JOHANNESBURG- South Africa's Investec broke ranks with other financial services firms on Thursday by saying it would pay a dividend after a better-than-expected first-half of the year.

Its Johannesburg-listed shares, however, were 4.5% lower by 1152 GMT as investors tried to understand how a hedging position had cost the company some 53 million pounds ($70.19 million) in the six months to Sept. 30 alone.

This took the shine off a 50% decline in profits which was a less dramatic fall than it had previously forecast, and the 5.5 pence dividend announcement.

Chief Executive Fani Titi said its businesses had remained resilient.

He added during a media call that Investec declared the dividend on the back of expectations of a reduction in credit losses during the second half of the year and confidence that the company had enough capital to resume payouts.

Rival firms in South Africa and Britain, where Investec is also listed, have yet to return to dividend payouts after suspending them during the coronavirus pandemic to preserve capital following guidance from regulators.

"We entered this crisis from a position of strength and continue to have a strong capital, funding and liquidity position," Titi said, adding that Investec was well placed to navigate its way through the current environment.

Investec reported adjusted earnings per share of 11.2 pence in the six months to the end of September, compared to 22.4 pence a year earlier, a figure restated to reflect the demerger of asset management business NinetyOne.

It had previously forecast adjusted EPS of between 8.3 pence and 10.5 pence.

Investec's share price fall outpaced that of the broader banking index, which investors said was in part due to a hedge on its structured products book, which has repeatedly cost the group money.

Operating profit at its specialist UK banking division fell by 84% to 12.9 million pounds, mainly as a result of costs related to hedging on this book.

"The ongoing hedging losses is a big disappointment for me," said Jan Meintjes, a portfolio manager at Investec shareholder Denker Capital, adding this could continue to be material for another 24 months.

"This raises a risk management question," he said.

($1 = 0.7551 pounds)

(Reporting by Emma Rumney; Editing by Alexander Smith and Bernadette Baum) ((Emma.Rumney@thomsonreuters.com; +27115952832;))