September 20, 2019 / 6:55 AM / a month ago

Investec warns of first-half profit drop as restructuring costs bite

LONDON (Reuters) - Anglo-South African financial services company Investec (INVP.L) (INLJ.J) said its first-half profit will be lower than a year ago due to a jump in restructuring costs and as global trade tensions and Brexit roil its key markets.

Investec, which provides asset management and specialist banking services, has been streamlining its operations by selling and shutting some units and restructuring businesses.

Investec's London-listed shares fell as much as 10% in early deals to lead fallers in the mid-cap index .FTMC, after it revealed costs would nearly double to 42 million pounds and headline earnings per share are expected to be 15% to 18% down on last year.

At 1010 GMT, the stock was trading down 6.1%.

In a pre-close trading update, Investec said the hike in costs related to the closure of its private equity direct investments business in Hong Kong, part of its UK wealth operation and the restructuring of its Irish branch in preparation for Britain’s exit from the European Union, although this was partially offset by the sale of its Irish wealth management business.

Plans to spin off its asset management unit were on track to complete next year at a cost of 7.5 million pounds.

Investec said it remains committed to the bank and wealth unit’s three-year targets.

Earnings were also hit by a 2.8% depreciation of the rand against sterling during the period, it said, adding to market weakness, including in its British banking operations.

“Market variability and persistent uncertainty relating to Brexit and global trade wars, has negatively impacted investment banking fees and trading income,” Investec said as it warned that its UK specialist banking unit’s profit would be “significantly” behind.

Reporting by Pushkala Aripaka in Bengaluru; Editing by Saumyadeb Chakrabarty and Elaine Hardcastle

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