Investec Plc · LSE:INVP
Investec — Debt Investor Presentation (July 2017)
50 slides from Investec's debt investor presentation, July 2017
Slide 1: Investec plc – Debt Investor Presentation July 2017
Investec plc – Debt Investor Presentation July 2017 The information in this presentation relates to the year ending 31 Mar 2017, unless otherwise indicated. All information relates to Investec plc unless otherwise indicated.
Slide 2: Contents
Contents 1. An overview of Investec plc 2. Investec plc’s investment proposition and operating fundamentals 3. Funding profile 4. Appendix 2
Slide 3: An overview of Investec plc
An overview of Investec plc YS o Investec
Slide 4: Investec plc: overview
Investec plc: overview Investec plc key facts % contribution to operating profit* • Investec plc operates as a specialist bank and asset manager, principally in the UK 25% 40% • We have a number of other distribution and origination Mar channels which support our underlying core businesses for 2017
Slide 5: Balanced business model supporting our long-term strategy
Investec plc: balanced business model supporting our long-term strategy Three distinct business activities focused on well defined target clients Corporate / Institutional / Government Private client (high net worth / high income) / charities / trusts Asset Management Specialist Banking Specialist B
Slide 6: Simplified structure and main operating subsidiaries
Investec plc: simplified structure and main operating subsidiaries Baa1 Features of Investec’s plc structure Investec plc • Investec plc is authorised by the PRA and is regulated by the FCA Listed on LSE and the PRA on a consolidated basis. Non-SA operations • Two main operating subsidiaries: Invest
Slide 7: We have realigned the business model
Investec plc: we have realigned the business model • We have significantly realigned our business model over the past few years and focused on growing our capital light businesses • Our total capital light activities account for 63% of Investec plc’s income CAPITAL LIGHT ACTIVITIES CAPITAL INTENSIVE
Slide 8: We have realigned the business model
Investec plc: we have realigned the business model • We have significantly increased our third party assets under management - a key capital light annuity income driver - from the Asset Management and Wealth & Investment businesses • Strong cash flows from the wealth and asset management businesses
Slide 9: Key strategic developments over the past year
Investec plc: key strategic developments over the past year We have continued to grow our core Specialist Banking business: o Notwithstanding macro uncertainty and volatility, the Specialist Bank recorded robust levels of activity. o The corporate business saw a strong performance from our advisory,
Slide 10: We have reduced the legacy portfolio
Investec plc: we have reduced the legacy portfolio… • Since 31 March 2016 the group’s legacy portfolio in the UK has continued to be actively managed down from £583 million at 31 March 2016 to £476 million at 31 March 2017 (equating to 5.5% of net core loans and advances) largely through asset sales
Slide 11: Strategic objectives
Investec plc: strategic objectives Robust liquidity management philosophy Maintain healthy capital ratios • Appropriately manage our levels of surplus liquidity and • Always held capital in excess of regulatory requirements cost of funding • Targets: • Common equity tier 1 target: >10% (already achi
Slide 12: Investec plc's investment proposition and operating fundamentals
Investec plc’s investment proposition and operating fundamentals
Slide 13: Business model and key operating activities
Investec plc: business model and key operating activities • Investec plc comprises three distinct business activities: Specialist Banking, Wealth & Investment and Investec Asset Management Specialist Banking Wealth & Investment Value Proposition Value Proposition • High-quality specialist banking so
