Investec ready for another year of strong financial returns

File photo of Investec CEO Fani Titi presents the company interims at their offices in Sandton, north of Johannesburg.

File photo of Investec CEO Fani Titi presents the company interims at their offices in Sandton, north of Johannesburg.

Published May 24, 2024


Revenue momentum at higher-end lender Investec would likely continue into the 2025 financial year, underpinned by book growth, stronger client activity levels and success in client acquisition strategies, partly offset by interest rate cuts, CEO Fani Titi said yesterday.

Speaking at the release of results for the year to March 31, he said the bank’s management anticipates the return on equity (ROE) to be 14% in the new financial year, with the southern Africa business expected to report an ROE of 18.5%, while the UK & Other operations ROTE (return on tangible equity) was expected to be 14%.

The forecast group ROE is slightly lower than the 14.6% achieved in 2024, above 13.7% in 2023 and in the midpoint of the group’s 12% to 16% target range.

He said costs would continue to be well managed despite inflationary pressures and continued investment in the business, with cost-to-income ratio expected to be 54%. This figure was also marginally above the 53.8% achieved in 2024.

Total operating costs increased 3.2% in 2024, including a £30 million provision for the potential financial impact of the recently announced industry-wide Financial Conduct Authority (FCA) review into historical motor finance commission arrangements and sales in the UK.

The credit loss ratio was forecast to be within the through-the-cycle range of 25 basis points (BPS0 to 45bps for the new year. Southern Africa’s was expected to be close to the lower end of the range of 15bps to 35bps. UK & Other’s credit loss ratio was expected to remain elevated between 50bps and 60bps in the short term.

Titi said they remained well positioned to support clients amid the uncertain macroeconomic outlook.

“We have strong capital and liquidity levels to navigate the current environment and pursue our identified growth initiatives in our chosen markets,” he said.

The group announced new medium-term targets. Significant actions in 2024 included the combination of Investec Wealth & Investment UK (IW&I UK) with the Rathbones Group, and completion of about R6.8 billion in share buy-backs to optimise capital in South Africa.

Other actions included disposing of the property management companies to Burstone Group, the restructure of Bud Group Holdings in the prior year to facilitate Investec’s orderly exit, and the distribution of a 15% shareholding in Ninety One in the prior year.

“The optimisation of the South African capital base is substantially complete, we are at the early stages in the journey to migrate the UK capital measurement from a standardised to the internal ratings-based approach,” he said.

Bud Group Holdings has announced plans to sell Assupol to Sanlam. Assupol is a significant asset within the group of assets earmarked to facilitate Investec’s and other shareholders’ exit from Bud Group Holdings.

A final dividend of 19p per share (17.5p) would result in a total dividend of 34.5p (31p) for 2024, translating to a 44.2% payout ratio.

Overall, group revenue increased 5% from £1.99 billion (R40bn at current exchange rates) to £2.09bn (R49bn) in the past year. Headline earnings per share increased 22.7% in rand terms to 72.9 pence (R17.16).

The group’s credit loss ratio on core loans increased to 28bps, which was nonetheless at the bottom end of the group TTC range of 25bps to 35bps, but higher than the 23bps a year before.