price has not recovered from the onslaught, as it continued to trade below the R88 a share level on the JSE on Friday afternoon.
Investec’s price per share fell to R85.48, losing R18.01 in those two days alone from R103.49. It has since continued to trade sideways below the R90 a share level. The trading update released by the company on Friday is not providing good news for the company either, with profits expected to decrease even further.
Economic storm
While the share price felt the Brexit impact, the company said its diversified business was able to weather the economic storm provided by such economic downturns.
“While the referendum result is clear, there remains uncertainty as to how and when this might be implemented. We cannot predict the impact of Brexit on levels of economic activity, our diversified business model with multiple income streams should provide resilience as it has done in the past during times of economic uncertainty.
“We have significant excess liquidity and sound capital ratios, which continue to support our underlying balance sheet fundamentals,” group said.
Investec currently holds £13 billion (R239bn) in cash and near cash balances of £6.9bn in Investec Limited and £6.1bn in Investec Plc, which amounts to 48 percent of customer deposits.
On Friday, the group said its results had been marginally the impacted by the depreciation of the average rand against the pound exchange rate of approximately 3 percent over the period.
Uncertainty
The bank said the first half of the group’s financial year continued to see high levels of macro uncertainty in its key operating geographies.
“Against this backdrop, the Asset Management and Wealth and Investment divisions are expected to report results comfortably ahead of the prior year. Both divisions have benefited from higher levels of average funds under management,” the group said.
Investec is expecting to report operating profit slightly behind the prior comparable period, due to high investment spend in its UK specialist bank and changes to accounting policies in the local banking business.
Although Investec expects results that are under pressure, the revenue is anticipated to be ahead of the prior six months with impairments also expected to be in line with estimates.
The group grew funds under management by 13.3 percent to £137.9bn between March 31 and August 31. Deposits increased 12.7 percent to £27.1bn over the five months, while loans and advances increased 10.5 percent to £20bn.
Investec shares dropped 2.99 percent on the JSE on Friday to close at R85.85.