Investec earnings drop

Johannesburg - Investec said on Friday that for the quarter ended June 2009 compared to the quarter ended June 2008 attributable earnings have declined 26%. The group is, however, trading well ahead of the last quarter of the 2009 financial year, it said.

The reasons given for the decline in attributable earnings are net operating income (after expenses and minorities but before impairments on loans and advances) decreased by 12% and defaults have continued to increase in line with expectations, with the credit loss ratio on core loans and advances amounting to 0.8% annualised for the quarter (2008: 0.3%).

The group added that expenses continued to be tightly managed and have declined by 7%.

The group said its diversified business model, sound balance sheet and recurring revenue base continue to support profitability in challenging economic conditions.

In an interim management statement, Investec added that its recurring revenue base and operational diversity have continued to support profitability across its core geographies.

The group has maintained its disciplined focus on managing risk, building capital and preserving liquidity. Operating fundamentals and activity levels within the group's businesses, however, continue to be negatively impacted by weak global economic conditions.

The group's three core geographies remain profitable with recurring income as a percentage of total operating income amounting to approximately 65%.

As at end June 2009 the capital adequacy ratio of Investec plc (applying UK Financial Services Authority rules to its capital base) was 16.0% and the capital adequacy ratio of Investec Limited (applying South African Reserve Bank rules to its capital base) was 14.6%.

The group has a strong liquidity position and currently has approximately £5.5bn of cash and near cash available to support its activities.

Since 31 March 2009 - the end of the group's financial year - core loans and advances grew by 1.0% to £16.3bn, customer deposits increased by 6.4% to £15.5bn and third party assets under management increased by 9.7% to £53.6bn.

The group's gearing ratio remains low at approximately 12 times and the advances to customer deposits ratio is approximately 1 times.

Since end June 2009 the group has via a tender offer acquired £36.7m in aggregate principal amount of its £350m Fixed/Floating Undated Subordinated Callable Step-Up Notes issued under its Euro Medium Term Note Programme (RNS announcement made on 7 July 2009) plus a further £12.5m in the open market. In addition, the group has acquired £18.4m principal amount of 9.00%.

Looking ahead, the group said notwithstanding the improvement in some financial markets since the group's year-end the global environment remains uncertain. Investec's geographical and operational diversity continues to enable it to navigate a steady course.

Investec has a sound balance sheet and the group will continue to leverage off its existing platforms, seeking to create additional operational efficiencies and organic growth opportunities across all geographies.

The group will be holding a pre-close briefing on 17 September 2009 at which it will provide further detail on the performance of its businesses, it said.

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