Bloomberg News

Investec Profit Falls 28% on Investment Banking, Property

November 17, 2011

(Updates with managing director’s comment in fourth paragraph, accounting gain in sixth.)

Nov. 17 (Bloomberg) -- Investec Plc, owner of a bank and money manager in South Africa and the U.K., said fiscal first- half profit declined 28 percent amid declining revenues from its investment-banking and property businesses.

Net income fell to 178.9 million pounds ($281.6 million) in the six months ended Sept. 30 from 247 million pounds in the year-earlier period, the Johannesburg and London-based company said in a statement today. Pretax profit from investment banking decreased 91 percent to 3.7 million pounds and profit from real estate declined 29 percent to 11.7 million pounds.

Investec is seeking to expand its asset- and wealth- management units and move away from property lending after incurring losses on Irish and Australian real estate. The company agreed to buy London-based Evolution Group Plc in September to bolster its investment-banking and private-client wealth management business in the U.K.

“When the financial crisis of 2008 started, we realized we could not be dependent on capital-intensive businesses,” Bernard Kantor, Investec managing director, said in an interview today. “Asset values are coming down, so that will of course affect performance, but we don’t run our businesses for the next six months. We take a long-term view.”

The stock dropped 1.2 percent to 363.3 pence as of 9:13 a.m. in London. The stock has declined 31 percent this year.

‘Particularly Bad’

Investec’s profit in the year-earlier period was boosted by an accounting gain tied to the company’s decision to purchase the portion of wealth manager Rensburg Sheppards Plc that it didn’t already own. Profit for the six months ending in September of this year rose 0.9 percent to 214.3 million pounds excluding the accounting gain, Investec said in the statement.

The investment-banking unit was hurt by the “sharp fall” in stock markets in August and September, which reduced the value of Investec’s investment portfolio, the company said in the statement.

“The investment-banking business is particularly bad,” Kantor said. “Corporate finance and advisory are really quiet at the moment. I think this volatility is going to continue for some time.”

The private banking unit’s loss widened to 4.9 million pounds from 3.9 million pounds in the year-earlier after Investec decided to shut its property development portfolio in Australia and Ireland. The Australian business has been hurt by “significantly increased” impairments on loans, according to the statement. Impairments for bad loans increased 17 percent from the year-earlier period.

--Editors: Keith Campbell, Steve Bailey.

To contact the reporter on this story: Jesse Westbrook in London at

To contact the editor responsible for this story: Edward Evans at

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