UPDATE 2-S.Africa's Investec profit to drop by up to 23% as coronavirus bites

  • Reuters
  • Stock Market News
UPDATE 2-S.Africa's Investec profit to drop by up to 23% as coronavirus bites
Credit: © Reuters.

(Adds CEO, analyst comments, updates shares)

JOHANNESBURG, March 20 (Reuters) - South Africa's Investec INVP.L INLJ.J warned on Friday that its full-year profits would drop by up to 23%, with coronavirus expected to deal a further blow to a company already struggling with tough market conditions.

Investec's shares, however, rose over 13% in a broadly rebounding Johannesburg bourse with some analysts saying the stock looked relatively cheap having plummeted in recent days as the coronavirus outbreak roiled markets.

The company also pushed on with its spin-off and London listing of asset management firm Ninety One N91.L on Monday.

CEO Fani Titi said Investec had delivered a resilient performance and it remained optimistic, even as the group said the impact of coronavirus would further dent its fourth quarter performance.

"What we see, out in communities, is what you would see normally in wartime," he told reporters, adding he hoped the situation would improve in the next few months but Investec was ready to work for a prolonged period in the current circumstances.

The group's adjusted earnings per share, which reflect profits made in the course of its ordinary operations, are set to be between 16% and 23% lower in the year to March 31.

Investec had already been hurt by factors including lacklustre growth in South Africa, which tipped into recession in the final quarter of 2019, and Britain's departure from the European Union, with its UK specialist banking arm in particular struggling.

Its Johannesburg-listed shares rose 13.57% following the trading update, before retreating to trade 5% higher by 0730 GMT - versus a 7% gain in the Johannesburg Stock Exchange overall, which was enjoying a reprieve after days of losses.

Harry Botha, banking analyst at Avior Capital Markets, said it was hard to read too much into share price moves after days of such substantial volatility, but Investec likely benefited from being relatively cheap and some strong fundamentals in its business.

"It's still in a reasonably okay position, they've got a lot of liquidity, capital position is okay... they're cutting costs in the UK, so I think this kind of stuff helped them," he said.

While the listing of Ninety One went ahead as planned, the company opted to postpone the sale of a 10% stake in the asset manager as the coronavirus outbreak roiled global markets.

Its total stake in Ninety One stands around 25%. Titi said Investec had enough capital and there was no pressing need to sell any of it until conditions improved: "We will hold on to the 25% stake for as long as we think is necessary."

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