Release Date: November 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Investec PLC (IVTJF, Financial) reported solid results with adjusted earnings per share of 39.5p, at the upper end of their guidance range.
- Funds under management in their wealth business grew by double digits to £23.4 billion, with significant inflows.
- The company declared a dividend of 16.5p, a 6.5% increase over the prior period.
- Investec PLC (IVTJF) achieved a return on equity of 13.9%, within their upgraded through-the-cycle range of 13% to 17%.
- The South African business reported a commendable adjusted operating profit increase of 21.9% in a challenging market.
Negative Points
- The UK business saw a decline in adjusted operating profit by 5.4%, with the specialist bank down by 2.4%.
- The credit loss ratio increased to 42 basis points, at the higher end of their through-the-cycle range.
- Group costs increased significantly, with South Africa up 14% and the UK up 27%, raising concerns about cost management.
- The UK market remains highly competitive, impacting deposit pricing and profitability.
- The company faces challenges from geopolitical risks and changes in tax environments, particularly in the UK.
Q & A Highlights
Q: Can you explain how the 11% pre-provision operating profit growth translates to only 2% adjusted EPS growth?
A: The growth in pre-provision operating profit is due to a 5.6% increase in revenue and a 5.8% increase in costs, resulting in opening jaws. The adjusted EPS growth is impacted by an increased credit loss ratio and impairment charge. Additionally, the tax charge remained similar, but the UK absorbed a higher tax rate, and new additional tier one capital instruments were issued at a higher cost due to the current rate environment. These factors combined to influence the adjusted EPS growth. - Nishlan Samujh, Group Finance Director
Q: With a 14.8% common equity tier one ratio in South Africa, how are you thinking about capital given your strong generation?
A: We are preparing for Basel 3.1, which will adjust our risk-weighted assets calibration. Despite this, we continue to generate surplus capital in a low-growth environment. We expect growth in risk-weighted assets to pick up in an improving environment, which will absorb some of this capital. If the capital ratio becomes unattainable, we will consider other actions. - Nishlan Samujh, Group Finance Director
Q: What are your plans regarding group costs, given the 14% increase in South Africa and 27% in the UK?
A: We are managing stranded costs from the combination with Rathbones and have committed to significant sponsorships to enhance our brand presence. We are monitoring group costs closely and will continue to manage them actively. - Fani Titi, CEO
Q: How do you quantify the synergies from the Rathbones deal, and what risks could result in negative earnings surprises?
A: We are pleased with the integration progress, which is on track. The synergies are ahead of schedule, particularly with the release of the Finsbury property. However, we limit our comments to what Rathbones has disclosed, as we do not control their operations. We remain committed to the strategy and expect benefits in the medium term. - Fani Titi, CEO
Q: Given the strong capital position, would you consider buying back shares to limit dilution?
A: Last year, we executed a significant buyback of shares. The increase in the weighted average number of shares is due to the maturity of certain options in our share schemes, which we hold in treasury stock. There are no new issuances of shares. - Nishlan Samujh, Group Finance Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
