Results presentation For the six months ended 30 I 09 I 2012 - - PowerPoint PPT Presentation

Results presentation

For the six months ended 30 I 09 I 2012

Proviso

• Please note that matters discussed in today's presentation may contain

forward looking statements which are subject to various risks and uncertainties and other factors including, but not limited to:

• the further development of standards and interpretations under IFRS applicable to

past, current and future periods

• evolving practices with regard to the interpretation and application of standards

under IFRS

• domestic and global economic and business conditions
• market related trends
• A number of these factors are beyond the group’s control
• These factors may cause the group’s actual future results, performance or

achievements in markets in which it operates to differ from those expressed

• r implied
• Any forward looking statements made are based on knowledge of the group

at 15 November 2012

2

The six months in review

3

80 90 100 110 120 130 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Rebased to 100 JSE FTSE ASX Source: Datastream

Interest rates Interest rates

Difficult operating environment has continued

1 2 3 4 5 6 7 8 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 % R £ A$ U$

Since Mar-12 Since Sep-11 +8.7% +6.4% +4.6% +8.1% +1.1%

• 2.6%

+1.0% +3.3%

+ depreciation

• appreciation

80 90 100 110 120 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Rebased to 100 Rand/£ Euro/£ US$/£ A$/£

Change on average Since Sep-11 +15.2% +9.7% +0.7%

• 3.1%

Since Mar-12 Since Sep-11 +6.6% +20.5%

• 0.1%

+13.0%

• 0.3%

+8.3%

Equity markets Equity markets Exchange rates Exchange rates

4

• Difficult operating environment
• Depreciation of the Rand
• Lower investment income earned in the UK

business

• … resulting in a decrease of 2.5% in

revenues (increase in stable currency)

Summary

• Solid net inflows and moderate loan growth
• Recurring income of 69.3%
• Improvement in SA business benefiting from

growth in revenue and cost containment

• Strong improvement in Australia as

impairments significantly down Results negatively impacted by: Results negatively impacted by: Results highlights include: Results highlights include:

5

Operating profit impacted by the Rand

Operating profit before tax* Operating profit before tax*

*Before goodwill, acquired intangibles, non-operating items and after non-controlling interests

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Specialist Banking Wealth & Investment Asset Management 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 SA & Other UK, Europe, Australia & Other

By business By geography

6

…with the asset and wealth management businesses accounting for 40%

Continued growth in net inflows and loans

*On a stable currency basis

…up in stable currency

Customer accounts up 2.3%* Core loans and advances up 2.5%* FUM up 6.7%* Net inflows of £2bn 7 20 40 60 80 100 120 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Sep-12 £’bn Asset Management Wealth & Investment Other 0% 20% 40% 60% 80% 100% 120%

• 5

10 15 20 25 30 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Sep-12 £’bn Customer deposits (LHS) Core loans and advances to customers (LHS) Core loans (excluding own originated securitised assets) to customer deposits (RHS)

Third party assets under management Third party assets under management Customer accounts (deposits) and loans Customer accounts (deposits) and loans

Significantly improved impairment position

Impairment analysis Impairment analysis

8 25 50 75 100 125 150 175 200 225 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 £’mn Australia UK & Other South Africa

… particularly in Australia

South Africa South Africa

9 0% 1% 2% 3% 4% 5%

• 20

40 60 80 100 120 140 160 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 R’bn

UK & Europe (ex Kensington) UK & Europe (ex Kensington) Australia Australia

0% 1% 2% 3% 4% 5%

• 1

2 3 4 5 6 7 8 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 £’bn Net core loans (LHS) Credit loss ratio (RHS) Net defaults (before collateral) as a % of core advances (RHS) 0% 2% 4% 6% 8% 10% 12% 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 A$’bn

Headcount stable (excluding acquisitions)

Headcount analysis (permanent employees) Headcount analysis (permanent employees)

Note: Includes Rensburg Sheppards from June 2010

1000 2000 3000 4000 5000 6000 7000 8000 Alliance Equipment Finance NCB Holdings Specialist Banking Wealth & Investment Asset Management 1000 2000 3000 4000 5000 6000 7000 8000 Australia UK & Europe SA & Other

By business By geography

10

65.6 56.7 80.5 62.6 68.8 56.6 81.4 64.7 20 40 60 80 100 UK & Europe SA & Other Australia Group

% Sep-11 Sep-12

64.7 75.7 60.4 62.6 65.0 80.7 61.7 64.7 20 40 60 80 100

Asset Management Wealth & Investment Specialist Bank Group % Sep-11 Sep-12

Costs slightly up

Jaws ratio Jaws ratio

200 400 600 800 1000 1200 £’mn

Operating income

CAGR since 2003: 16.0%

Expenses (excl. depreciation)

