Investec expects its profits to slump by as much as 63% because of Covid-19 restrictions that reduced client activity and saw the banking group record "elevated levels" of credit losses.
The group, which completed the de-merger with its asset management business, Ninety One, when the latter listed as a separate entity on the JSE in March, said if it includes the asset manager's operations, its adjusted earnings per share could tank by up to 71%.
Investec will present its results for the six months due to end on 30 September in November. But the five months to the end of August have led the group to estimate that its annualised credit loss ratio could sit anywhere between 47 and 54 basis points because of increased impairments and Covid-19 provisions that were raised. The group's credit loss ratio, which gauges bad debt losses on loans, sat a 23 basis points in the previous interim period.
While Investec predominantly provides secured loans to niche target markets such as professionals and high net worth individuals, its CEO, Fani Titi, previously said that its banking operations would not be immune to disruptions caused by Covid-19 because many of these clients are self-employed individuals who had their incomes disrupted.
On Friday, Investec announced that it provided payment relief to loans equivalent to 23% of its book in South Africa, mainly for property and business clients. In the UK, it provided relief to loans equivalent to 13.7% of its book.
However, Investec's credit losses are still comparably better than most of its peers in the banking industry. Of the banks that recently reported half-year results, Absa saw its credit loss ratio jump to 277 basis points in the six months to June, Nedbank's shot to 194 basis points and Standard Bank's went up to 169 basis points.
But while on the lending front the situation looks gloomier than it was before the lockdown, the group said its Wealth & Investment businesses saw more people moving money into it. As a result, third-party funds under management increased by 14.1% to £51.4 billion (just over R1 trillion).