Investec Group H2 Earnings Call Highlights

Investec Group LON: INVP reported resilient annual results despite what Chief Executive Officer Fani Titi described as a “very challenged environment” shaped by geopolitical uncertainty, market volatility and rapid technological change.

Titi said the group’s conservative positioning on capital and liquidity had enabled it to continue supporting clients, reinvest in the business and return capital to shareholders. He said Investec remained in a heightened investment period aimed at building “a larger, better business for our clients,” with management expecting the program to begin showing positive results from 2028.

Adjusted earnings per share rose 4.8% for the year, while net asset value increased 8.3%. Titi said funds under management grew at a double-digit rate, with loans and advances and deposits both increasing in the high teens, reflecting continued client activity and trust in the franchise.

The group reported return on equity of 13.6%. Titi noted that the figure was affected by the September 2023 combination of Investec Wealth & Investment with Rathbones, which increased the capital base. On a like-for-like basis, he said the return was 1.2 percentage points higher than the prior comparative numbers.

Revenue Growth Offset Lower Interest Income

Group Chief Financial Officer Nishlan Samujh said adjusted operating profit increased 3.4% to GBP 951 million from GBP 920 million, while total revenue rose 4.2%.

Net interest income declined 1.6%, reflecting lower average interest rates and the effect on endowment earnings. Samujh said loan book growth and improved deposit funding helped offset the pressure. Non-interest income increased 13.6%, supported by stronger client activity, fee generation and positive realizations of certain exposures.

Operating costs rose 4.7%, with fixed costs increasing above inflation in both main geographies. The group’s cost-to-income ratio was 52.9%, within its guided range of 52% to 54%. Samujh said Investec expects to continue operating within that range while absorbing technology and platform investment costs.

The credit loss ratio improved slightly to 36 basis points from 38 basis points. Titi said credit quality remained good, though he warned that interest rates may stay higher for longer because of inflation risks tied to geopolitical developments, including conflict in the Middle East.

Dividend Increased, Buyback Completed

Investec’s tangible net asset value increased 9.2% to GBP 553.1p. The board declared a final dividend that brought the total dividend for the year to GBP 38.5p, up 5.5% from the prior period.

Titi also said the group completed the share buyback announced last year, returning about GBP 110 million, or ZAR 2.5 billion, to shareholders. He said Investec’s dividend policy remains unchanged and that the group will continue to manage capital dynamically, prioritizing reinvestment in the business before returning excess capital through buybacks or special dividends.

Technology Spending and AI Deployment Continue

Samujh said Investec’s IT spending remained about 20% of the overall cost base, totaling GBP 246 million for the period. Around half of that spending was directed toward growth initiatives and platform enhancement, including modernization and the implementation of new technologies.

He said the group is deploying about GBP 282 million from 2025 to 2028 into its platforms, including investments that support the mid-market strategy, private client strategies and new systems. Most of that investment is being expensed through the income statement rather than capitalized.

Samujh also said Investec is beginning to see benefits from artificial intelligence, though it is too early to measure the full impact. He said the organization has 7,777 permanent employees and “800 agents” running within the business. Cloud modernization has increased to 58%, up from 48% last year and 8% when the group first began discussing the transition with investors.

Regional Performance Mixed but Stable

In the U.K., Samujh said operating profit increased 1.3%. The wealth and investment contribution, representing Investec’s share of Rathbones’ earnings, grew 17%, while the banking business reported slightly lower profit as lower interest rates weighed on earnings.

Samujh said Rathbones reported assets under management of GBP 113.6 billion at the end of March and remains committed to reaching a 30% operating margin by the end of its financial year ending Dec. 31, 2026. He said achieved synergies of GBP 76 million were ahead of what had been communicated when the transaction was executed.

In South Africa, operating profit increased 5.2%. The wealth and investment business generated 8.2% operating profit growth, while the banking business grew 6%. Samujh said net interest income increased in South Africa despite lower interest rates, supported by retail deposit growth and improved funding margins. The South African credit loss ratio was 14 basis points, compared with 15 basis points last year.

Guidance and Q&A

Titi said Investec remains on track to achieve its 2030 targets of 16% return on equity and 18% return on tangible equity. For the next year, the group expects ROE between 13% and 14%, broadly in line with the current year. For 2028, Titi guided to ROE of 13.8% to 14.2%, with an expected inflection as investment spending peaks and new revenue begins to contribute.

During the Q&A, Titi said Investec’s low credit losses in South Africa reflect both the quality of its client base and the group’s conservative risk culture. He said the group may take more risk as it expands in business and commercial banking, but added that client selection will remain disciplined.

Asked about U.K. corporate lending stages, Ruth Leas, CEO of Investec Bank, said there was “no trend deterioration” and described movements across the book as normal. She said movements into stage 3 had slowed relative to prior periods.

Titi also addressed potential acquisitions in capital-light businesses, particularly wealth management. He said Investec remains interested in bolt-on opportunities but will maintain capital allocation discipline and seek returns above the cost of equity. He reiterated a desire for capital-light businesses, especially wealth, to contribute at least one-third of group earnings over time.

On discretionary motor finance provisions, Titi said Investec’s exposure was small and that conservative assumptions used in its initial provision meant the group remained adequately provided after the final redress scheme was announced.

About Investec Group LON: INVP

Investec Group engages in the provision of various financial products and services in South Africa, the United Kingdom, and internationally. The company provides private banking services; wealth services, including wealth and portfolio management, stockbroking, and offshore and retirement investment, and intergenerational wealth solutions; savings accounts; personal and property financing, and finance for practice; and insurance solutions covering severe illness, disability, life, mortgage and income protection, and business overloads.

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