Investec reported a strong performance in the year to March 31 with its 13.9% return on equity in line with guidance from a year ago and a new strategy was outlined for the next five years.
Headline earnings a share at 72.6 pence were barely changed from 72.9 pence last year. Pre-provision adjusted operating profit increased by 7.8%. Robust capital and liquidity levels were maintained.
CEO Fanie Titi said in an online presentation that a strategy to simplify and focus the business, communicated to the market in 2019, had resulted in a 200 percent point (bps) structural improvement in group returns.
“We are scaling and leveraging our client franchises, allocating capital with discipline, and investing in clearly defined growth initiatives to enhance our existing platform,” he said.
He said they aimed to achieve incremental returns of a further 200 basis points over the next five years, resulting in a return on equity at the upper end of an upgraded medium-term target range.
Revenue for the past year, which increased to £2.19 billion from £2.01bn over the past year, was supported by client acquisition and entrenchment strategies, strong net inflows in discretionary and annuity funds under management, as well as growth in average interest-earning assets.
Net interest income benefitted from higher average lending books and lower costs of funds in Southern Africa, as a result of the strategy to optimise the funding pool, partly offset by the effects of deposit repricing in the UK.
Over the next five years, in South Africa, the plan was to accelerate the client acquisition strategy, particularly in the high-income segment.
Investment in the wealth-led international Private Client business would continue. These initiatives would facilitate increased market share, and enhance the breadth of the client offering, enabling more effective competition in the market.
The cost-to-income ratio already incorporated investment spending on new growth initiatives, so a significant increase in this ratio was not anticipated, with the ratio expected to remain below 55% in the medium term.
Shareholder returns would also continue to be optimised. “We will allocate capital to activities that generate returns above our cost of capital. The group manages its capital dynamically, maintaining an appropriate balance between total returns to shareholders, investment in the business, and holding strong capital levels.”
A comprehensive banking proposition would accelerate the next phase of growth for our UK Private Client business, where the group had a relatively small market share.
Client engagement would be deepened, client acquisition would increase, higher mortgage growth among high-net-worth individuals would be supported, and the cost of funding would be reduced.
A full-suite product offering would include multi-currency accounts and credit cards while improving lending capabilities.
The aim was to increase the current client base of 7 500 to about 18 500, resulting in a market share of 18% by the 2030 financial year.
The group also intended to grow into the corporate mid-market in the UK and South Africa significantly over the next five years.
In South Africa, the client acquisition strategy would be accelerated, particularly in the high-income segment. “We will continue to invest in our wealth-led international Private Client offering to provide an integrated holistic global proposition to our clients.”
Titi said a priority was to increase the earnings contribution from capital-light activities, and organic and inorganic opportunities to achieve this objective would be explored.
Financial director Nishaln Samujh said the economies in the UK and South Africa had been lacklustre, while the operating environment was volatile, and they expected further 50 to 75 basis point cuts in the interest rates in South Africa this year, and two to three interest rate adjustments still to come in the UK.
Pre-provision adjusted operating profit increased by 7.8% to £1.04bn in the past year, as revenue grew by 5% against operating cost growth of 2.8%. The credit loss ratio (CLR) on core loans was 38 bps versus 28 bps in 2024, within the group’s through-the-cycle target range of 25 bps to 45 bps. The overall credit quality remained strong, with no evidence of trend deterioration, said Titi.
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