Investec: Client gains, credit quality steer earnings growth despite interest rate headwinds

Key topics:Earnings rise as strong lending, client acquisition and wealth inflows drive growth.Credit loss ratio improves to 35bps, supporting stable returns amid revenue softness.Operating costs edge higher from tech and people investment, lifting cost-to-income ratio.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..BizNews Reporter.Investec has delivered a resilient set of interim results for the six months ended 30 September 2025, posting a 2.5% rise in adjusted earnings per share (EPS) to 40.5 pence. Navigating a complex macroeconomic environment characterised by geopolitical uncertainty and falling interest rates, the dual-listed specialist bank relied on substantial client acquisition and impeccable credit quality to offset revenue headwinds.The results paint a picture of a diversified group effectively managing the "controllables"—cost of funds, credit risk, and strategic investment—while weathering external shifts in the rate cycle.The Good: Lending growth and credit strengthThe "main sails" driving the business forward were robust client activity and lending.Loan book expansion: Net core loans expanded by an annualised 8.0% to £33.7 billion, driven by growth across diversified corporate lending portfolios and private client books in both geographies.Wealth inflows: The Wealth & Investment division demonstrated strong annuity generation. Discretionary and annuity funds saw strong net inflows of R11.5 billion (£478 million), further bolstered by a strategic acquisition in Switzerland.Credit quality: Perhaps the most pleasing aspect for shareholders was the improvement in credit quality. The Credit Loss Ratio (CLR) improved to 35 basis points (bps), down from 42bps in the prior period. This sits comfortably within the Group’s through-the-cycle target range, differentiating Investec amid peers facing rising impairments.Shareholder returns: Shareholders received a 6.1% increase in total dividends to 17.5 pence per share.The Bad: Revenue pressure and rising costsDespite the operational successes, the Group faced unavoidable headwinds that dampened top-line performance.Revenue dip: Revenue dipped slightly by 0.6% in sterling terms. This was primarily due to lower average interest rates and a decline in trading and investment income. The comparative period (1H2025) was buoyed by positive market sentiment following the formation of South Africa's Government of National Unity (GNU), a high watermark not repeated in this cycle.Cost efficiency: Operating efficiency tightened slightly. Total operating costs rose by 1.5%, pushing the cost-to-income ratio up to 51.9% from 50.8%. Management attributes this not just to inflation, but to deliberate investment in technology and people to drive strategic growth initiatives. Consequently, pre-provision adjusted operating profit decreased by 2.6%.Outlook: Steering toward 2030Looking ahead, Investec remains committed to its strategic goal of achieving an incremental return on equity (ROE) of c.200bps by FY2030. While the current ROE dipped slightly to 13.6%, it remains firmly within the Group’s target range of 13% to 17%.Management expects second-half revenue to be supported by continued book growth and client acquisition, positioning the Group to navigate the "choppy waters" of current economic uncertainty. While the favourable winds of high interest rates may have abated, the engines of client growth and credit quality ensure the ship continues to make steady headway..Read the results in full by downloading the PDF below

Investec: Client gains, credit quality steer earnings growth despite interest rate headwinds

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