Investec plc · LSE:INVP
Investec — Investec Bank — Debt Investor Presentation (May 2022)
43 slides from Investec's debt investor presentation, May 2022
Slide 1: Investec Bank Limited
Investec Bank Limited May 2022 The information in this presentation relates to the financial year ended 31 March 2022, unless otherwise indicated.
Slide 2: Agenda
Agenda Contents 1. 2. 3. 4. 5. Investec Group at a Investec Bank IBL IBL peer analysis IBL Appendices glance Limited (IBL) operating overview fundamentals 2
Slide 3: Investec Group at a glance
Investec Group at a glance
Slide 4: Investec Dual Listed Company structure
Investec Dual Listed Company structure Investec plc and Investec Limited are Non-Southern African operations Southern African operations separate legal entities and listings, but are bound together by contractual Investec plc Sharing Investec Ltd agreements and mechanisms 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 Assets international business platform £27.8bn employing approximately 8 300+* FUM people £44.4bn Listed on the JSE
Slide 6: One Investec
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 Performance Client focus Dedicated partnership We demand cast-iron integrity in all internal and external We emp
Slide 7: Investment proposition
Investment proposition Well positioned to pursue long-term growth 1 Well capitalised and highly liquid balance sheet 2 Improved capital allocation – operating with excess capital in South Africa Diversified mix of earnings by geography and business, with significant annuity income underpin from lead
Slide 8: Framework to drive improved business performance
Framework to drive improved business performance Growth initiatives Cost management Clear set of opportunities to deliver disciplined revenue growth Enhanced management of the cost base through operational leverage Underpinned by Capital discipline A more disciplined approach to capital allocation a
Slide 9: Sustainability highlights
Sustainability highlights Operate responsibly, finance and invest for a sustainable future and maintain our competitive ESG position Sustainability principles Committed to a clean carbon Providing profitable, 1. Creating long-term value for all our stakeholders 2. Do no harm through ethical conduct
Slide 10: Investec Bank Limited (IBL) overview
Investec Bank Limited (IBL) overview
Slide 11: Overview of Investec Bank Limited
Overview of Investec Bank Limited IBL is a specialist bank with a strong franchise in niche market segments operating primarily in Southern Africa. Total Net core Total Customer Employees assets loans equity deposits 4 000+ R553.9bn R294.8bn R46.8bn R420.1bn Well established franchise Key strategic
Slide 12: Specialist Banking
Specialist Banking We have a specialised niche offering to a select target market • Invested in our • Strong technology and • Deepening our • Our growth initiatives • Maintaining cost • Maintaining sound business, digital platforms existing client and strong franchise efficiency with low capital rat
Slide 13: Specialist Banking
Specialist Banking High-quality specialist banking solutions with leading positions in selected areas Corporate and Investment Banking and Private Banking Investec for Business Institutional banking Principal Investments For high net worth clients, For corporates (mid to large size), professionals a
Slide 14: Specialist Banking: Private Banking
Specialist Banking: Private Banking A full-service Private Banking offering integrated into One Place™ Ambition • To be a leading domestic and international Private Bank Clear target market • HNW individuals, emerging entrepreneurs, and professionals Value proposition • Bank, borrow, save and invest
Slide 15: Specialist Banking: Investec for Business
Specialist Banking: Investec for Business Bespoke lending offerings for working capital optimisation and business growth Ambition • Develop an integrated niche offering to our target clients Clear target market • Smaller and mid-tier corporates • Combining bespoke lending with Investec’s other trans
Slide 16: Specialist Banking: Corporate and Institutional Banking
Specialist Banking: Corporate and Institutional Banking Strong franchise value and leading market position in our niche markets Ambition • To be a top tier corporate and institutional bank Clear target market • Corporates (mid to large size), intermediaries, government and SOEs • Diversified client-
Slide 17: Specialist Banking: Investment Banking and Principal Investments
