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South Africa: Investec Weathers the Storm to Beat Forecast
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Business Day (Johannesburg)
16 May 2008
Posted to the web 16 May 2008
Renée Bonorchis
Johannesburg
INVESTEC has weathered a tough year, including the subprime mortgage crises in August, with full-year results beating market expectations.
While CE Stephen Koseff did not believe the global problems had come to an end, he said yesterday the financial storm was "almost over".
Net interest income rose almost 70% to £583,4m and, having disposed of a property management company during the year, Investec was able to translate its stronger income figures into a 15% rise in earnings attributable to shareholders of £391,6m while dividends climbed 8,7% to 25p.
Koseff said in terms of subprime exposure, the bank was carrying £16m on a face value of 10 times that number.
"We are carrying them at about 12% of face value. We don't expect further writedowns but you can't know that," Koseff said. He said that in view of Investec's profitability, £16m was not a significant number.
According to a survey by the group, which is listed on the JSE and in London, a handful of analysts had expected adjusted earnings a share of 56,6p but the bank managed 56,9p. This was also above the consensus of five analysts polled by Reuters, who expected 54,7p.
Jan Meintjes, an analyst at Gryphon Asset Management, told Bloomberg the Investec figures were an "excellent result" given the tough trading conditions. "I don't think the quality of earnings was great, but this is also a sign of the difficult markets. Results were generally in line with what I expected, with the UK lower, but SA better," he said .
SA accounted for 63% of Investec's operating profit, while the UK made up 31% and Australia contributed 6%. However, the weakening of the rand had not worked in Investec's favour and its default loan ratio increased to 1,7% from 1,3%.
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The group's share price rose 4,5% yesterday to 377p in London and 1,35% in Johannesburg to R56,15. Investec's price has been harder hit than other banks in SA after the global credit crunch. Since August last year it has sloughed off more than 37% of its value. Koseff said the shares sell-off had been indiscriminate; South Africans had been buying "because they see value and they know us".
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