South Africa’s most exclusive bank takes UK hit

Investec is expected to report a mixed bag for its 2025 financial year, as the private bank’s UK operations did not perform nearly as well as its South African business.

Investec is a leading international Bank and Wealth Manager that started from a small finance company founded in South Africa in 1974.

Today, it is an international organisation with listings on the London and Johannesburg Stock Exchanges.

Investec released a trading update on 20 March 2025, which revealed its expected results for the 11 months ended 28 February 2025.

This update revealed a mixed bag for the banking giant. It expects its operating profit to grow by between 5% and 12%, while its basic earnings per share are projected to decline by around 30% to 36%.

The company explained that this discrepancy is largely due to once-off gains it made in its 2024 financial year, specifically its UK Wealth and Investments combination with UK-based Rathbones.

However, the bank reported that its cost-to-income ratio remains strong and is expected to improve from 53.8%, driven by revenue growth that outpaced cost increases.

Investec’s return on equity (ROE) is projected to be between 13% and 14%, which is within the bank’s medium-term target of 13% to 17%.

From a segmental perspective, Investec’s South African operations far outperformed its UK business.

In Southern Africa, Investec’s operating profit is expected to grow by at least 5% in rand terms, with an ROE of between 17.7% and 18.7%.

This segment’s core loans grew by 9% in rand terms, with strong private client and corporate lending.

Its credit loss ratio is expected to be between 15 and 35 basis points.

However, in the UK, Investec’s operating profit could range between 4% lower to 4% higher compared to the previous year.

Its credit loss ratio is also expected to be at the upper end of 50 basis points to 60 basis points, mainly due to impairments recognised in the period.

This segment’s ROE is projected between 13.5% and 14.5%.

Overall, Investec said it expects to report strong revenue growth, driven by solid client acquisition and net inflows in discretionary and annuity funds under management.

The bank’s net interest income also benefitted from loan book growth and lower cost of funds in South Africa.

In terms of non-interest revenue, Investec received a boost from increased fee-generating activities in banking, a strong performance from its South African Wealth and Investment business, and investment income growth from fair value gains and dividends.

The South African Wealth and Investment business saw its funds under management increase by 14.5% to £24.0 billion.

The bank also managed to remain cost-efficient in the 2025 financial year as its cost-to-income ratio improved.

Investec’s year-end results for the year ending 31 March 2025 are scheduled for release on Thursday, 22 May 2025.