Results presentation For the year ended 31 I 03 I 2012 2 Long - PowerPoint PPT Presentation

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