Investec profits up despite political clouds in the UK and South Africa

Financial services firm Investec reported increased profits today as funds under management rose, in spite of political uncertainty in its two main markets, the UK and South Africa.

Statutory operating profits rose by 11.8 per cent year-on-year in the first half of its financial year, although that represented a rise of 1.1 per cent on a currency-neutral basis, the firm announced today.

The firm drew in £3.6bn in funds under management in its asset management and wealth and investment businesses, with “favourable equity markets” also boosting performance.

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However, the combined UK and other businesses lagged, with a five per cent drop in profits compared to what it described as a “particularly strong” performance in the prior period.

Meanwhile the firm raised its dividend by five per cent, described as “disappointing” by Stephan Potgieter, an analyst at UBS.

Stephen Koseff, Investec chief executive, told City A.M. they were “a reasonable set of results in a tricky world”.

The firm, which offers banking and investment management services, could up its dividend in the second half of the year provided external conditions improve, he said. However, he added he expects “a few lumps in the road” depending on geopolitical issues.

The main operations of the firm, which traces the roots for part of its business as far back as 1827, are based in South Africa and the UK, both of which are undergoing political ructions.

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“Both geographies we work in are going through a difficult period,” Koseff said.

On Brexit Koseff said he would prefer a softer approach, retaining much of the trading relationship and “minimising the impact of the dissolution”.

The financial services firm will not be forced to move many, if any, staff to European jurisdictions after the UK leaves the EU, Koseff said.

However, if the firm is forced to set up a subsidiary in the EU to continue to serve clients within the bloc it could harm profits, he added.

Koseff said: “The minute you have to capitalise a separate institution there are all sorts of costs.”

Meanwhile, there is likely to be little in the way of spillover from the power struggles in Zimbabwe, although any outcome which brought a more stable government would be welcome for the South African economy, a trading partner, he added.

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Full story: Investec profits up despite political clouds in the UK and South Africa: City A.M.

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