Investec plc · LSE:INVP
Investec — FY2019 Earnings Presentation
33 slides from Investec's earnings presentation, May 16, 2019
Slide 1: Year End Results Presentation
YEAR END RESULTS PRESENTATION 16 May 2019
Slide 2: Proviso
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: changes in the political and/or economic environment that would materially affect the In
Slide 3: Agenda
Agenda 1. 1. Overview Overview –– Fani Fani Titi, Titi, Joint Joint Group Group Chief Chief Executive Executive Officer Officer 2. Financial review – Nishlan Samujh, Group Finance Director 3. Business review Bank and Wealth – Fani Titi, Joint Group Chief Executive Officer Asset Management – Hend
Slide 4: Overview
OVERVIEW Out of the Ordinary x & Investec
Slide 5: Year under review
Year under review Sound operating performance 9.4% increase in operating profit to £664.5mn 3.6% increase in adjusted EPS to 55.1p 2.1% dividend growth to 24.5p Improved Group ROE to 12.9% Supported by strong client franchises Substantial net inflows in Asset Management Good loan book gr
Slide 6: Year under review (cont.)
Year under review (cont.) Simplify, focus and grow with discipline Smooth leadership transition Good progress on the proposed demerger of Asset Management Identified growth initiatives on track Actions taken to simplify business: - Disposal of the Irish Wealth business - Discontinued Click &
Slide 7: Agenda
Agenda 1. Overview – Fani Titi, Joint Group Chief Executive Officer 2. Financial 2. Financialreview review–– Nishlan Nishlan Samujh, Samujh, Group Group Finance Finance Director Director 3. Business review Bank and Wealth – Fani Titi, Joint Group Chief Executive Officer Asset Management – Hendri
Slide 8: Financial Review
FINANCIAL REVIEW Out of the Ordinary x & Investec
Slide 9: Backdrop of persistent economic uncertainty
Backdrop of persistent economic uncertainty 130 Half Year 120 Policy uncertainty and Rebased to 100 weak economy in SA has 110 impacted activity levels Exchange 100 rates 90 Brexit and political uncertainty has impacted 80 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan
Slide 10: Snapshot of group financial performance
Snapshot of group financial performance Growth in operating profit* and adjusted EPS** of 9.4% and 3.6% respectively Key metric Cost to Income Dividend ROE CET1 Ratio Ratio^ Cover Target 12% to 16% < 65% > 10% 1.75x to 3.5x Limited: Mar-19 Standardised – 10.5% 12.9% 69.9% Pro-forma FIRB – 11.6% 2.
Slide 11: Divisional operating profit performance
Divisional operating profit* performance Strong performance from the UK Specialist Bank Specialist Bank Wealth & Investment Asset Management (AM) Good loan book growth Positive net inflows Substantial net inflows Significant impairment reduction Impacted by non-recurring Growth in AUM an
Slide 12: Growth in key earnings drivers
Growth in key earnings drivers Core income drivers impacted by the closing Rand depreciation of 13.1% £’bn 175 160.6 167.2 150 125 Third party assets under Third party management up 4.1% to 100 assets £167.2bn 75 under 50 management 25 0 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Asset Management Wealth &
Slide 13: Supporting growth in operating income
Supporting growth in operating income £'mn 3,000 80% 2,500 2,443.5 2,486.3 Annuity revenue continues 2,000 75% to support earnings Operating 1,500 70% income 1,000 Total operating income 65% trend 500 increased by 1.8% to 0 60% £2,486.3mn Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Net interest income Ne
Slide 14: Costs up ahead of revenue and an area of focus for management
Costs up ahead of revenue and an area of focus for management £’mn 2,600 2,486.3 2,400 2,200 Cost to income^ of 69.9% 2,000 (Mar-18: 68.3%) 1,800 Operating income up 1.8% 1,695.0 Jaws ratio 1,600 1,400 Operating costs up 3.8% 1,200 Revenue growth and cost 1,000 Mar-15 Mar-16 Mar-17 Mar-18 Mar-
Slide 15: Reduction in ECL charges
Reduction in ECL^ charges £’mn 160 ECL charges amounted to 148.6 £66.5mn 140 (Mar-18: £148.6mn) 120 No repeat of substantial 100 legacy impairments Total ECL charge by 80 Credit loss ratio within long- 66.5 geography 60 term average range at 0.31% 40 (Mar-18: 0.61%) 20 0 Mar-15 Mar-16 Mar-17 M
Slide 16: Improving group equity returns
Improving group equity returns Return on Equity Dividend and dividend cover £’mn pence times 4,500 18% 60 4.0 55.1 4,300 4,226 17% 53.2 55 3.5 4,122 4,100 16% Target range: 1.75x-3.5x 50 Target range: 12-16% 3.0 3,900 15% 45 3,700 14% 2.5 2.2 2.2 40 3,500 12.9% 13% 2.0 12.1% 35 3,300 12% 1.5 30 3,10
Slide 17: Sound balance sheet
Sound balance sheet Capital ratios in excess of regulatory requirements Capital 7.4% Leverage ratio 7.6% CET 1 ratio above 10% target and total capital ratios within target 7.4% range of 14%-17% 11.6% Solid leverage ratios, remain comfortably ahead of 6% target CET 1 ratio^ 10.5% Investec 10.0%
