Investec plc · LSE:INVP
Investec — Debt Investor Presentation (November 2022)
46 slides from Investec's debt investor presentation, November 2022
Slide 1: Investec plc Overview – Investor generic presentation
Investec plc Overview Investor generic presentation November 2022 The information in this presentation relates to the six months ended 30 Sept 2022, unless otherwise indicated.
Slide 2: Agenda
Agenda Contents 1. 2. 3. 4. 5. Investec Group Overview of Investec plc Further Appendix at a glance Investec plc operating information and fundamentals peer analysis 2
Slide 3: Overview of Investec Group
o Investec Overview of Investec Group OUT OF THE ORDINARY
Slide 4: Investec Dual Listed Company structure
Investec Dual Listed Company structure Non-Southern African operations Southern African operations • Investec plc and Investec Limited are separate legal entities and listings, but are Investec plc Investec Ltd bound together by contractual agreements and mechanisms Sharing Agreement • Investec oper
Slide 5: Investec Group at a glance
Investec Group at a glance A domestically relevant, internationally connected banking and wealth & investment Group • Established in 1974 Since 1992 • Today, an efficient integrated international business platform Assets employing approximately 8 500+ people £29.1bn • Listed on the JSE and LSE (a FT
Slide 6: One Investec: our values
One Investec Our values Our purpose is expressed in four key values that shape the way that we work and live within society. 45+ years of 1 2 3 4 heritage. Cast-iron Integrity Distinctive Client focus Dedicated partnership Performance Two core We demand cast-iron We employ talented people We break c
Slide 7: Investment proposition
Investment proposition Well positioned to pursue long-term growth 1 Well capitalised and highly liquid balance sheet 2 Strong capital generation - returning excess capital to shareholders Diversified mix of earnings by geography and business, with significant annuity income underpin from leading 3 w
Slide 8: Fuelling a disciplined growth agenda
Fuelling a disciplined growth agenda Growth Objectives Continued execution Further develop connected Accelerate and scale with discipline, to drive client eco-systems across new growth initiatives optimisation of returns business units & geographies Underpinned by: Deepening our entrepreneurial cult
Slide 9: Group sustainability highlights
Group sustainability highlights Operate responsibly, finance and invest for a sustainable future and maintain our competitive ESG position PROGRESS MADE ON OUR IMPACT SDGs Net-zero commitments Equality commitments 1.7mn tCO2e Group Board Cost of living crisis Transformation Participated in the W&I s
Slide 10: Focused on doing well and doing good
Focused on doing well and doing good Other highlights Consistently strong ESG ratings and rankings • Investec Group joined the African Natural Capital Alliance • Group CE, Fani Titi, has personally committed to joining the UN Global Compact’s Africa Business Leaders Coalition Top 2% Top 14% Top 1% S
Slide 11: Overview of Investec plc
Overview of Investec plc The information in this presentation relates to the six months ended 30 Sept 2022, unless otherwise indicated. 11
Slide 12: Investec plc
Investec plc A distinctive bank and investment manager with primary business in the UK Funds under Total assets Net core loans Customer deposits Employees management £29.1bn £15.3bn £18.9bn 3 500+ £40.5bn Key highlights Diversified revenue streams with high annuity base Sound balance sheet • Never r
Slide 13: Overview of Investec plc
Overview of Investec plc We provide our clients with a diversified, combined and integrated banking and wealth management offering with extensive depth and breadth of product and services Corporate / Institutional / Private Equity / Intermediary / Government Private clients (high net worth) / charit
Slide 14: Balanced business model
Balanced business model Focused on growing capital light businesses • We have significantly increased our funds under management, a key capital light annuity income driver, over the last 10 years by growing our Wealth & Investment business. Wealth & Investment FUM have grown from £14.2bn at 31 Mar 2
Slide 15: Specialist Banking
Specialist Banking Winning in under-serviced parts of the market through dynamic, full-service offering Private equity and Publically listed Private clients Private companies sponsor-backed Specialist sectors companies companies For UK mid-market founder For high net worth clients that For UK mid-ma
Slide 16: Wealth & Investment
Wealth & Investment A leading private client wealth manager in the UK with £40.5bn funds under management • Financial planning advice Total FUM £40.5bn1 Our service offering • Investment management, including bespoke portfolio management % UK Discretionary 87% • Private clients, including HNW and In