CAGR since 2003: 14.3%

By business By geography

11

Cost to income ratio Cost to income ratio

…largely due to acquisitions

63-65 70-72 <55 60-62 Target 2015: <60 <55 <65 60-62 Target 2015:

Resulting in a stable group performance

*Before goodwill, acquired intangibles, non-operating items, taxation and after non-controlling interests

Stable currency Sep-12 Sep-12 Sep-11 % change Operating profit* before tax (£’000) 259,080 229,419 223,629 2.6% Adjusted earnings attributable to ordinary shareholders before goodwill, acquired intangibles and non-operating items (£’000) 198,658 168,575 162,867 3.5% Adjusted EPS* (pence) 21.6 19.7 20.6 (4.4%) DPS (pence) NA 8.0 8.0 0% Net tangible asset value per share (pence) 326.3 311.6 321.0 (2.9%)

12

Pounds

…and an improved Rand performance

*Before goodwill, acquired intangibles, non-operating items, taxation and after non-controlling interests

Sep-12 Sep-11 % change Operating profit* before tax (R’mn) 2,825 2,462 14.7% Adjusted earnings attributable to ordinary shareholders before goodwill, acquired intangibles and non-operating items (R’mn) 2,185 1,832 19.2% Adjusted EPS* (cents) 255.4 232.7 9.8% DPS (cents) 112.0 103.0 8.7% Net tangible asset value per share (cents) 4,172.2 4,051.6 3.0%

13

Rands

Financial Targets

Notes: *As determined in accordance with IFRS. Adjusted EPS is before goodwill, non-operating items and after the accrual of dividends attributable to perpetual preference shareholders **As revised in Mar 2012

Target

Sep-12 Mar-12 Sep-11

ROE

Actual ROE 12%-16% over a rolling 5-year period**

10.1% 12.8% 7.8% 14.2% 10.1% 14.3% Adjusted* EPS growth 10% > UKRPI (4.4%) (26.4%) (6.8%) Cost to income

< 65%

64.7% 64.7% 62.6% Dividend cover (times) 1.7 - 3.5 times 2.5x 1.9x 2.6x Capital adequacy

15-18% ** Limited

17.2% 16.1% 15.7%

plc

17.2% 17.5% 17.1% Tier 1 ratio

11%-12% Limited

11.6% 11.6% 12.0%

plc

11.3% 11.6% 11.6%

• Capital ratios remain stable

14

Divisional highlights

15

Stable performance across the three key businesses

*Before goodwill, acquired intangibles, non-operating items, taxation and after non-controlling interests

16 50 100 150 200 250 Asset Management Wealth & Investment Specialist Banking Investec Group £’mn Sep-11 Sep-12

Operating profit* by business Operating profit* by business

(£) Sep-12 Sep-11 % change Operating profit* (mn) 67.2 65.6 2.5% Cost to income 65.0% 64.7% Sep-12 Mar-12 % change Assets under management (£’bn) 62.4 61.5 1.3% Net flows (£’mn) 1,520 5,170

• Higher average funds under management
• Positive net inflows of £1.5bn
• Competitive investment performance over

all periods

• Positive momentum but flat markets

combined with uncertainty will put pressure on inflows

• Strategy remains unchanged

Asset Management

Overview of performance Overview of performance Outlook Outlook Financial summary Financial summary

*Before goodwill, acquired intangibles, non-operating items, taxation and after non-controlling interests

17

Assets under management by asset group (£’bn) Assets under management by asset group (£’bn)

27.0 19.8 15.6

Sep-12 Equities and commodities Fixed income Multi-asset

27.0 18.9 15.6

Mar-12

(£) Sep-12 Sep-11 % change Operating profit* (mn) 22.9 21.8 4.9% Cost to income 80.7% 75.7%

• ROE (pre-tax)**

13.6% 17.3%

• ROE tangible (pre-tax)

46.9% 27.0%

• Stable performance
• Higher average funds under management
• Net inflows of £0.6bn
• Inclusion of Williams de Broë and NCB
• Integration of acquisitions progressing well
• Williams de Broë
• Migrated onto Investec platform from end of

August with the excess costs still reflecting in 2013 results

• Rebranded Investec Wealth & Investment

Sep-12 Mar-12 % change Total FUM (£’bn) 36.7 34.8 5.6% UK FUM (£’bn) 22.5 21.0 7.3% SA Funds under management (R’bn) 190.5 169.4 12.5%

• Short terms prospects supported by

synergies from integration

Wealth & Investment

Overview of performance Overview of performance Outlook Outlook Financial summary Financial summary

*Before goodwill, acquired intangibles, non-operating items, taxation and after non-controlling interests **Return on adjusted shareholders’ equity (including goodwill)

18

Private Client

£13.1bn

Corporate Client UK & Europe Southern Africa Australia

£5.0bn

• South Africa benefited from:
• Improved net interest income in the lending and

fixed income businesses

• Solid performance from principal investment

and investment properties portfolios.