Slide 14: Business model and key operating activities
Investec plc: business model and key operating activities Investec Asset Management Capabilities and organisational structure^ Global Specialist Asset Manager Equities - £39bn Fixed Income - £27bn • Founded in 1991 by current leadership • Long only equity • Credit • Origins are African – presence an
Slide 15: Profitability supported by diversified revenue streams
Investec plc: profitability supported by diversified revenue streams Recurring income Revenue versus expenses £’mn £’mn 1400 90% 1400 1200 80% 1200 70% 1000 1000 60% 800 800 50% 600 600 40% 400 400 30% 200 200 20% 0 10% 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 201
Slide 16: Profitability supported by diversified revenue streams
Investec plc: profitability supported by diversified revenue streams Operating profit before tax* Business mix percentage contribution to operating profit* £’mn 100% 400 90% 350 80% 300 70% Specialist 250 Banking 60% 200 50% Wealth & 150 Investment 40% 100 30% Asset 50 Management 20% - 2008 2009 201
Slide 17: Sound capital base and capital ratios
Investec plc: sound capital base and capital ratios Total capital Total risk-weighted assets £’mn £’mn 3,500 30,000 80% 71% 70% 3,000 25,000 66% 64% 60% 56% 60% 2,500 53% 54% 53% 53% 51% 20,000 50% 2,000 15,000 40% 1,500 30% 10,000 1,000 20% 500 5,000 10% - - 0% 2008 2009 2010 2011 2012 2013 2014 20
Slide 18: Sound capital base and capital ratios
Investec plc: sound capital base and capital ratios Basel capital ratios* Capital development % 20.0 A summary of ratios* 17.5 18.0 16.8 16.6 16.2 15.9 16.2 16.0 15.3 14.9 31 Mar 2017 31 Mar 2016 Target 14.7 14.6 14.0 Common equity tier 1 (as reported) 10.9% 9.3% >10% Common equity tier 1 (‘fully lo
Slide 19: Gearing ratios amongst lowest vs. peers
Investec plc: gearing ratios amongst lowest vs. peers Gearing remains low Total assets composition times £’mn 16.0 30,000 14.1 Loans and deposits in FY15 impacted by 14.0 13.5 13.3 the sale of group assets, largely in Australia. 25,000 12.0 11.2 10.8 10.7 10.0 10.0 20,000 10.0 9.2 8.8 8.0 15,000 6.0
Slide 20: Analysis of our core loan portfolio and counterparty exposures
Investec plc: analysis of our core loan portfolio and counterparty exposures Gross core loans as at 31 March 2017: £8.7bn Legend – reads clockwise 3 types of lending: Commercial property investment 0.1% Commercial property development 5.3% 10.7% Commercial vacant land and planning Lending collateral
Slide 21: Core lending and asset quality
Investec plc: core lending and asset quality Core loans and asset quality Highlights £’bn • Credit quality on core loans and advances for the for the year 10 6% ended 31 March 2017: 9 5% • Impairments on loans and advances decreased from £84.2mn to 8 £75.0mn 7 4% 6 • The credit loss charge as a perc
Slide 22: Maintaining robust surplus liquidity
Investec plc: maintaining robust surplus liquidity Fully self funded: healthy loan to deposit ratio Total deposits £’mn Loans and deposits in FY15 impacted by the £’mn 12,000 sale of group assets, largely in Australia. 140% 12,000 10,000 120% 10,000 100% 8,000 8,000 80% 6,000 6,000 60% 4,000 40% 4,0
Slide 23: Maintaining robust surplus liquidity
Investec plc: maintaining robust surplus liquidity Cash and near cash balances Cash and near cash analysis at 31 March 2017 * 3.5% Average 22.3% Cash Since 2011 £'mn Ave 5,899 Central bank cash placements and Min 5,026 guaranteed liquidity Max 6,343 74.2% Near-cash (other 'monetisable' March 2017 5,
Slide 24: Funding profile
Funding profile o Investec
Slide 25: Diversified funding strategy
Investec plc: diversified funding strategy Conservative and prudent funding strategy Maintaining a high base of high quality liquid assets Diversifying funding sources Limiting concentration risk Low reliance on wholesale funding Maintaining a stable retail deposit franchise 25