Slide 17: Investec plc ranks 9th for UK banks by revenue
Investec plc ranks 9th for UK banks by revenue • Investec plc is a substantial business generating revenues of £618mn during the six months to 30 Sept 2022 (31 Sept 2021: £513mn) • The wealth business contributes £175mn of those revenues or 28% of Investec plc’s total revenues. The chart below shows
Slide 18: Investec plc's operating fundamentals
Investec plc’s operating fundamentals
Slide 19: Profitability supported by diversified revenue streams
Profitability supported by diversified revenue streams Annuity income1 (£'mn) £'mn Costs and cost to income ratio (£'mn) Annuity income 2011: Annuity income Sept-22: 51% 79% 900 100% 4% 800 15% 6% 80% 700 68.2% 11% 12% 600 22% 60% 25% 500 400 40% 14% 300 54% 200 422 20% 37% 100 0 0% Mar-11 Sept-22 2
Slide 20: Profitability supported by diversified revenue streams
Profitability supported by diversified revenue streams Business mix percentage contribution to adjusted operating Adjusted operating profit1 (£'mn) profit1 400 0.4% 312 300 7% 7% 287 23% 35% 200 Mar 29% Mar Sept 2021 2022 2022 100 64% 58% 76% 0 2018 2019 2020 2021 2022 Specialist Banking Adjusted op
Slide 21: Consistent asset growth, gearing ratios remain low
Consistent asset growth, gearing ratios remain low Total assets composition Gearing1 remains low 35.0 12 11.1 10.4 10.4 30.0 9.9 9.9 10 8.8 5.3 25.0 4.7 8 6.9 5.6 20.0 5.1 8.5 8.9 5.9 £'bn 5.1 6 5.4 6.9 5 4.9 15.0 6.0 4.6 7.0 4.1 5.8 4 10.0 14.4 15.3 11.9 12.3 2 5.0 9.7 10.5 0.0 0 2018 2019 2020 202
Slide 22: Exposures in a select target market
Exposures in a select target market • Credit and counterparty exposures are to a select target market: – High net worth clients – Mid to large sized corporates – Public sector bodies and institutions • The majority of exposures reside within the UK • Our portfolios have performed well to date with l
Slide 23: Strong growth in loan book
Strong growth in loan book Continued growth in HNW & Other Private client lending and increased activity in certain corporate lending portfolios Net Core Loans Net core loans up 12.8% since Mar-22 annualised, £’mn Property Corporate & Other Lending HNW & Other private • Sustained growth in mortgages
Slide 24: Sound asset quality
Sound asset quality Credit loss ratio trend bps 1.00% • Annualised CLR increased to 32 bps (1H2022: 9 bps), within the through- 0.50% 0.97% the-cycle range (TTC) range of 30-40bps 0.60% 0.52% • Total ECL charges of £27.9mn 0.28% 0.32% (1H2022: £4.9mn) mainly driven by: 0.09% 0.08% 0.00% 1H2020 2H202
Slide 25: Asset quality metrics
Asset quality metrics Asset quality metrics reflect the solid performance of core loans to date Balance sheet ECL provisions (£’mn) Gross core loans by Stage (£’mn) 200 1500 107 101 100 67 73 108 1000 31 35 38 14 42 27 37 27 32 35 1242 0 500 1 067 992 2019 2020 2021 2021 Sept-22 576 576 Stage 1 Stag
Slide 26: Diversified funding strategy
Diversified funding strategy • Investec plc's funding consists primarily of customer deposits • The bank adopts a conservative and prudent funding strategy • Investec plc is not subject to the Banking Reform Act ring-fencing requirements which are applicable to all large UK deposit takers, as it fal
Slide 27: Primarily customer deposit funded with low loan to deposit ratio
Primarily customer deposit funded with low loan to deposit ratio • Loans as a percentage of customer deposits remains conservative at 81.3% Fully self funded: conservative loan to deposit ratio • Customer deposits have grown by 62% (11% CAGR) since 2018 to £18.9bn at 30 Sept 2022 20 81.3% 100% • Low
Slide 28: Maintaining robust surplus liquidity
Maintaining robust surplus liquidity • We maintain a high level of readily available, high-quality liquid assets – Cash and near cash composition targeting a minimum cash to customer deposit ratio of 25%. These balances have increased since Mar-13 (£4.6bn) to £8.5bn at 30 Sept 22. (representing 44.8
Slide 29: Sound capital ratios in excess of internal and regulatory minimums
Sound capital ratios in excess of internal and regulatory minimums Robust headroom of 3.5% above the MDA threshold based on the latest regulatory requirements Capital ratios : Investec plc Minimum CET 1 requirement % 5 30 Sept 20221 31 Mar 20221 Target Investec plc: 2 10.9% 10.7% 10.7% lowest min CE
Slide 30: We inherently hold more capital per unit of risk
We inherently hold more capital per unit of risk As we use the standardised approach for RWA calculations, our capital ratios are not directly comparable with peers RWA density – Total RWA / Total Assets CET 1 / Total Assets (%) Total capital (£'bn) 75.0% 8.0% 3 7.0% 50.0% 2 6.0% 5.0% 25.0% 1 4.0% —
Slide 31: Further information and peer analysis
Further information and peer analysis
Slide 32: UK high net worth banking: journey to scale