Specialist Banking: Investment Banking and Principal Investments Delivering holistic investment solutions to clients Investment banking Principal investment activities • Using our collective skill set to optimise capital allocation in principal Ambition • To be the leading investment bank with an in
Slide 18: IBL operating fundamentals
IBL operating fundamentals
Slide 19: Revenue supported by resilient franchises
Revenue supported by resilient franchises Annuity income* Revenue versus expenses R’mn R’mn 16,000 90.0% 16,000 60.0% 85.4% 83.7% 82.3% 14,000 53.3% 52.6% 53.7% 14,000 80.2% 78.3% 80.0% 51.7% 49.3% 50.0% 70.0% 12,000 12,000 60.0% 40.0% 10,000 10,000 50.0% 8,000 8,000 30.0% 40.0% 6,000 6,000 30.0% 20
Slide 20: Operating Profit
Operating Profit IBL reported an increase in profit before tax of 44.6%. Our client engagement has been proactive, resulting in good client acquisition across both private and corporate clients in the period under review. Profits increased primarily due to: Higher net interest income driven by h
Slide 21: Investec Bank Limited: sound capital base
Investec Bank Limited: sound capital base Total capital resources Total risk-weighted assets: lower RWA intensity R’mn R’mn 600,000 80% 60,000 70% 500,000 50,000 60% 400,000 40,000 50% 300,000 40% 30,000 30% 200,000 20,000 20% 100,000 10,000 10% 0 0% 0 2018 2019 2020 2021 2022 2018 2019 2020 2021 20
Slide 22: Sound capital ratios and capital ratios
Sound capital ratios and capital ratios Capital development Basel capital ratios # Increased AIRB Scope * FIRB % 20 31 Mar 2022^ 31 Mar 2021^ 31 Mar 2021^ 18 16 Common equity Tier 1 15.8% 14.0% 13.3% 14 12 10 Common equity Tier 1 (fully loaded) ^^ 15.8% 14.0% 13.3% 8 6 Tier 1 ratio 16.6% 14.4% 13.7%
Slide 23: Consistent asset growth, gearing ratios remain low
Consistent asset growth, gearing ratios remain low Total assets composition Gearing remains low1 times R’mn 14 600,000 12 11.1 500,000 10 400,000 8 6.4 300,000 6 200,000 4 100,000 2 0 2018 2019 2020 2021 2022 0 2018 2019 2020 2021 2022 Net core loans Cash and near cash balances Other assets Total ge
Slide 24: Substantial surplus liquidity
Substantial surplus liquidity • We maintain a high level of readily available, high quality liquid assets, targeting a Cash and near cash balances minimum cash to customer deposit ratio of 25%. Cash and near cash balances have increased significantly since 31 March 2013 (9.1% CAGR) to R159.5bn at 31
Slide 25: Healthy loan to deposit ratio, stable customer deposit base
Healthy loan to deposit ratio, stable customer deposit base Fully self funded from customer deposits: healthy loan to deposit ratio R’MN • Customer deposits have grown by 126.7% (c.9% CAGR p.a.) since 450,000 100% 400,000 95% 2013 to R420.bn at 31 March 2022 350,000 300,000 90% • Loans and advances
Slide 26: Diversified funding strategy
Diversified funding strategy Investec’s funding consists primarily of customer deposits Investec adopts a conservative and prudent funding strategy Conservative and prudent funding strategy 1 Maintaining a high base of high-quality liquid assets 5 Low reliance on wholesale funding 2 6 Maintainin
Slide 27: 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 and high-income clients • mid to large sized corporates • government, public sector bodies and institutions • We typically originate loans with the intent of holding these assets t
Slide 28: Asset quality
Asset quality Core loans and asset quality R’mn 300,000 2.5% 290,000 2.0% 280,000 270,000 1.5% 260,000 1.0% 250,000 0.5% 240,000 230,000 0.0% 2018 2019 2020 2021 2022 Net core loans (LHS) Credit loss ratio (RHS) Net default loans before collateral as a % of net core loans / Stage 3 net of ECL as a %
Slide 29: Asset quality metrics
Asset quality metrics Provision build Gross core loans by stage R’mn R’mn 4,000 4.0% 5.3% 5.2% 5.9% as % of gross 1.3% 1.5% 2.5% 1.8% core loans 3,000 17,589 18,000 1,880 1,328 1,206 16,000 15,111 14,969 2,000 14,000 423 416 620 1,000 12,000 10,768 1,057 984 868 10,000 0 7,183 8,000 FY 2020 FY 2021
Slide 30: Credit ratings
Credit ratings Current credit ratings Historical credit ratings Moody’s Rating Outlook Long-Term Foreign Currency Current Nov-20* May-20* Apr-20* National scale long-term deposit rating Aa1.za Stable Deposit Rating National scale short-term deposit rating P-1.za Moody’s Ba2 Ba2 Ba1 Ba1 Global long-t
Slide 31: IBL peer analysis
IBL peer analysis
Slide 32: Peer group companies
Peer group companies Long-Term Deposit Rating S&P Fitch Moody's Global Credit Ratings Foreign National Foreign National Viability National Baseline credit Global International National currency* scale currency* scale ratings scale assessment Absa Bank Limited n/a za.AA BB- AA+(zaf) bb- Ba2 Aa1.za ba
Slide 33: Peer group companies (cont.)