Slide 18: Agenda
Agenda 1. Overview – Fani Titi, Joint Group Chief Executive Officer 2. Financial review – Nishlan Samujh, Group Finance Director Businessreview 3. Business review Bank and Wealth – Fani Titi, Joint Group Chief Executive Officer Asset Management – Hendrik du Toit, Joint Group Chief Executive Offi
Slide 19: Business Review
BUSINESS REVIEW Out of the Ordinary x & Investec
Slide 20: Bank and Wealth - overview
Bank and Wealth - overview A diversified mix of businesses Geography Division 21% 46% Operating Operating income up 0.5% to 54% £1,913.3mn income 79% UK and Other Southern Africa Wealth & Investment Specialist Bank 16% 34% Operating profit* up 13.0% to Operating £485.2mn profit* 66% 84% UK and Other
Slide 21: Wealth & Investment - overview
Wealth & Investment - overview Stable core earnings impacted by non-annuity revenue £’bn 56.0 55.1 60 AUM decreased by 1.7% to £55.1bn up 2.1% in neutral currency Assets 40 Impacted by markets under 20 management 0 Net inflows of £366mn Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 SA - Discretionary SA -
Slide 22: Specialist Banking UK and Other - overview
Specialist Banking UK and Other - overview Revenue supported by client activity £’bn Net core loans and advances Total deposits Core loans up 8.5% to £10.5bn 12 £’bn Customer 11 10.5 16 Good traction in HNW mortgage book 9.7 accounts 10 9 14 13.1 growth 11.6 (deposits) 8 12 Diversified corporate
Slide 23: Specialist Banking SA - overview
Specialist Banking SA - overview Resilient performance against a challenging backdrop R’bn Net core loans and advances R’bn Total deposits 340 Customer 256.7 271.2 400 321.8 341.6 Core loans up 5.6% to R271.2bn accounts 260 300 Good private client lending activity (deposits) 180 200 Deposits up 6.
Slide 24: Bank and Wealth - key metric trends
Bank and Wealth - key metric trends ROE and costs - an area of focus for management Drivers for ROE enhancement: 10.0% 10.4% 9.8% 9.3% Revenue growth initiatives 8.0% ROE Cost discipline Target*: ROE trend Optimising capital allocation 12% to 16% Greater connectivity across the business Mar-
Slide 25: Bank and Wealth return on equity
Bank and Wealth return on equity 3 5 SA Specialist Bank1 UK Specialist Bank IWI SA and UK 4 Group Costs Bank and Wealth 10.4% 26.6% 14.2% 13.7% 12.8% 8.1% 7.2% ROE 10.5% 8.1% -41.8% SA Bank ex Investment 2 Total UK Bank ex New banking Total Wealth & n.m. Investec Ltd Investec plc Investment Portfoli
Slide 26: Bank and Wealth - outlook
Bank and Wealth - outlook Positioning Outlook Market leading client franchises positioned for long term value creation despite challenging environment Continue to focus on our clients and our people Committed to achieving our performance targets in the short to medium term UK and Other Souther
Slide 27: Bank and Wealth - strategic priorities
Bank and Wealth - strategic priorities Strategic priorities Capital discipline, including reshaping the equity investment portfolio Build momentum in selected growth initiatives Cost management Deliver a shared value proposition to clients across Bank and Wealth as well as across geographies
Slide 28: Asset Management - overview
Asset Management - overview Momentum remains positive £’bn 150 103.9 111.4 AUM increased by 7.3% to Assets 100 £111.4bn under 50 Substantial net inflows of £6.1bn management 0 AUM supported by market recovery Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 in last quarter Equities Fixed Income Multi-Asset Al
Slide 29: Asset Management - outlook
Asset Management - outlook Positioning Outlook AUM by strategy type* Net flows by geography (£’mn) The long-term growth fundamentals in the asset management industry remain attractive in spite of challenges 2,908 2,670 2,684 Emerging Positive business momentum Markets 56% Motivated and stable
Slide 30: Asset Management - strategic priorities
Asset Management - strategic priorities Strategic priorities Grow Advisor business Grow North America Institutional business Continue to invest across investment platforms, especially Multi-Asset and China Embrace the Sustainability trend Achieve a successful demerger and listing Everythin
Slide 31: Agenda
Agenda 1. Overview – Fani Titi, Joint Group Chief Executive Officer 2. Financial review – Nishlan Samujh, Group Finance Director 3. Business review Bank and Wealth – Fani Titi, Joint Group Chief Executive Officer Asset Management – Hendrik du Toit, Joint Group Chief Executive Officer 4. Closing
Slide 32: Closing and Q&A
CLOSING AND Q&A Out of the Ordinary & Investec
Slide 33: Two independent businesses poised for long term growth and value creation
Committed to stakeholder value Two independent businesses poised for long term growth and value creation 33