• UK benefited from:
• Slightly improved margins and an increase in

net fees and commissions in the corporate advisory business

• Australia’s impairments significantly down

(£) Sep-12 Sep-11 % change Operating profit* (mn) 139.4 136.3 2.3% Cost to income 61.7% 60.4%

• ROE (pre-tax)**

9.3% 9.5%

• ROE tangible (pre-tax)

9.8% 10.1%

• Operating environment continues to be

challenging

• Deal pipeline remains reasonable

Specialist Banking

Overview of performance Overview of performance Outlook Outlook Financial summary Financial summary

*Before goodwill, acquired intangibles, non-operating items, taxation and after non-controlling interests **Return on adjusted shareholders’ equity (including goodwill)

19

Key earnings drivers (at Sep-12) Key earnings drivers (at Sep-12)

Private Client

£12.2bn

Net core loans and advances Total deposits

Specialist Banking – Net interest income

50 100 150 200 250 300 350 400 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-12 Stable Currency £’mn

Net interest income Net interest income

20

Specialist Banking – Net fee and commission income

25 50 75 100 125 150 175 200 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-12 Stable Currency £’mn

Net fee and commission income Net fee and commission income

21

Specialist Banking – Trading and investment income

40 80 120 160 200 240 280 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-12 Stable Currency £’mn

Trading and investment income Trading and investment income

22

Debt repurchase

Specialist Banking – Impairments

25 50 75 100 125 150 175 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-12 Stable currency £’mn

Impairments Impairments

23

Specialist Banking – Operating costs

50 100 150 200 250 300 350 400 450 500 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-12 Stable currency £’mn

Operating costs Operating costs

24

Strategy

25

We have built a balanced business model ...

Containing costs Maintaining credit quality Strictly managing risk and liquidity Net annuity fees and commissions of £321mn (33% of total) Other fees and other income of £162mn (17% of total) Net interest income of £350mn (36% of total) Investment income of £76mn (8% of total)

Capital intensive £485mn

50% of total

Capital intensive £485mn

50% of total

Capital light £483mn

50% of total

Capital light £483mn

50% of total

• Asset management
• Wealth management
• Advisory services
• Transactional banking services
• Property funds
• Lending portfolios
• Investment portfolios
• Trading income from client flows
• Trading income from balance

sheet management

• Other trading income

Trading income of £59mn (6% of total)

Sustainable business model Sustainable business model

26 100 200 300 400 500 600 700 800 Third party assets and advisory Net interest income and investment and trading income

Third party asset management and advisory revenue Net interest income, investment income and trading income

… with a recurring income base

Recurring income – average since 2003 of 66% Recurring income – average since 2003 of 66%

Note: annuity income is net interest income plus annuity fees

0% 10% 20% 30% 40% 50% 60% 70% 80% 200 400 600 800 1000 1200 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 £’mn Trading income Investment income Other fees and other operating income Annuity fees and commissions Net interest income Annuity income % 27

But ROE is still a challenge

28

41.9% 25.6% 18.5% 17.5% 14.9% 14.3% 11.8% 8.3% 11.4% 8.0% 6.0% 8.4% 15.0% 2.8% 4.0% 0.1%

• 11.1%

1.6%

• 20%
• 10%

0% 10% 20% 30% 40% 50% Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Sep-12 Southern Africa UK & Europe Australia

Post-tax return on average shareholders’ equity Post-tax return on average shareholders’ equity

Drag from the legacy books

29

UK and Europe UK and Europe

• 150

50 250 450 650 850 1050 Average Equity Capital Operating profit £’mn

• 20

20 40 60 80 100 120 Cost to income Annualised ROE %

Core Specialist Bank Legacy books

Low interest rates have had ...

30

Interest rates Interest rates

2 4 6 8 10 12 14 16 % SAJIB3M GBP3M AUD3M FEDFD

... negative endowment effect

31

Net interest margin Net interest margin

0% 1% 2% 3% 4% 5% Mar-09 Mar-10 Mar-11 Mar-12 Sep-12 Australia South Africa Investec group UK and Europe

Scale in Australia

32

Australia Australia

50 100 150 200 250 2009 2010 2011 2012 1h13* A$’mn Revenue Costs

• Restructure and clean-up of the

business is now complete

• Core areas of activity have been

defined

• Strong balance sheet has been built
• Well placed to grow core businesses
• Focused on smaller opportunistic

acquisitions of people / teams to fill capability gaps

*annualised

Low activity levels

33

Gross domestic product Gross domestic product

• 6
• 4
• 2

2 4 6 8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F

%

Australia South Africa UK US

Source: IMF October 2012

Higher capital requirements

34

Basel III requirements Basel III requirements

0% 2% 4% 6% 8% 10% 12% 14% Basel II 2013 2014 2015 2016 2017 2018 2019

Common equity ratio

Countercyclical buffer (maximum, if imposed) Capital conservation D-SIB/G-SIB (assuming max level) SA basic minimum add on Basic minimum 0% 2% 4% 6% 8% 10% 12% 14% Basel II 2013 2014 2015 2016 2017 2018 2019