Slide 26: Diversified funding strategy
Investec plc: diversified funding strategy • Investec’s funding sources consist primarily of customer deposits Selected funding sources Selected funding sources % split 100% 31 Mar 31 Mar 31 Mar £000’s 90% 2017 2016 2015 80% Customer deposits 11,021,581 10,808,980 10,306,331 70% Debt securities in i
Slide 27: Issued debt maturity profile with debt type breakdown
Investec plc: issued debt maturity profile with debt type breakdown Issued debt outstanding Debt securities in issue – maturity profile £’000 900,000 31 March 2017 Principal £’000 outstanding 800,000 700,000 Debt securities in issue 1,955,447 600,000 500,000 Subordinated liabilities 579,356 400,000
Slide 28: Credit ratings
Investec plc: credit ratings • Over the last 2 years both Investec Bank plc and Investec plc have received ratings upgrades. • Moody’s upgraded Investec Bank plc’s long-term deposit rating first in June 2015 to A3 from Baa3, then again in February 2016 to A2 (stable outlook). • Investec plc’s long-t
Slide 29: Summary
Investec plc: summary • Balanced business model comprising three distinct business activities; Asset Management, Specialist Banking and Wealth & Investment Diversified revenue • Continued focus on growing our capital light business, currently 63% of Investec plc’s income streams with high • High lev
Slide 30: Contact details
Contact details Ruth Leas Head of UK Risk Management • Phone: +44 (0) 20 7597 4379 • Email: ruth.leas@investec.co.uk Carly Newton Head of UK Investor Relations • Phone: +44 (0) 20 7597 4493 • Email: carly.newton@investec.co.uk Paul Myers Treasurer of Investec plc and Investec Bank plc Phone: +44 (0)
Slide 31: Appendix
Appendix o Investec
Slide 32: Investec plc: financials, asset quality and capital ratios
Investec plc: financials, asset quality and capital ratios
Slide 33: Salient financial features
Investec plc: salient financial features Year to Year to 31 March 2017 31 March 2016 % change Total operating income before impairment losses on loans and advances (£'000) 1,306,941 1,128,374 15.8% Operating costs (£'000) 1,005,130 863,648 16.4% Operating profit before goodwill, acquired intangibles
Slide 34: Income statement
Investec plc : income statement Year to Year to £'000 31 March 2017 31 March 2016 Interest income 563,354 549,092 Interest expense (274,173) (288,147) Net interest income 289,181 260,945 Fee and commission income 932,146 813,744 Fee and commission expense (128,283) (103,986) Investment income 59,975
Slide 35: Balance sheet
Investec plc : balance sheet £'000 31 March 2017 31 March 2016 Assets Cash and balances at central banks 2,853,571 2,638,069 Loans and advances to banks 1,130,998 1,112,441 Reverse repurchase agreements and cash collateral on securities borrowed 536,173 557,025 Sovereign debt securities 952,902 1,25
Slide 36: Balance sheet (cont.)
Investec plc : balance sheet (cont.) £'000 31 March 2017 31 March 2016 Liabilities Deposits by banks 690,749 544,210 Derivative financial instruments 582,600 964,362 Other trading liabilities 136,041 226,598 Repurchase agreements and cash collateral on securities lent 223,997 281,260 Customer accoun
Slide 37: Segmental analysis of operating profit
Investec plc: segmental analysis of operating profit For the year to 31 March 2017 Asset Wealth & Specialist £'000 Management Investment Banking Group Costs Total group Net interest income 111 4,368 284,702 - 289,181 Fee and commission income 427,626 268,429 236,091 - 932,146 Fee and commission expe
Slide 38: Segmental analysis of operating profit
Investec plc: segmental analysis of operating profit For the year to 31 March 2016 Asset Wealth & Specialist £'000 Management Investment Banking Group Costs Total group Net interest income 290 4,064 256,591 - 260,945 Fee and commission income 375,312 246,202 192,230 - 813,744 Fee and commission expe
