UPDATE 4-Investec profit falls, sees impairments stabilising

* Year adjusted EPS down 25.5 percent, meets firm's forecast

* Sees impairments at all units "stabilising"

* Shares down 4.4 percent

(Adds asset management figs, comment)

By Serena Chaudhry

JOHANNESBURG/LONDON, May 21 (Reuters) - South African investment bank and asset manager Investec (INLJ.J) said full-year profit fell by a quarter as the economic storm hit its loan book and asset portfolio but expected impairments to stabilise.

Investec, which is also listed in London (INVP.L), said on Thursday adjusted earnings per share for the year to end March fell 25.5 percent to 42.4 pence, in line with its forecast of a 22-30 percent drop.

Impairment losses on loans and advances, excluding the Kensington Group business acquired in August 2007, soared to 163 million pounds ($257 million) from 58.8 million.

"The world did fall off a cliff ... you are seeing stress out there and I think this will be the order of the day for a while," chief executive Stephen Koseff said.

Managing Director Bernard Kantor said he expected impairments at all its units to stabilise at current levels in the financial year.

"The (worst) of the storm definitely has been the last quarter of last year and the first quarter of this year."

Investec's private banking business was hit hard, with operating profit down 51.6 percent to 80.5 million pounds. Growth in the unit's combined total loan portfolio is expected to be flat for the year, Investec said.

"The earnings number was in line with our expectations. Nothing surprising there ... Impairments were quite bad, they rose significantly," one Johannesburg-based bank analyst said.

"Private banking operating income has come under a huge amount of strain across both geographies, both the UK as well as Africa."

Investec Asset Management reported a 13.4 percent fall in operating profits to 66.2 million pounds, due to a tougher mutual fund environment and weak equity markets. Assets under management were flat at 28.8 billion pounds.

Global net inflows amounted to 750 million pounds, supported by institutional client inflows of 1.2 billion pounds. The mutual funds platforms saw net outflows of 461 million pounds.

IAM chief executive Hendrik du Toit said the fund house would look to grow its relationships with existing institutional clients and target new business in selected areas. "We want to keep the cost line tight this year, but we want to be on the front foot."

SUB PRIME EXPOSURE

At 1407 GMT the company's London-listed shares were down 4.4 percent to 317 pence. The Johannesburg-listed shares were down 2.75 percent to 42.12 rand.

Unlike South Africa's main domestic lenders, Investec, the country's fifth-largest bank by assets, had some exposure to the U.S. subprime market, though it is unlikely to suffer the huge losses seen at some of its international counterparts.

Kantor said there was "no doubt" South Africa was in recession, but he added Africa's biggest economy may pull out of current economic conditions by the end of 2009.

"If our trading partners start recovering, and being a commodity-based economy, I think that you can see us (South Africa) slowly towards the end of this year, beginning to pull out of current recessionary conditions," he said.

Treasury Director-General Lesetja Kganyago said on Thursday South Africa faced a "sharp cyclical downturn" after a prolonged economic boom. [ID:nLL944902]

Analysts expect GDP data due out next week to show the economy contracted for the second consecutive quarter in Q1 2009, after shrinking by 1.8 percent in Q4, last year, meaning South Africa is in its first recession in 17 years. (Additional reporting by Claire Milhench; Editing by David Cowell) ($1 = 0.6331 pound)