Investec Plc · LSE:INVP
Investec — Investor Presentation (September 2003)
185 slides from Investec's investor presentation, Sep 8, 2003
Slide 1: Investec Investor Briefing
Investec Investor Briefing 8 September 2003
Slide 2: Overview
2 Investec Overview
Slide 3: Introduction
Introduction • Purpose of today’s introductory briefing is to provide an update on trading trends within the group • Details regarding the core divisional strategies and developments will be discussed during the course of today
Slide 4: Overview
Overview • Proviso: unless otherwise stated, figures and trends discussed in the operational review relate to the five month period to 31 August 2003
Slide 5: Regional developments
@ Investec Regional developments
Slide 6: UK and Europe
UK and Europe • There has been a significant turnaround in the performance of the UK operations – Largely driven by the rationalisation and the strategic realignment of some of the businesses undertaken in the previous period
Slide 7: UK and Europe
UK and Europe • The Private Banking operations have continued to perform well – Loan book growth of 6.4% since year-end coupled by an increase in fee income and minimal increase in costs • Carr Sheppards Crosthwaite continues to post creditable results despite equity market volumes remaining subdued
Slide 8: UK and Europe
UK and Europe • The Treasury and Finance operations are performing well – Losses in the trading activities have been curtailed as efforts have been directed towards supporting customer flow as opposed to proprietary trading – The banking activities are performing well and there is a strong deal pipe
Slide 9: UK and Europe
UK and Europe • Asset Management continues to penetrate market and build FUM but still below scale • With the repositioning of the group’s funding structure post the implementation of the DLC structure, the bulk of the return earned last year on surplus capital in the UK will not be repeated in the
Slide 10: Australia
Australia • Reasonable activity levels not all of which will be reflected in the first six months of the year • The group continues to make good progress in its 3 core areas of activity – Advances growth: 19.0% since year-end – Advised on 10 announced corporate finance transactions for A$2.2 billion
Slide 11: Israel
Israel • Economic environment remains difficult • Level of equity capital market activity picked up post Iraq war but has since subsided • Have experienced negative inflation during this financial year which will weaken nominal performance • Marginal decline in expenses but further work needs to be
Slide 12: US
US • Fundamental restructuring of the US business has been completed – Ensuring ongoing businesses are profitable • Headcount now comprises 68 personnel, all based in New York • Run-off costs associated with the closing of the businesses is in line with what we indicated previously (approx $3 - $5 m
Slide 13: South Africa
South Africa • The Private Banking operations have continued to perform well – Loan book growth of 12.2% since year-end (in rands) coupled by a solid increase in fee income and minimal increase in costs • Private Client Stockbroking continues to be affected by low equity market activity – FUM: R32.2
Slide 14: South Africa
South Africa • Treasury and Specialised Finance: – The majority of the Banking divisions are performing slightly below expectations however the forex and balance sheet management activities have significantly underperformed in relation to the comparative period
Slide 15: South Africa
South Africa • The Investment Banking division has benefited from an improved environment with a strong deal pipeline, direct investment and private equity opportunities
Slide 16: South Africa
South Africa • The Asset Management division has performed well benefiting from net inflows on the retail side and a growing positioning in specialist products • Assurance Activities: no guidance can be given on performance until the actuarial valuation has been completed – However, as indicated pre
Slide 17: South Africa
South Africa • Other activities: – The property division continues to perform well • Primegro and Growthpoint Merger • Growthpoint (managed by Investec) is now well positioned to become a point of reference for investors seeking SA property market exposure • Total assets under management approx R11
Slide 18: South Africa
South Africa • Traded Endowments continues to make a loss as its traditional client base lost confidence in the product – The business remains under strategic review
