Investec plc · LSE:INVP
Investec — H1 FY2011 Earnings Presentation
16 slides from Investec's earnings presentation, Nov 18, 2010
Slide 1: Interim results presentation
Interim results presentation For the six months ended 30 I 09 I 2010 Proviso • Please note that matters discussed in today's presentation may contain forward looking g statements which are subjectj to various risks and uncertainties and other factors including, but not limited to: o the further deve
Slide 2: Review of the interim period: Difficult operating environment
Review of the interim period 3 Difficult operating environment Since Mar-10 Mar 10 Since Sep-09 Sep 09 FTSE All Share -1.5% +8.8% JSE All Share +2.5% +18.3% Aus All Ords -5.2% -2.2% Volatile equity markets Stronger credit markets 120 170 150 110 100 00 130 Rebased to 10 Rebased to 1 100 110 90 90 80
Slide 3: Difficult operating environment; strategy to build non-lending revenues
Difficult operating environment Since Mar Mar-10 10 Since Sep Sep-09 09 At Sep-10 Sep 10 At Sep-09 Sep 09 Euro/£ +3.0% +5.5% UKINT 0.73% 0.54% Rand/£ -1.3% -9.3% JIBAR 6.03% 7.02% A$/£ +0.4% -10.0% AUSINT 4.87% 3.4% US$/£ +3.4% -2.0% USINT 0.29% 0.29% Strong Rand Low interest rates 120 8 115 7 110 6
Slide 4: Maintained a solid base of recurring income
Maintained a solid base of recurring income • Strong performance from five of our six core divisions • Supported by strong recurring income base Operating profit* Recurring income +49.5% 63% 63% 74% 61% 63% *Before goodwill, non-operating items, taxation and after minorities and excludes Group Servi
Slide 5: Impairments improving but still high
Impairments improving but still high • The uncertain pace of economic recovery has slowed the improvement in the level of non- performing loans and defaults have continued to increase • Impairments are down from £134.3 mn to £122.9 mn Analysis of defaults Defaults and core loans 6.6% of loans make u
Slide 6: Financial targets
Financial targets • ROE and EPS targets difficult to achieve in this environment • ROE target needs to be adjusted to align with revised regulatory expectations Sep-10 Mar-10 Sep-09 ROE Target: under revision 11.5% 13.5% 14.8% Adjusted* EPS growth Adjusted Target: 10% > UKRPI (7 9%) (7.9%) 6 4% 6.4%
Slide 7: Diversified our funding sources
Diversified our funding sources • Successfully grew customer deposits in all three core geographies • Substantially increased our cash and near cash balances Customer accounts (deposits) Surplus cash and near cash £'bn £'mn 28 10,500 , 23.5 24 21.9 9,500 Ave: £6.4 bn 20 Average 18.0 8,500 16 14.6 12
Slide 8: Diversified portfolio of businesses; Asset Management
Diversified portfolio of businesses % contribution to operating profit* (E l di G (Excluding Group S Services i and d Oth Other A Activities) ti iti ) 100% 90% 80% 70% Capital p Markets 60% 50% 40% Investment Banking Private Banking 30% Property Activities 20% Wealth and Investment^ 10% Asset Manage
Slide 9: Wealth and Investment; Property Activities
Wealth and Investment (formerly Private Client Portfolio Management & Stockbroking) (6.4% of group) Overview of performance % • Completed acquisition of Rensburg (£) Sep-10 Sep-09 change Sh Sheppards d plc l Operating profit* (mn) 16.3 12.0 36.1 • Benefited from higher average funds under management
Slide 10: Private Banking; Investment Banking
Private Banking (-1.5% of group) Overview of performance % • Weak performance as a result of: (£ ) Sep-10 Sep-09 change o The restructure restr ct re of the Tr Trust st b businesses sinesses in the UK Operating income (mn) 194.4 177.0 9.8% o Low activity levels Operating profit* pre o Increased impa
Slide 11: Capital Markets; Group Services and Other Activities
Capital Markets (52.6% of group) Overview of performance % • Very strong performance as a result of (£) Sep-10 Sep-09 change goodd llevels l off activity ti it across th the advisory d i and structuring businesses, particularly in: Operating profit* (mn) 133.5 73.6 81.3% o Principal Finance Cost to
Slide 12: General; Strategy and outlook
General • Operational effective tax rate up from 18.2% to 20.2% • Weighted shares from 669.2 mn to 739.7 mn • Goodwill impairment of £2.8 mn o Largely relates to Asset Management businesses acquired in prior years • Profit on acquisition of Rensburg Sheppards plc of £73.5 mn • Loss of £6.5 mn (net o
Slide 13: Strategic focus; Realign the business model
Strategic focus To facilitate T f ilit t the th CREATION of WEALTH And the MANAGEMENT G off WEALTH We strive to be a DISTINCTIVE SPECIALIST BANK AND ASSET MANAGER, driven by commitment to our core philosophies and values. 25 Realign the business model 600 Third party Proprietary assets andd risk i k
Slide 14: Maintain operational efficiency; Focus on building our brand
Maintain operational efficiency • Cost to income ratio was 61.4% (well below our internal target of <65%) • Total expenses were up 24.8% Cost analysis Efficiency ratio 1,000 £'mn Sep-10 Sep-09 Difference Operating income* CAGR: 16 16.7% 7% Total expenses 540.9 433.5 107.3 800 £'mn Currency adjustmen
Slide 15: Perpetuate quality of the balance sheet; Capture opportunities
Perpetuate quality of the balance sheet • Continue to diversify funding sources and reduce reliance on wholesale funding • Manage risk and maintain credit quality Gearing ratios Core loans to capital ratio 16 8.0 6.6 5.8 60 6.0 14 13.4 4.8 times 12.3 12.1 4.0 12 11.2 11.4 10.9 2.0 10 0.0 Sep-08 Sep-
Slide 16: Outlook; Thank you
Outlook • The group’s operational performance is reflective of our forward-focused approach over the past year and the ongoing effort to build our brand throughout the financial crisis i i • While the pace of economic recovery varies across the world, and the regulatory environment remains challengi