UPDATE 2-Investec shares drop as British bank drags again

  • Reuters
  • Stock Market News
UPDATE 2-Investec shares drop as British bank drags again

* Investec expects profit to be 20-29% lower

* Shares fall 4.8%

* CEO says no concerns around paying final dividend

* Chairman to step down

(Recasts, updates shares, bullets, CEO comments, adds details)

JOHANNESBURG, March 19 (Reuters) - South Africa's Investec INLJ.J INVP.L warned of an up to 29% drop in full-year profit, citing its ailing British bank and sending its shares down almost 5% on Friday.

Investec's British operation has long dragged on the group, and high hedging costs related to the division's structured deposits book have further soured sentiment around it over the last year.

Though it has since announced plans to wind the book down, it expects to continue incurring costs, including another 53 million pounds in the last six months of its financial year.

CEO Fani Titi told reporters Investec had made "good progress" on efforts to reduce the risk by selling off parts of the book.

He added the costs for the second half of the year to March 31 were in line with guidance. But when combined with others related to restructuring, investors were left disheartened.

"The disappointment lies in the UK bank," said Neelash Hansjee, portfolio manager at Old Mutual (LON: OMU ), adding this contrasted with a good performance at Investec's wealth business and lower credit impairments than feared.

Overall, Investec expects full-year adjusted earnings per share, which reflect profits on ordinary operations, of 24-27 pence, down from 33.9 pence a year earlier when accounting for the spin-off of asset manager Ninety One N91.L .

SIMPLIFICATION COMPLETE

Investec has in recent years been on a simplification drive, in part to eliminate future nasty surprises, such as the hedging costs. It said on Friday this was largely complete, allowing it to focus on growth.

Titi said this could include both organic and inorganic growth, especially in capital-light areas, including transactional banking and wealth.

Titi said Investec did not harbour any concerns about paying a final dividend and it expected to remain in its previously guided payout ratio.

Investec also announced on Friday that chairman Perry Crosthwaite would step down in August. Titi said both internal and external candidates were being considered in the search for a successor.

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