Good morning, everybody. Welcome to our pre-close briefing. Most of you would have already seen that we made an additional announcement this morning, which I'll deal with at the end of the briefing. I'll This is not drafting. Let's see. I'll use that one. Okay. That one's not working. If we look at, this is to give you some guidance to the end of September and some of the asset management and balance sheet figures are up to the end of August. If we look at the operating environment, I think we still are operating with a lot of uncertainty in both our core geographies. Notwithstanding the fact that the global world is, when you look at the macro picture, doing okay, particularly the U.S.
The South African economy is very weak, as you would have seen with GDP figures released last week, where they talk about a technical recession. You can argue whether it's a recession or technical recession, there is a negative. Confidence is weak as a consequence of policy uncertainty, and that is having an impact on overall business confidence. I think both the SA equity market and the U.K. equity market have been okay during this period, particularly the last few months. SA supported by rand hedge stocks, U.K. also by a weaker sterling. I think if we look at our overall business expected for the period ended 30 September, I think our asset management business has reported results ahead of the prior period, or should report results well ahead of the prior period. While the investment business is expected to report results behind the prior period.
Both divisions however have had high levels of funds under management and reasonable equity markets and good net inflows. When we look at the specialist banking business, U.K. Specialist Bank is expected to report results well ahead of the prior period. South African banking business is more or less in line with the prior period. Exchange rate has had a negative effect with the rand at this point in time, depreciating approximately 3.5% on average against sterling over the equivalent period. We do expect revenue to be moderately ahead of the prior period. Recurring revenue will be approximately 78% of our total revenue. That will say that a weakness in our results will have been investment income. Otherwise, all the other factors we saw growth. The total income statement charge is less than the prior period.
I think obviously, we dealt with legacy. We expect our bad debt charge to be back between 0.21%-0.25% compared to 2.54% last year. Costs are higher, and that's growth in headcount to support both activity levels and increased regulatory requirements, in particular in the U.K. where we had MiFID II and GDPR. We do expect our adjusted operating profit to be ahead of the prior year. Looking at our core growth drivers, I think third party assets under management increased 4% in sterling, 8.7% on a currency neutral basis. Customer accounts down 5.5% in sterling. That's really the rand, 2.5% on a currency neutral basis. Loans and advances down a similar number, but an increase of 2.5% on a currency neutral basis. We've maintained a very sound balance sheet. Liquidity has retained a very strong level.
Loan to customer deposits at end of August was 79.6%. Our capital ratios are expected to be in line with our group target. We have got permission to do a parallel run, still subject to final regulatory approval, to implement Foundation IRB in South Africa by the end of the 2019 year. We expect that to have about a 1.2% improvement in our Core Tier 1 ratio in South Africa. That's a pre-step towards advanced where there would be further improvement. Our leverage ratio is sound. They're running at over 7%, so they're comfortably ahead of that target. Overall, we believe the balance sheet remains very sound. If we look at asset management and look at the individual business units, I think very strong inflows. I think perhaps a feature of these results, GBP 4.4 billion to the end of August 2018.
We've had a competitive investment performance over the long term and notwithstanding challenging markets, in particular emerging markets where there has been outflow from emerging markets. I think the leadership transition is well underway with an ordinary and well-executed plan. If you look at funds under management, they're up 4.9% in sterling to GBP 109 billion, which is 9.7% on a currency neutral basis, which we believe is very strong underlying performance. On the wealth and investment business, we expect to be behind the prior period. We have got higher funds under management. We had net inflows of GBP 600 million. That is mainly discretionary inflows. We did have some discontinued services as a consequence of MiFID, obviously we've had some outflows as a consequence of that. On the South African side, underlying profitability is impacted by lower activity levels because of lack of confidence.
There's an element of activity that always comes through in the wealth numbers. On the U.K. side, I think we've had higher costs driven by IT initiatives, implementation of MiFID II and GDPR, which has had an effect on this business. Overall, funds under management up 2.4% in sterling to GBP 57.4 billion, 7.1% on a currency-neutral basis. Looking at the Specialist Bank, we are expecting to be reasonably ahead of the prior year. Net interest income driven by book growth in both U.K. and South Africa is up. Fees and commissions driven by good performance from our U.K. corporate advisory business as well as our South African private and business banking activities are up. Other income, really investment income, is well behind the prior year due to weaker performance from listed and unlisted equities relative to the past year, and partially offset by improved trading income.
Costs in the U.K. are up in line with revenue, and flat compared to the second half of last year. You are aware that there were a lot of investment costs in that business. That has now flattened and tapered off. We expect that we will not see cost rises of any kind of material form going forward. South Africa costs are increasing at below inflation, which I think is well under control. On other information, our expected tax rate is expected to be 18%. Last year it was at 14.5%, and it's going to normalize. Non-controlling interest of GBP 35 million attributable to profit related to asset management business and the consolidation of the Investec Property Fund. Weighted number of shares in issue, approximately 937 million shares. Overall, I think the environment has been challenging.