Slide 19: Other issues
2 Investec Other issues
Slide 20: Headcount by geography
Headcount by geography Aug 2003 Mar 2003 Mar 2002 Mar 2001 SA & Other 2,655 2,935 3,009 2,244 UK & Europe 1,428 1,471 1,510 1,417 Australia 106 103 84 74 USA 68 131 688 859 Israel 218 234 238 242 Total 4,475 4,874 5,529 4,836
Slide 21: Headcount by business
Headcount by business Aug 2003 Mar 2003 Mar 2002 Mar 2001 Investment Banking 282 336 462 344 Treasury & Spec Finance 485 489 503 441 Private Banking 1,077 1,085 958 1,032 Private Client Stockbroking 481 544 855 996 Asset Management 783 771 763 670 Assurance 185 490 576 - Other Activities 1,182 1,159
Slide 22: IBL pref issue
IBL pref issue • Issued R1.5 billion of non-cumulative, non- redeemable and non-participating preference shares • More than six times over subscribed • We had to issue more shares to meet the demand and treat all applicants in the most equitable manner possible • Will further boost Investec Bank’s (
Slide 23: Taxation
Taxation • Effective tax rates relative to Sept 2002: – SA is likely to be a lot lower largely as a result of losses brought forward – UK should be in line – Israel should be higher as a consequence of inflation adjusted earnings
Slide 24: Empowerment transaction
Empowerment transaction • The Employee Share Trust created ito this deal was approved at the AGM on 7 August 2003 • Shares will be issued when all formalities are finalised • Final implementation of the transaction is imminent
Slide 25: Conclusion
2 Investec Conclusion
Slide 26: Conclusion
Conclusion • Overall cost base adjustment last year is paying off • Revenue environment still difficult but improving • Weak spots: Traded Endowments, SA forex activities and Israel
Slide 27: Conclusion
Conclusion • Highlights: – Substantial turnaround in all activities which were under pressure last year – Much better investment banking environment – Private Bank continues on its growth path
Slide 28: Investment banking
@ Investec Investment banking
Slide 29: Mission statement
Mission statement • To be an international investment banking super-boutique distinguished by: – Our leadership in chosen niches – Our people and their approach – Our bond with our clients Bulge Bracket International Investec Coverage Local boutiques Mid-Market Client Focus
Slide 30: Organisation
Organisation Investment Banking Bradley Fried Andy Leith Southern UK Australia US Israel Africa • Johannesburg • London • Sydney • New York • Tel Aviv • Cape Town • Dublin • Melbourne
Slide 31: Product offering
Product offering PRODUCT GEOGRAPHY DESCRIPTION • Domestic businesses benefiting from access to UK, Corporate an international network South Africa, Finance • Mid-market focus with a penetration into larger Australia clients, specifically in South Africa Research, UK, • Research operated on domestic
Slide 32: Strategy
Strategy Business Model Product Offering People Service Strong CLIENTS Access to Domestic International (Mid-Market Focus) Focus Network • Recognised advisory and • Experienced teams • Long standing capital markets offering • High retention relationships • Direct Investments levels • Intimate market
Slide 33: Investment Banking - South Africa
Investment Banking - South Africa
Slide 34: South Africa - operating environment
South Africa - operating environment • Equity capital market volumes remain depressed • Strong Black Economic Empowerment focus • Overcapacity in the market means: – significant competition at every level - pressure on fees – deals difficult to conclude – client retention increasingly under threat •
Slide 35: South Africa - operating environment
South Africa - operating environment New listings / delistings 150 Total Total Total Total Total Total Total Total Listed Listed Listed Listed Listed Listed Listed Listed 125 474 542 616 668 669 642 626 614 101 100 85 75 74 75 74 75 66 54 50 40 38 28 27 28 25 11 14 7 0 2002 2001 2000 1999 1998 1997
Slide 36: South Africa - operating environment
South Africa - operating environment Total M&A activity 1200 1002 1019 1000 897 914 783 800 600 502 485 372 400 315 242 276 232 200 166 62 0 2002 2001 2000 1999 1998 1997 1996 Total Value (R'billions) Total number of transactions Note: In 2001, two deals (Billiton/BHP merger (R223 billion) and the D
Slide 37: South Africa - present positioning
South Africa - present positioning • Investec seen as leading black empowered domestic player • International competitors operating at top end with integrated offering: – Deutsche – JP Morgan – UBS Warburg – Merrill Lynch • HSBC, Goldman Sachs, Morgan Stanley, Citigroup, Cazenove, Rothschild maintai
