Investec warns of lower profits, despite healthy AM inflows

Added 16th September 2016

Investec cautioned profits would be “slightly behind the prior year”, despite positive H1 net inflows in its asset management arm.

Investec warns of lower profits, despite healthy AM inflows

Shares in Investec dipped 1.38% to 466p Friday morning following the lower group profit forecast, which it anticipates will be “well ahead” of the H2 2016 figure.

The “high levels of macro uncertainty” in South Africa and the United Kingdom, Investec’s key operating geographies, and the depreciation of the average rand against the sterling exchange rate took their toll on the overall group results, the firm said.   

In particular, Investec expects both its UK and South African specialist banking businesses to return weaker interim results, though the company blames increased investments in its UK operations and expenses relating to the formation of its Investec Equity Partners vehicle.

Current “activity levels appear to be stable” in the two businesses, according to Investec.

Despite this, Investec said its asset management and wealth arms had benefited from the recovery in equity markets and net inflows over the period, producing results “comfortably ahead of the year prior.”

The asset management group took in positive net inflows of £1.1bn and saw assets under management bloom by 14.8% to £86.9bn.

Investec's Wealth & Investment AUM grew to £50.4bn, up 11% since 31 March 2016. Net inflows were relatively more modest at £0.5bn.

In total, third party AUM rose 13.3% to £137.9bn, an increase of 10% on a currency neutral basis.

Investec signed off by assuring shareholders that its balance sheet and levels of liquidity remained strong.

"While the referendum result is clear, there remains uncertainty as to how and when this might be implemented. While 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," it said in a statement. 

"We have significant excess liquidity and sound capital ratios which continue to support our underlying balance sheet fundamentals". 

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