Investec PLC (LSE:INVP) expects to report growth in half-year profit, but cautioned credit losses would be at the upper end of the cycle range as higher interest rates take their toll.
The Anglo-South African international banking and wealth management group was updating investors on trading for the six months ending 30 September and said notwithstanding the challenging macroeconomic environment it is on course to achieve its financial targets.
It expects to report adjusted EPS between 35.5p and 37.5p, growth of 8-14% from last year’s 32.9p, and adjusted operating profit before tax between £428.7 million and £449.6 million, up from £405.0 million before.
Profit growth was driven by continued client acquisition, positive effects from higher global interest rates and year-on-year growth in average lending books.
But it forecast the credit loss ratio would be at the upper end of the cycle range of 25 basis points (bps) to 35bps, reflecting the higher interest rate and inflationary environment.
Return on equity is expected to be around the mid-point of the group's target range of 12% to 16%.
Revenue growth was supported by growth in new clients, a higher interest rate environment and balance sheet growth.
The cost to income ratio improved as revenue grew ahead of costs and is expected to be below 60%.