Slide 38: SA Corporate finance - key developments
SA Corporate finance - key developments • Increasing cross border activity with Australia • Ranked in top 3 in Dealmakers survey in – M&A activity – general corporate finance activity • Awarded 20 mandates in last 5 months
Slide 39: SA Corporate finance - key drivers
SA Corporate finance - key drivers • Leverage market positioning and reputation • State of equity markets • Proactive versus reactive deal initiatives • Ability to offer integrated solutions to clients • Increased BEE transactions • Competitor activity
Slide 40: SA Corporate finance - prospects
SA Corporate finance - prospects • Limited capital raising opportunities • Strong BEE positioning • Parastatal and government advisory opportunities • Increased cross border transactions with South African corporates • Deal pipeline reasonable
Slide 41: SA Institutional stockbroking - key developments
SA Institutional stockbroking - key developments • Ranked in top 3 by 5 of top-6 institutional clients • Research ranked no 5 in FM (FM resources dependent) • Top-ranked domestic stockbroking firm • Ranked as only BEE firm with value proposition • ISL ranked FY to date – Top-5 in terms of market sha
Slide 42: SA Institutional stockbroking - key drivers
SA Institutional stockbroking - key drivers • Market volume (down 23% yr/yr in the three months to August) • Competitor activity • Diminishing size of pure agency market – approx. 50% of daily activity • Allocation process still predominantly research driven • Best execution becoming increasingly im
Slide 43: SA Institutional stockbroking - prospects
SA Institutional stockbroking - prospects • Research coverage now complete, with two recent appointments • Leverage gains made in South Africa market in recent months • Depressed market may require streamlined research offering • Opportunities for sourcing new deal flow, e.g. hedge funds, prime brok
Slide 44: SA Private equity and direct investments - key developments
SA Private equity and direct investments - key developments • Concentration on larger transactions • Rationalisation of current portfolio • Establishing annuity revenue investments • Focus on industries / sectors • Involved in a number of direct investment opportunities
Slide 45: SA Private equity and direct investments - key drivers
SA Private equity and direct investments - key drivers • BEE positioning • Market demand due to : – Low PE’s – Lower interest rates • Opportunities coming from : – Fund realisations – Delisting opportunities • Surplus funds available for deal opportunities • Opportunism in direct investments
Slide 46: SA Private equity and direct investments - prospects
SA Private equity and direct investments - prospects • Larger assets within portfolio performing well • Rationalisation of Fedsure assets finalized shortly • Looking at two new investments • Supporting growth in current investments via acquisition • Good direct investment opportunities
Slide 47: Investment Banking - Australia
Investment Banking - Australia
Slide 48: Australia – operating environment
Australia – operating environment • Overall increase in M&A activity • Difficult equity market conditions • Deals taking longer to complete • Foreign investor appetite adversely impacted by strong Australian dollar • Large competitors moving into mid-cap space • Limited quality private equity opport
Slide 49: Australia - present positioning
Australia - present positioning • Corporate finance acts as an independent adviser – M&A and general corporate advice – Capital and corporate restructuring – IPO advisory with some equity arranging • Market segmentation can be summarised: Mid - to large cap 250 • Below target of “bulge-bracket” play
Slide 50: Australia - key developments
Australia - key developments • Advised on 10 announced transactions for A$2.2 billion since 1st January 2003 • Investec Private Equity (IPE) made two investments totalling A$18 million • IPE has increased funds under management to ±A$100 million • Human Resources – Inclusion of Melbourne corporate a
Slide 51: Australia - key drivers
Australia - key drivers • Leverage Wentworth contacts, reputation and knowledge • Recruit additional corporate advisors to expand revenue base • Grow M&A capability in Melbourne • Continued focus on core business • Gradual expansion of service offering • Leverage off Investec group relationships / c
