By Chris Dorrell
Higher interest rates continued to provide a welcome tailwind for Investec, as the firm upped its dividend on the back of higher annual profit figures.
Operating income at the bank rose by five per cent in the year to £2.1bn, up from £2.0bn last year.
The revenue boost came as interest income rose 5.6 per cent in the year, thanks to “higher global interest rates”. Non-interest income also increased, with net fee and commission income rising by nearly five per cent.
This helped adjusted operating profit rose eight per cent year on year to £884.5m, up from £818.7m last year.
Investec reported that lending increased by 1.7 per cent in the period, with higher corporate lending in both the UK and South Africa. Private client lending in South Africa also grew.
Expected credit loss impairment charges decreased by 2.1 per cent thanks to recoveries from “previously written off exposures in South Africa”.
“Asset quality remains within Group appetite limits, with exposures to a carefully defined target market well covered by collateral,” the firm said.
The bank will pay out a total dividend for the year of 34.5p per share, up from 31p last year and translating into a payout ratio of 44.2 per cent.
Looking ahead, Investec said: “Revenue momentum is expected to continue, underpinned by book growth, stronger client activity levels and success in our client acquisition strategies; partly offset by expected cuts in interest rates”.
It said it expected to make a return on equity of between 13-17 per cent in the medium term. In the UK, this will be driven by the “increasing scale and relevance of our unique corporate mid-market position“.
“The group has delivered strong financial performance notwithstanding the uncertain operating environment that prevailed throughout the financial year,” Fani Titi, chief executive, said.
“This performance demonstrates the continued success in our client acquisition strategies which underpinned the increased client activity and loan book growth, supported by the tailwind from the high interest rate environment,” Titi continued.
