May 22, 2003
By Edward West
Cape Town - London- and Johannesburg-listed Investec yesterday showed a 28.6 percent decline in headline earnings to £82.6 million (R1.5 billion) for the year to March. But the investment bank managed to maintain its dividend for the year.
Headline earnings a share before exceptionals decreased 28.3 percent to 90.9p - or 21 percent in rand terms to R13.671 - about midway between analysts' forecasts of 80p and 95p.
The total dividend for the year was 54p, but in rand terms it was down 9 percent to R7.51.
Chief executive Stephen Koseff said the results were in line with expectations. The results reflected the difficult environment which affected all global investment banks - the FTSE all share index and the JSE Securities Exchange all share fell 32.1 percent and 30.3 percent, respectively.
Additionally, the rand declined 9 percent in value and 80 percent of operating profit was generated in southern Africa.
The bank ended the year streamlined, with a dual listing in London and an empowerment deal in South Africa, without which local growth prospects would be much lower, said Koseff.
In terms of cost cuts, the group started the past financial year with £486 million of costs and it was ending the financial year with £348 million. In addition, the number of staff worldwide had fallen to 4 300 from 5 600.
In spite of the lower cost structure, the cost to income ratio increased as a result of declining revenues to 79.8 percent from 72 percent. Koseff said the aim was to grow the revenue line to bring costs down further
.
He said there were signs of improvement in investment banking in the UK. In April six deals were done, although there was no indication how sustainable that level of activity was.
In South Africa there was a lack of initial public offerings, but black empowerment, restructuring and merger and acquisition activity meant reasonable deal flow in investment banking.
Operating profit declined to £84.8 million from £158.6 million.
In the UK, Carr Sheppards Crosthwaite and Investec Asset Management raised assets in spite of the hostile environment for equity-related businesses.
Private banking grew profit both here and in the UK.
Annuity income as a percentage of operating income grew to 71.3 percent from 68.7 percent, demonstrating that the breadth and regional diversity of Investec's financial services model had offset some of the negative effects of the market on other income streams.
Net interest income fell 19.8 percent to £131.4 million, mainly as a result of the winding down of the interest rate business in the UK and the depreciation of the average rand/pound exchange rate.
Koseff said Investec was well capitalised going forward. Total capital resources increased 5.7 percent to £1.013 million.
Investec's capital adequacy ratio is 12.6 percent, surpassing the 10 percent minimum required by the SA Reserve Bank.
Investec lost R1 to close at R91.50 yesterday.
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