Slide 52: Australia - prospects
Australia - prospects • High level of corporate finance activity • Number of exciting and active deals in the pipeline – deals remain hard to close – largely success fee driven – anticipated timing of revenue difficult to estimate • Quality private equity investment opportunities remain scarce
Slide 53: Investment Banking - UK
2 Investec Investment Banking - UK
Slide 54: Investec Investment Banking & Securities - operating environment
Investec Investment Banking & Securities - operating environment • Selective economic data highlights rebound • Improved equity market levels and volumes, in particular in small and mid caps • Improved investor appetite for primary and secondary dealflow • Corporate confidence returning as operating
Slide 55: UK M&A activity - 1998 to date
UK M&A activity - 1998 to date Number of deals 600 479 500 400 335 300 246 210 200 122 140 100 0 1998 1999 2000 2001 2002 YTD Source: Bloombergs
Slide 56: Investec Investment Banking & Securities - present positioning
Investec Investment Banking & Securities - present positioning • Stable, integrated model • Leading ‘purely’ domestic player, specialized by virtue of – Depth of local knowledge and relationships – Mid-market strength – UK - South African link • Bulge bracket focus on – Top-end corporates – Global a
Slide 57: Investec Investment Banking & Securities - developments
Investec Investment Banking & Securities - developments • Significant (approx 30%) reduction in cost base (benefit from beginning of financial year) • Advised on high profile public-to-privates, including: Fitness First and IG Index; several placings completed • Increased market share amongst tradit
Slide 58: Selected recent advisory transactions
Selected recent advisory transactions Fitness First Incisive Media plc £143m Recommended Cash Offer by CVC £395m MBO £35.2m acquisition of Capital Partners * Risk Waters Group Advisor Limited July 2003 June 2003 April 2003 Neoscorp Limited Allders plc £13.4m Recommended £131.9m Recommended Cash Offe
Slide 59: Selected recent equity issues
Selected recent equity issues Datamonitor plc Alba plc 5% Placing on behalf of Reuters plc 10% Placing on behalf of Harris Family July 2003 June 2003 Ferraris Group plc Incisive Media plc £7.3m Placing and £16.1m Placing and Open Offer Open Offer June 2003 April 2003
Slide 60: Investec Investment Banking & Securities - key drivers
Investec Investment Banking & Securities - key drivers • Internal – Cost control – Stability of key practitioners and team • External – Market levels – c.30% rally in London since 3287 FTSE low of March 2003 – Secondary trading volumes – volatile, but upward trend – Corporate confidence – pipeline /
Slide 61: Investec Investment Banking & Securities - prospects
Investec Investment Banking & Securities - prospects • First half year should be influenced by: – Cost initiatives implemented last year – Good business mix for first five months – Stability of team • Second half year will be driven by: – Corporate pipeline, deal creation and conversion – Supportive
Slide 62: UK - Private equity
UK - Private equity • Developments – No material developments in portfolio of 3rd party funds • Key drivers – Asset disposals in underlying funds • Prospects – Remains value potential in residual funds
Slide 63: Investment Banking - US
@ Investec Investment Banking - US
Slide 64: US - developments
US - developments • Fundamental restructuring of the US business has been concluded – complete exit from domestic US equities - the business now comprises – Institutional Fixed Income trading – Vilas and Hickey (interdealer bond brokers) – Corporate Bond trading, and – an Israeli US stocks equities
Slide 65: US - key drivers
US - key drivers • Retention of key personnel • Bond market flows (corporate and institutional) • Ability to identify additional small niche businesses and growth opportunities
Slide 66: US - prospects
US - prospects • Focus has been on creating stability (staff turnover, morale, P&L) • Low capital usage and variable cost base across bond businesses caps upside / limits downside
Slide 67: Investment Banking - Israel
2 Investec Investment Banking - Israel
Slide 68: Israel - positioning
Israel - positioning • Full service securities offering to institutions and brokers • Distinctive (and unique) Israeli offering in New York through dedicated New York-based securities staff
Slide 69: Israel - key drivers & prospects
