Investec Plc (INL), the owner of a bank and money manager in South Africa and the U.K., said earnings will drop because of “volatile” markets and sluggish activity in the lender’s fiscal second half, missing estimates.
Operating profit is expected to fall as much as 16 percent for the year ended in March, the company said in its so-called pre-close briefing statement today. Earnings per share excluding one-time items are forecast to be as much as 27 percent lower, which is more than the 9 percent decline predicted by nine analysts surveyed by Bloomberg, who estimated 39.2 pence.
“The U.K. business is expected to report operating profit marginally ahead of the prior year,” the lender said in the statement. “The South African business is expected to report operating profit in rands in line with the prior year. As reported in the group’s interim results, the Australian business is expected to report an operating loss.”
Investec, which was founded in Johannesburg in 1974 and listed its shares in London in 2002, still holds the greatest proportion of its assets in South Africa. It has been expanding its wealth business in the U.K. and agreed in September to buy London-based Evolution Group Plc as it sought access to Evolution’s wealth-management unit. While South Africa has avoided being drawn into the European debt crisis, Investec’s London business has experienced the effects.
“Given the changing financial, regulatory and economic landscape, the group’s return on equity and capital adequacy targets have been under review,” the lender said in the statement today as it lowered its target for ROE (INVP) to 12 percent to 16 percent from 20 percent. Investec also raised its capital adequacy targets to between 15 percent and 18 percent from 14 percent to 17 percent.
Investec closed 1.3 percent lower at 400 pence in London. The stock has risen 18 percent this year.
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