We've still got a lot of uncertainty around the type of Brexit we're going to have, which has some impact on confidence in certain sectors. Our activity levels in the U.K. have ever been supporting profitable growth and have been acceptable. I think on the South African front, there has been negative emerging market sentiment. There's continued policy uncertainty. Hopefully, that starts getting dealt with. We're in an election year, so that also encourages populist rhetoric. That has hurt investment confidence and therefore we've had a significant weakening of the currency, particularly in the last few months. Growth in that environment is challenging and is being reflected in overall activity levels and performance. When we look at the overall group results, I think they have been supported by good growth in funds under management, positive net inflows, and an improving performance from the U.K. Specialist Bank.
That's another issue. What we told you before was once we get through this legacy, which Arvin mentioned here, that it is behind us, you'll start seeing a strong uplift in the U.K. Specialist Bank, which is what we're seeing in these numbers. That's the trading update. I don't know if anyone wants to ask questions, and I'll start in London before I go on to the next story. Okay, no questions. Can I go to Johannesburg? I can't see Johannesburg. Are you guys connected? Yes, we're here. Are you there? Okay. Any questions? Any questions? No. Okay, cool. Go on. Cool. Okay. We also announced this morning the proposed demerger and listing of Investec Asset Management. I think since we made the succession announcement in February 2018, we've focused on orderly transition of leadership.
Fani and Hendrik will assume their roles as joint CEOs on the 1st of October, as was previously planned. In conjunction with this leadership transition, the board, together with the executive directors, old executives, and new incoming executives, did have a strategic review of the group. The strategic review is focused on ensuring that the group is positioned to enhance long-term interest of shareholders, clients, and employees. I think through the strategic review, we concluded that the group comprises of a number of successful businesses operating across, in essence, two core geographies with different capital requirements and growth trajectories in those businesses. We see that there are compelling current and potential linkages between the Specialist Bank and the wealth and investment business which deal with private individuals. Elements of the Specialist Bank and the wealth business does deal with private individuals.
However, there are limited synergies between those businesses and the asset management clientele. Post that review, I think the board has concluded that it is now appropriate to demerge and publicly list Investec Asset Management. The Specialist Bank and wealth & investment business will continue to remain part of the dual listed company structure, and it is intended that asset management will be listed on the London Stock Exchange with an inward listing into Johannesburg. We believe that this transaction simplifies the group and focuses both asset management and the remaining group in their respective growth paths. We also believe that this will enhance the long-term prospects and potential of both businesses for the benefit of all stakeholders. The transaction is subject to regulatory approval, shareholder approval, and other approvals, and is expected to be completed within a 12-month period.
The asset management team's management stake will be retained by them, so they will end up with shares in the listed entity, and the remaining group will retain a minority stake in Investec Asset Management. In post-implementation of the transaction, shareholders of the Investec Group will have a direct shareholding in asset management, in addition to their shareholding in the remaining group. I think following the implementation, Fani Titi will lead the remaining group, and Hendrik du Toit will lead Investec Asset Management. The precise mechanics of the demerger listing will be communicated in due course. We're not here to talk about the mechanics because that's a process, and we'll come back to the market as soon as that process is clearly defined.
We believe that our individual businesses are well-positioned strategically, with strong market positions and good prospects, and that it is now the right time to demerge the asset management business. It wasn't possible in the immediate past. I think we believe it's now the right time. We have made very good progress on expanding our banking and wealth management franchises in our two key markets over the years. We are focusing and have improved the operational and financial performance. I think the transaction does allow these businesses to reach their full potential. Shareholders, we believe, will benefit from future value creation, having a direct ownership of two separately listed companies. Now what am I doing? People ask me why, and I relate it to when my daughter left home and got married.
At first it was very hard, and then I had three grandchildren, and now it's easy. She was also allowed to go on and develop as an individual. I think we have been building Investec Asset Management together with Hendrik and his team for 28 years. It's like letting one of our children go, but we're giving it its own wings to fly. I think this is where we've come to as a firm, and we believe that both businesses should flourish in the ongoing future, and there will be a much greater degree of focus and much more simplicity. We understand you guys in the market, you like simplicity. You don't like complexity. That's the end of the story. Thank you. Questions? No questions here, Anita? I mean, London? Richard? We have any questions in Johannesburg?
We have questions.
Yeah, there is one. Hello.
Hi, it's Stephen Cranston.
Hello, Stephen.
Does that mean obviously John Green and Mimi Ferrini go back to their old jobs? Or they must be a bit disappointed? No.
You have to be cynical, eh? I'm sure. Even, I was trying to avoid your question for a long time, and I was even going to banking to not to deal with it, but now you catch me. No, absolutely not. There's an executive transition happening in the group and in the asset management business on October 1, as announced. Mimi and John become joint CEOs of the asset management business. Fani and I take up the group, and we have to navigate this. After that, we each go our different ways, but only after that is executed.
No, John and Mimi remain as exactly as announced till they have to start work. There are actually grandchildren already. Any more questions, Richard? No. Steven can't ask more questions. It's constant. He's had his once a day. I know. He's going to come with lots. Is that it, Rich? Yeah, it looks like it, Steven. Okay. Well, I've got food. Thank you. Thank you.
Okay. Thank you very much. Thank you, everybody, for attending, and we'll see you soon. Next time, Fani and Hendrik du Toit will present. Cheers.