Israel - key drivers & prospects • Drivers – Progress on peace – Increased business and consumer confidence – Domestic Israeli stock market revival • Prospects – Macro factors highly unfavourable for first 5 months of year
Slide 70: Investment Banking prospects – overall summary
Investment Banking prospects – overall summary • Restructuring in UK and US complete • Activity levels satisfactory in difficult equity markets • Performance linked to equity market recovery
Slide 71: Carr Sheppards Crosthwaite
2 Investec Carr Sheppards Crosthwaite
Slide 72: Scope of activity
Scope of activity • Background and history • Portfolio management services to “highish” net worth clients both UK and international • Portfolio management services to smaller charities • Settlement and administration services to similar financial institutions and corporations • Holistic financial ad
Slide 73: Positioning
Positioning • No dominant competitors in the UK market • Market share around 2% • Nearest competitors are Rathbones, HSBC, Gerrard and Cazenove • Competitively priced and good investment performance (where measurable) • Highly regarded for service and operational expertise
Slide 74: Developments
Developments • FUM increased by £860 million to £5.6 billion since 31st March • £660 million increase resulted from rise in market and £200 million from new business • Discretionary funds increased by 2% to 63% over the past 12 months • Appointed as one of two fund managers for Lord Chancellors’ Dep
Slide 75: Developments
Developments • Costs down with staff reduction of 50 (mainly support) since December 2002 • Regional offices rationalised and non-core activities disposed of
Slide 76: Key drivers
Key drivers • The ability to generate significant new funds under management • Some confidence returned to the market with a 19% improvement in the FTSE All Share and no sharp setbacks • Cost containment, but not at the expense of operational efficiency or control • Increasing longevity of populatio
Slide 77: Industry developments
Industry developments • Recent results reported by brokers covering the past year have, as expected, been disappointing • Increasing regulation • Imminent diminishing of PEPs and ISAs attraction
Slide 78: Future prospects
Future prospects • Economic recovery fragile and structural problems remain • No increase from current market levels assumed • Gathering new assets under management should continue at current rate • Benefits of new business gained and cost saving benefits will be evidenced to a greater extent in the
Slide 79: Private Client Stockbroking and Portfolio Management - SA
Private Client Stockbroking and Portfolio Management - SA
Slide 80: Scope of activity
Scope of activity • Discretionary investment management • Advisory and execution stockbroking • Specialised investments • International (boutique) Investment Services
Slide 81: Present positioning : Investment Management Services
Present positioning : Investment Management Services • Funds under discretionary management August 2003 : R5.2 billion March 2003 : R4.6 billion • Funds under non-discretionary management August 2003 : R27 billion March 2003 : R21 billion • Offshore (included above) August 2003 : R2 billion March 20
Slide 82: Present positioning
Present positioning • Largest Private Client stockbroking business in South Africa • Scale provides operational leverage to continue making profits in a bear market (critical mass; distribution eg. Nedbank and Investec pref share offers) • Group affiliations enable Private Client Securities business
Slide 83: Developments
Developments • Market volumes continue to be under pressure • Strong currency and continued high real interest rates have negatively affected the market • Private Client has remained in cash/near cash • Demand for offshore investments has slowed • Ongoing domestic consolidation (NIB, Nedcor, BOE, Sy
Slide 84: Key drivers
Key drivers • Revenue diversification and economies of scale (new specialised products and services : international; hedge funds; alternative portfolio structures) • Selective acquisitions – strict criteria (individuals and/or businesses) • Continued drive towards annuity income • Technology initiat
Slide 85: Prospects and issues influencing performance
Prospects and issues influencing performance • Client relationships • Investment performance • Investor sentiment • Skills attraction/retention • Changes in legislation • Macro-economic variables (interest rates; rand volatility etc.)
