Investec Falls as UK Bank Weakness Offsets SA Strength

Investec (LON: INVP), the dual-listed UK and South African bank and wealth manager, said in a pre-close trading statement this morning that first-half results, due on 19 November, are expected to come in broadly in line with the guidance it gave in May.

Shares fell to around 646.5p in early trading, down 2.2% from Thursday’s close of 661p, having touched an intraday low of 640.5p.

At group level the numbers looked steady. Investec guided adjusted earnings per share of 41.7p to 43.3p, up 3-7% on the 40.5p reported a year earlier, with group return on equity, a measure of profitability against shareholder capital, guided at 13.1% to 13.5%, within its 13.0% to 14.0% target range.

The detail beneath that headline told a different story. Investec’s UK business, including its stake in wealth manager Rathbones, guided adjusted operating profit down 2-6% year-on-year, with UK return on tangible equity guided at 12.3% to 12.7%, near the bottom of its 12.5% to 13.5% target range.

The Southern African business moved the opposite way, guiding adjusted operating profit up to 14% higher in sterling terms, with SA return on equity guided at 18.5% to 19.0%, near the top of its range.

That divergence appears to explain why the shares fell despite guidance that, at group level, was broadly unchanged from May. Markets focused on the deterioration in the UK franchise rather than the in-line group figures or the offsetting strength from South Africa.

Investec’s full first-half results, including any further detail on the split between its UK and South African businesses, are due on 19 November.