Peer group companies* (cont.) Investec is one of the more proportionately liquid of the Big 5 banks and is a net provider of funds to the interbank market in South Africa % regulatory liquidity coverage ratio Liquidity: Asset quality ratios 6.00% 5.4% 160 138.9 140 128.0 5.00% 4.7% 113.0 116.8 4.0%
Slide 34: Peer group companies (cont.)
Peer group companies (cont.) Definitions and/or explanations of certain ratios: • A capital ratio is a measure of a bank's available capital expressed as a percentage of a bank's risk-weighted assets. It is based on regulatory qualifying capital (including common equity tier 1, additional tier 1 and
Slide 35: Investec Bank Limited Appendices
Investec Bank Limited Appendices
Slide 36: Macroeconomic scenarios – 31 March 2022
Macroeconomic scenarios – 31 March 2022 Key judgements at 31 March 2022 • After careful review of portfolio performance, the current design of the ECL models and updated published market data, management reduced the ECL overlay of R290 million at 31 March 2021 to R219 million at 31 March 2022 in the
Slide 37: IBL: salient financial features
IBL: salient financial features Key financial statistics 31 March 2022 31 March 2021 % change Total operating income before expected credit losses (R’million) 14 304 12 049 18.7% Operating costs (R’million) 7 048 6 469 9.0% Operating profit before goodwill and acquired intangibles (R’million) 7 247
Slide 38: IBL: income statement
IBL: income statement R’million 31 March 2022 31 March 2021 % change Interest income 26 230 26 370 (0.5%) Interest expense (16 020) (17 584) (8.9%) Net interest income 10 210 8 786 16.2% Fee and commission income 3 609 2 804 28.7% Fee and commission expense (539) (467) 15.4% Investment income 241 47
Slide 39: IBL: balance sheet
IBL: balance sheet R’million 31 March 2022 31 March 2021 Assets Cash and balances at central banks 11 893 9 653 Loans and advances to banks 19 609 24 666 Non-sovereign and non-bank cash placements 13 176 8 956 Reverse repurchase agreements and cash collateral on securities borrowed 56 437 30 221 Sov
Slide 40: IBL: balance sheet (cont.)
IBL: balance sheet (cont.) R’million 31 March 2022 31 March 2021 Liabilities Deposits by banks 18 721 17 144 Derivative financial instruments 7 551 23 011 Other trading liabilities 3 309 3 388 Repurchase agreements and cash collateral on securities lent 12 091 16 593 Customer accounts (deposits) 420
Slide 41: IBL: asset quality
IBL: asset quality R’million 31 March 2022 31 March 2021 Gross core loans 297 451 285 968 Of which subject to ECL * 296 094 284 547 Of which FVPL (excluding fixed rate loans above) 1 357 1 421 Gross core loans to customers subject to ECL 296 094 284 547 Stage 1 273 138 262 395 Stage 2 17 589 14 969
Slide 42: IBL: analysis of core loans by risk category
IBL: analysis of core loans by risk category Gross core loans at Gross core loans at amortised cost and FVPL FVPL (not subject to Gross core loans (subject to ECL) ECL) Stage 1 Stage 2 Stage 3 Total At 31 March 2022 Gross Gross Gross Gross R’million ECL ECL ECL ECL Exposure Exposure Exposure Exposur
Slide 43: 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
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