Slide 39: Asset quality
Investec plc: asset quality £'000 31 March 2017 31 March 2016 Gross core loans and advances to customers 8,747,618 7,946,793 Total impairments (126,876) (143,191) Specific impairments (83,488) (121,791) Portfolio impairments (43,388) (21,400) Net core loans and advances to customers 8,620,742 7,803,
Slide 40: Capital adequacy
Investec plc: capital adequacy £'million* 31 March 2017 31 March 2016 Common equity tier 1 capital 1,448 1,141 Additional tier 1 capital 24 130 Total tier 1 capital 1,472 1,271 Tier 2 capital 475 535 Total regulatory capital 1,947 1,806 Risk-weighted assets 13,312 12,297 Capital requirements 1,064 9
Slide 41: Investec Bank plc: financials, asset quality and capital ratios
Investec Bank plc: financials, asset quality and capital ratios
Slide 42: IBP: salient financial features
IBP: salient financial features Year to Year to 31 March 2017 31 March 2016 % change Total operating income before impairment losses on loans and advances (£'000) 982,690 859,189 14.4% Operating costs (£'000) 744,716 628,515 18.5% Operating profit before goodwill, acquired intangibles, non-operating
Slide 43: IBP: income statement
IBP: income statement Year to Year to £'000 31 March 2017 31 March 2016 Interest income 562,092 550,715 Interest expense (263,340) (280,649) Net interest income 298,752 270,066 Fee and commission income 502,106 437,650 Fee and commission expense (13,260) (11,608) Investment income 55,900 67,308 Shar
Slide 44: IBP: balance sheet
IBP: balance sheet £'000 31 March 2017 31 March 2016 Assets Cash and balances at central banks 2,853,567 2,638,064 Loans and advances to banks 922,764 935,071 Reverse repurchase agreements and cash collateral on securities borrowed 536,173 557,025 Sovereign debt securities 952,902 1,252,991 Bank deb
Slide 45: IBP: balance sheet (cont.)
IBP: balance sheet (cont.) £'000 31 March 2017 31 March 2016 Liabilities Deposits by banks 673,586 526,717 Derivative financial instruments 583,562 964,386 Other trading liabilities 136,041 226,598 Repurchase agreements and cash collateral on securities lent 223,997 281,260 Customer accounts (deposi
Slide 46: IBP: segmental analysis of operating profit
IBP: segmental analysis of operating profit For the year to 31 March 2017 Specialist £'000 Wealth & Investment Banking Total group Net interest income 4,368 294,384 298,752 Fee and commission income 268,429 233,677 502,106 Fee and commission expense (582) (12,678) (13,260) Investment income 2,169 53
Slide 47: IBP: segmental analysis of operating profit
IBP: segmental analysis of operating profit For the year to 31 March 2016 Specialist £'000 Wealth & Investment Banking Total group Net interest income 4,064 266,002 270,066 Fee and commission income 246,202 191,448 437,650 Fee and commission expense (1,209) (10,399) (11,608) Investment income 5,817
Slide 48: IBP: asset quality
IBP: asset quality £'000 31 March 2017 31 March 2016 Gross core loans and advances to customers 8,725,515 7,924,577 Total impairments (126,876) (143,191) Specific impairments (83,488) (121,791) Portfolio impairments (43,388) (21,400) Net core loans and advances to customers 8,598,639 7,781,386 Avera
Slide 49: IBP: capital adequacy
IBP: capital adequacy £'million* 31 March 2017 31 March 2016 Common equity tier 1 capital 1,552 1,400 Total tier 1 capital 1,552 1,400 Tier 2 capital 560 590 Total regulatory capital 2,112 1,990 Risk-weighted assets 12,716 11,738 Capital requirements 1,017 939 A summary of capital adequacy and lever
Slide 50: Legal disclaimer
Legal disclaimer IMPORTANT NOTICE THE INFORMATION, STATEMENTS AND OPINIONS CONTAINED IN THIS DOCUMENT DO NOT CONSTITUTE A PUBLIC OFFER UNDER ANY APPLICABLE LEGISLATION OR AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OR FINANCIAL INSTRUMENTS OR ANY ADVICE OR RECOMMENDATION WITH