Private Clients UK high net worth (HNW) banking: journey to scale We are proud to have beaten our targets for HNW banking to breakeven by Mar 2022 Journey to profitability Growth 6 £’000 Mar-20 Mar-21 Mar-22 5.1 5 4.5 Loan book (£’bn) Revenue 25.2 36.5 75.3 4 3 ECL impairments (0.6) (1.5) (2.4) 2 Co
Slide 33: Investec Bank plc: peer group comparisons
Investec Bank plc: peer group comparisons Funding: Loans and advances to customers as a % of customer deposits Credit loss ratio: ECL impairment charges as a % of average core loans and (smaller number is better) advances (smaller number is better) 150% 1.50 131% 1.2 112% 116% 1.00 0.93 100% 81.3% 7
Slide 34: Appendix
Appendix
Slide 35: IFRS 9 macro-economic scenario forecasts
IFRS 9 macro-economic scenario forecasts At 30 Sept 2022, the revised macro-economic scenarios have been updated to account for elevated levels of inflation in the UK, interest rate rises, energy considerations and other relevant factors since 31 Mar 2022. There has also been an increase in scenario
Slide 36: Investec plc: salient financial features
Investec plc: salient financial features Key financial statistics 30 Sept 2022 30 Sept 2021 % Change 31 Mar 2022 Total operating income before expected credit loss impairment charges (£'000) 618 234 512 689 20.6 % 1 087 969 Operating costs (£'000) 421 540 380 426 10.8 % 775 866 Adjusted operating pr
Slide 37: Investec plc: income statement
Investec plc: income statement Six months to Six months to Year to £'000 30 Sept 2022 30 Sept 2021 % Change 31 Mar 2022 Interest income 527 328 344 247 53 % 718 446 Interest expense (195 591) (115 023) 70 % (235 727) Net interest income 331 737 229 224 45 % 482 719 Fee and commission income 234 871
Slide 38: Investec plc: balance sheet
Investec plc: balance sheet £'000 30 Sept 2022 31 Mar 2022 Assets Cash and balances at central banks 4 490 840 5 379 994 Loans and advances to banks 1 503 335 1 467 770 Reverse repurchase agreements and cash collateral on securities borrowed 2 041 317 1 447 473 Sovereign debt securities 1 376 257 1
Slide 39: Investec plc: balance sheet (continued)
Investec plc: balance sheet (continued) £'000 30 Sept 2022 31 Mar 2022 Liabilities Deposits by banks 2 425 565 2 026 601 Derivative financial instruments 1 385 425 863 295 Other trading liabilities 42 260 42 944 Repurchase agreements and cash collateral on securities lent 149 515 154 828 Customer ac
Slide 40: Investec plc: segmental analysis of operating profit
Investec plc: segmental analysis of operating profit Specialist Banking For the six months to 30 Sept 2022 Wealth & Private Group £'000 Investment Banking CIB & Other Investments Group Costs Total Group Net interest income 9 714 54 618 267 405 — — 331 737 Fee and commission income 165 497 1 310 68 0
Slide 41: Investec plc: segmental analysis of operating profit (continued)
Investec plc: segmental analysis of operating profit (continued) Specialist Bank Group Costs/ For the six months to 30 Sept 2021 Wealth & Group £'000 Investment Private Banking CIB & Other Investments Total Group Net interest income 436 30 546 198 242 229 224 Fee and commission income 173 390 404 64
Slide 42: Investec plc: asset quality under IFRS 9
Investec plc: asset quality under IFRS 9 £‘mn 30 Sept 2022 31 Mar 20221 Gross core loans 15 495 14 557 Gross core loans at FVPL 587 609 Gross core loans subject to ECL1 14 908 13 948 Stage 1 13 537 12 665 Stage 2 1 067 992 of which past due greater than 30 days 44 28 Stage 3 304 291 ECL (146) (134)
Slide 43: Investec plc: capital adequacy
Investec plc: capital adequacy £‘mn 30 Sept 20221 31 Mar 20221 Tier 1 Capital Shareholders’ equity 2 278 2 340 Non-controlling interests — — Regulatory adjustments to the accounting basis (7) 71 Deductions (315) (480) Common equity tier 1 capital 1 956 1 931 Additional Tier 1 instruments 250 250 Tie
Slide 44: UK sustainability highlights
UK sustainability highlights Operate responsibly, finance and invest for a sustainable future and maintain our competitive ESG position PROGRESS MADE ON OUR IMPACT SDGs Net-zero commitments Equality commitments 192k tCO2e Participated in W&I signed up as a Group Board Cost of living crisis Transform
Slide 45: Focused on doing well and doing good
Focused on doing well and doing good Other highlights Specialist banking Wealth & Investment • Rolled out a sustainability awareness programme aimed at identifying • Continued inflows into the Investec Global Sustainable Equity Fund sustainability business opportunities - $44.5mn (since launch in Ma
Slide 46: Top of UK peers across the most credible international ESG ratings
Top of UK peers across the most credible international ESG ratings 1 MSCI ESG Ratings 2 Sustainalytics Ratings 3 S&P Corporate Sustainability Assessment TOP 1% in the financial services sector in the TOP 14% of globally assessed companies in TOP 2% of diversified financials in the S&P MSCI Global Su
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