Tier 1 ratio

Core strategic focus

35

• 20

40 60 80 £’mn

Operating profit*

Asset Management Wealth & Investment Specialist Banking Asset Management Wealth & Investment Specialist Banking

• Solid platform in place
• Continue to grow business organically
• Focus on increasing AUM
• Maintain strong momentum
• Strong domestic platform in UK as a

result of acquisitions

• Excess costs from acquisitions to be

aligned

• Opportunity to position as an

international Wealth & Investment business with integrated offering

• Broaden client base and markets
• Single Bank process will continue to

improve efficiencies and eliminate duplication

• Launch transactional banking and

leverage off W&I

• Scale up corporate and institutional

banking

• Coordinate investment banking globally
• Grow global resource franchise
• Optimise liquidity, capital and costs

*Before goodwill, acquired intangibles, non-operating items and after non-controlling interests

• 10

20 30 40 £’mn

• 40

80 120 160 200 240 £’mn

Grow organically Integrate and broaden Reshape and optimise

Building quality and depth of our franchise ...

36

• Best Business Bank (Sunday Times Top Brands, 2012)
• Best Discretionary Service Wealth Management Award (City of London, 2012)
• Excellence in Institutional Asset Management CEO of the Year (Financial News Awards,

Europe 2012)

• Emerging Markets Manager of the Year (aiCIO awards, 2012)
• Dealmaker of the Year, 9 out of the last 11 years (DealMakers, 2012)
• Highest Domestic Approval Rate (Visa Service Quality Performance awards, 2012)
• Middle East and Africa Financier for 2012 (Corporate Jet Investor awards)

Some recognition received includes: Some recognition received includes:

Outlook and closing

37

2007 2008 2009 2010 2011 20 40 60 80 100 120 2007 2008 2009 2010 2011 Max Average

Source: Bank of England Financial Stability Report, company published accounts

The cliff risk hanging over the world appears to have subsided as the global banking systems stabilise

38

Leverage ratios (times) (a) Leverage ratios (times) (a)

LCFIs (large complex financial institutions) (a) Leverage ratio is defined as assets divided by capital. Assets are adjusted for cash items, tax assets, goodwill and intangibles. Capital includes total shareholders’ equity adjusted for minority interests, preferred shares, goodwill and intangibles. Assets are also adjusted on a best-efforts basis to achieve comparability between US GAAP and IFRS with respect to derivatives and off balance sheet vehicles. (b) Pro-forma data are used for RBS from 2007 to 2009. (c) End-2011 for major UK banks except for National Australia Bank (31 March 2012) and Nationwide (4 April 2012).

US LCFIs European LCFIs Major UK banks (b)(c)

2007 2008 2009 2010 2011

SA Banks

2007 2008 2009 2010 2011 Investec plc: Sep-12: 10.5x Mar-12: 10.8x Mar-08 : 14.1x Investec Limited: Sep-12: 12.1x Mar-12: 12.2x Mar-08 : 12.8x

IMF expect growth to pick up over next few years

39

Gross domestic product Gross domestic product

• 6
• 4
• 2

2 4 6 8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F

%

Australia South Africa UK US

Source: IMF October 2012

But there are still significant macro risks

40

Macro risks Macro risks

US Fiscal Cliff Middle Eastern Unrest Growth in China Eurozone crisis

... and confidence remains low

41

Consumer confidence index Consumer confidence index

Source: Nationwide, The Westpac-Melbourne Institute, SACCI

20 40 60 80 100 120 140 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 SA Australia UK

• The global economic environment continues to be volatile with some significant macro

risks unresolved

• The financial system has started to show signs of greater stability as the process of

deleveraging slows down and the capital and liquidity structures of the major global banks continue to improve

• Investec’s business model has been substantially realigned and the focus going

forward is to consolidate the gains made in the asset management business and broaden the distribution of the wealth management offering

• The group will also continue the progress made in clearing legacy issues and

improving returns in our specialist banking business

• Overall, Investec’s balanced business model ensures the group has the necessary

ability to adapt to the changing environment whilst being well placed to benefit from an improvement in market conditions

Outlook

42

Well placed to benefit from an improvement in market conditions Well placed to benefit from an improvement in market conditions

Results presentation

For the six months ended 30 I 09 I 2012

43