Results presentation For the year ended 31 I 03 I 2012
2 Long term strategy
Our long term strategy Since inception we have expanded through a combination of organic growth and strategic acquisitions The internationalisation of Investec is based on the following strategy:: Following our customer base Gaining domestic competence and critical mass in the chosen geographies Gaining domestic competence and critical mass in the chosen geographies Facilitating cross-border transactions and flow Our strategy for the past 20 years has been to build a diversified portfolio of businesses and geographies to support clients (institutional corporate and businesses and geographies to support clients (institutional, corporate and private individuals) through varying markets and economic cycles In order to create a meaningful and balanced portfolio we need proper foundations in place which gain traction over time 3 3
We remain steadfast with this strategy UK Australia South Africa Extremely tough and competitive Struggled to gain a foothold initially We are not a high street bank and environment instead have carefully niched Have now built a foundation to activities in asset management, activities in asset management Established a brand and gaining E t bli h d b d d i i support a sustainable business t t i bl b i wealth and investment and traction in most businesses model specialist banking “ ” 4 4
5 The year in review
Very difficult operating environment … Equity markets Equity markets Interest rates Interest rates 110 6 +4.2% 5 100 100 ‐ 2.1% 4 Rebased to 100 ‐ 10.3% 90 3 % 2 80 1 1 0 70 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 SAJIB3M BBGBP3M BBAUD3M BBUSD3M JSE FTSE ASX E change rates Exchange rates Exchange rates E change rates Rand/£ Rand/£ Euro/£ Euro/£ A$/£ A$/£ 14.0 1.80 1.24 13.0 1.70 1.20 12.0 1.16 1.60 11.0 1.12 1.50 10.0 1.08 1.40 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 Source: Datastream 6 6
… masking significant realignment that has taken place Financial performance for the year 2012 has echoed the difficulties of the broader environment We have realigned our business model We have maintained revenues despite difficult markets with the quality of earnings improving substantially improving substantially Many of our businesses have continued to deliver Underperforming businesses are turning the corner with gross defaults down 7
Integration a core focus across the group Wealth & Investment in the UK Integration of Rensburg Sheppards business was completed during the year We have made substantial progress in integrating Williams de Broë businesses p g g g Investment Banking in the UK The integration of Evolution Securities into the Investment Banking business is largely complete after rationalisation of the combined entity after rationalisation of the combined entity Specialist Banking Single Bank integration Establishing a single platform One business servicing defined target markets Significant cost and revenue synergies to be extracted over time Increase in cross-border activity servicing local client base Australia Significant restructuring of the business and credit portfolio to align with rest of group 8
We have realigned our business model ... …by building capital light revenues Sustainable business model Sustainable business model Capital light Capital light Capital intensive Capital intensive £’mn £949mn £949mn £983mn £983mn 1,500 49% 49% 49% of total 49% of total 51% of total 51% 51% 51% of total 1,200 Net fees and commissions 900 Net interest income of of £884mn £699mn (46% of total) (36% of total) 600 300 Investment income of Other of £65mn £174mn (3% of total) - (9% of total) 2002 2004 2006 2008 2010 2012 Thi d Third party assets and advisory t t d d i Trading income of £109mn Net interest income and investment and trading income (6% of total) Net interest income, Net interest income, Third party asset management Third party asset management investment income and trading and advisory revenue income Lending portfolios Asset management Investment portfolios Containing costs Wealth management Trading income from client flows Maintaining credit quality Advisory services Trading income from balance Strictly managing risk and liquidity y g g q y g Transactional banking services l b k sheet management Property funds Other trading income Trends reflected in graph are for the year ‐ ended 31 March, unless otherwise indicated. 9
… into three distinct business areas Asset management and wealth management now account for 48.1% of group % contribution of operating profit* to total group 100% % 90% 80% 51.9% 61.4% 61 4% 70% 70% 74.7% 60% Specialist Banking 50% 40% 48.1% 30% 38.6% 20% 25.3% Wealth & Investment 10% Asset Management 0% 2002 2004 2006 2008 2010 2012 *Before goodwill, acquired intangibles, non-operating items, taxation and after non-controlling interests 10
Impairments down in two key geographies SA and UK & Europe impairments much improved Australian credit loss ratio substantially up as a result of additional impairments required in light of the weak residential property market required in light of the weak residential property market South Africa South Africa UK & Europe (ex Kensington) UK & Europe (ex Kensington) Australia Australia R'bn R bn £'bn £ bn A$'bn A$ bn 5% 140 5% 8 5% 4 7 120 4% 4% 4% 6 3 100 5 5 3% 3% 3% 3% 3% 3% 80 4 2 60 2% 2% 2% 3 40 2 1 1% 1% 1% 20 20 1 0% - 0% - 0% - 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 C Credit loss ratio (LHS) dit l ti (LHS) N t Net core loans (RHS) l (RHS) 11
Costs relative to revenue deteriorated slightly … but cost to income ratios still within our target range Jaws ratio Jaws ratio Headcount* relatively stable excluding acquisitions Headcount* relatively stable excluding acquisitions Including £'mn Cost to income: 64.7% from 61.7% Excluding Evolution Evolution Group 2,200 , 8000 G Group 2,000 7000 CAGR since 2003 1,800 of 16% 6000 1,600 1,400 5000 1,200 4000 1,000 3000 800 CAGR since 2003 600 of 13% 2000 400 1000 200 200 - 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Mar-10 Mar-11 Mar-12 Mar-12 Australia UK and Europe SA and Other Expenses (excluding depreciation) Operating income *Permanent headcount and includes Rensburg Sheppards from June 2010 12
Resulting in a weak group performance % Mar-12 Mar-11 Change Operating profit* before tax (£’000) 358 625 434 406 (17.4%) Operating profit* before tax and impairment losses on 683 743 752 636 (9.2%) loans and advances (£’000) loans and advances (£ 000) Attributable earnings* (£’000) 257 579 327 897 (21.4%) Adjusted EPS* (pence) j (p ) 31.8 43.2 (26.4%) ( ) DPS (pence) 17.0 17.0 - Net tangible asset value per share (pence) Net tangible asset value per share (pence) 343.8 343.8 (8.3%) (8.3%) 315.1 315.1 Total shareholders’ equity (£’mn) 3 961 1.3% 4 013 Core loans and advances to customers (£’bn) Core loans and advances to customers (£ bn) 18 2 18.2 18 8 18.8 (2 8%) (2.8%) *Before goodwill, acquired intangibles, non-operating items, taxation and after non-controlling interests 13 13
Financial targets adjusted for changing landscape ROE and capital adequacy targets revised given changing financial, regulatory and economic landscape Capital ratios remain strong Target Target (Previous target) Mar ‐ 12 Mar ‐ 11 12%-16% over a rolling 5-yr period ROE 11.2% 7.8% (>20% over the medium to long-term) Tangible ROE 9.5% 13.2% Adjusted* EPS growth Target: 10% > UKRPI (26.4%) (4.2%) Cost to income Cost to income Target: < 65% Target: < 65% 64.7% 64 7% 61 7% 61.7% Dividend cover (times) Target: 1.7 - 3.5 times 2.5x 1.9x Capital adequacy Target: 15-18% Limited 16.1% 15.9% (14%-17%) plc 16.8% 17.5% Tier 1 ratio Target:11%-12% Limited 11.6% 11.9% 11% plc 11.6% 11.6% *As determined in accordance with IFRS. Adjusted EPS is before goodwill, acquired intangibles and non-operating items. Note: These are medium to long-term targets which we aim to achieve them through varying market conditions. 14
15 Divisional highlights
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