Social, economic impact of Covid-19 pandemic takes toll on Investec

INVESTEC was left to count the cost of the Covid-19 outbreak after the financial services group took a hit of £105 million (R2.68 billion) to its adjusted operating profit in the year to end March.

The group reported a 16.8 percent decline in adjusted operating profit to £608.9m, down from £731.9m, while adjusted operating profit from continuing operations of £419.2m was 24.1 percent lower compared with £552.5m reported to last year.

Its adjusted earnings per share (Eps) declined by 23.6 percent to 46.5 pence a share and the group said, in light of regulatory guidance provided to banks in both South Africa and the UK, the board had decided not to declare a final ordinary dividend.

This resulted in the full year dividend of 11p an ordinary share, down from last year’s 24.5p. The group said the financial year was characterised by weak economic fundamentals like Brexit-related uncertainties in the UK, geopolitical tensions and persistent economic weakness in South Africa.

The conditions worsened as a result of the Covid-19-related dislocation in global markets during the last quarter, impacting its trading income, investment income through fair value adjustments and expected credit loss charges.

Chief executive Fani Titi said in the course of the past two months, the social and economic impact of the pandemic on their customers and the markets had affected the performance of the group.

“Earnings were characterised by growth in client-related revenues and much tighter cost containment. This was more than offset by significantly lower investment and trading revenues, and higher expected credit loss charges given the economic backdrop,” Titi said.

However, Investec said its client franchises showed resilience during the period despite the core loans remaining broadly flat.

In specialist banking, the South

African business generated adjusted operating profit of £276.4m, a decline of 10.9 percent while in the UK, the division reported that adjusted operating profit declined by 44.3 percent to £106.7m.

In the wealth and investment, the group said net inflows and higher average assets under management supported stable revenue. As a result the South African adjusted operating profit increased by 2.3 percent to £26.8m while in the UK adjusted operating profit declined by 10.8 percent to £63m.

Titi said the outlook remained fluid and difficult to forecast with the Covid-19 pandemic uncertainty.

“We expect the year ahead to be challenging as the economic recovery from the devastating effects of Covid19 is likely to be protracted. Client activity is likely to be muted,” he said.