Slide 86: Prospects and issues influencing future performance cont…
Prospects and issues influencing future performance cont… • Asset gathering/performance • Optimising skillset and other resources (including infrastructure) • Introduction of new technologies to improve client service/related economies of scales • Move up the “value chain” i.e. focus on the HNWI • A
Slide 87: Private banking
2 Investec Private banking
Slide 88: Mission statement
Mission statement • To be the specialist private banking partner of choice in the creation of distinct value for our select clients
Slide 89: Private banking - financial overview
Private banking - financial overview
Slide 90: Net profit before tax (NPBT)
Net profit before tax (NPBT) NPBT March 00 March 01 March 02 March 03 GBP 000’s 14 386 19 634 26 887 34 641 3 year compound annual growth rate 34% March 00 March 01 March 02 March 03 ZAR 10.46 11.39 16.16 12.51
Slide 91: NPBT by geography
NPBT by geography 20 15 GBP millions 10 UK & Europe South Africa 5 Israel Australia 0 -5 2000 2001 2002 2003
Slide 92: Total income
Total income 100 80 34 41 45 60 % Split Fees 40 Margin 66 59 55 20 0 2001 2002 2003
Slide 93: Non-interest income
Non-interest income 25 Lending 20 Fiduciary / advisory Investment GBP millions 15 management Forex 10 Transactional banking 5 Pvt Client investment banking 0 Other 2001 2002 2003
Slide 94: Cost to income ratio
Cost to income ratio March 2001 March 2002 March 2003 Cost to income 0.69 0.63 0.61 ratio * * After depreciation and EVA
Slide 95: Salient features
Salient features GBP March 2001 March 2002 March 2003 Lending book 18% 14% 46% growth Deposits book 11% 7% 34% growth FUM growth 67% 66% 20%
Slide 96: Non performing loans
Non performing loans GBP 000’s March 2001 March 2002 March 2003 Lending book 1 732 429 1 973 937 2 873 225 NPL’s 31 423 21 968 26 460 NPL’s as a % of 1.81% 1.11% 0.92% lending book Specific bad 13 039 6 526 11 190 debt provisions Specific bad debt provisions 41% 30% 42% as a % of NPL’s
Slide 97: Private banking - business model
Private banking - business model
Slide 98: Target market
Target market South Africa UK/Europe & Australia Ultra High Net Worth Private Private Bank Bank Private Private High Net Bank Bank Worth Mass Affluent & High Income Consumer Banking South Africa UK and Europe • HNWI (net asset value R50m+ and • Targeted at individuals with a net asset investible ass
Slide 99: What we do
What we do Advisory services including: • Banking • Specialised lending • Structured property finance • Investment management • Private client investment banking • Trust and fiduciary services
Slide 100: Geographical positioning
Geographical positioning • The principles, philosophies and strategies are finessed accordingly, to each geography, based on the demographics, identified margin opportunities and the maturity of the different businesses
Slide 101: Banking services
Banking services • Daily transactional banking • Foreign exchange services • Deposits and cash investments • Debt consolidation facilities • Consumer lending services
Slide 102: Structured and specialised lending
Structured and specialised lending Tailor made, advice led credit solutions • Structured property finance – Retail, office, residential • Mezzanine debt • Senior debt • Equity participation • Provide debt solutions for asset backed and investment gearing opportunities • Aircraft acquisition and fund
Slide 103: Investment management
Investment management • Bespoke independent investment advisory services • Comprehensive, innovative offering across all asset classes • Best of breed offering / open architecture • Disciplined approach and investment methodology (PB houseview, PB deal forum) • Personalised asset allocation based on
Slide 104: Private client investment banking (PCIB)
Private client investment banking (PCIB) • Targeted at the active wealthy entrepreneur as opposed to the passive wealthy investor • Below the radar screen of traditional corporate finance and private equity houses • Focus on growth finance for the HNWI and their businesses incorporating: – Debt and
Slide 105: Trust and fiduciary services
Trust and fiduciary services • Integral to structuring of private client affairs • Emphasis on technical capability and advisory services • International trusteeship and company administration services, including • Estate planning • Solvency • Income, capital and inheritance tax advice
Slide 106: Private banking – recent developments
Private banking – recent developments
Slide 107: Factors affecting the industry
Factors affecting the industry • Global economic environment – Difficult private client investment markets – Continued nervous sentiment around equity, property and fixed income markets • Increased regulatory obligations with resultant increase in costs – SA amnesty legislation – FAIS, POCA, FICA –
Slide 108: Private banking - making headlines
Private banking - making headlines
Slide 109: Press clipping on lower entry requirements
Therefore, some local banks, notably Investec Private Bank can lower their entry requirements for clients they believe will become high net worth individuals in time.
Slide 110: Investec Private Bank concludes property deal
INVESTEC LAUNCHES FIRST FUND OF FUNDS Investec Private Bank concludes property deal
Slide 111: Private banking - South Africa
Private banking - South Africa
Slide 112: Market recognition
Market recognition • Ranked by PMR September 1999, 2001 and 2002 as the best private bank in SA • Rated by peer group for the fourth consecutive year as the number one private bank as per the Price Waterhouse Coopers 2000, 2001, 2002 and 2003 Southern African banking survey
Slide 113: Private Banking peer review (PwC Banking survey)
Private Banking peer review (PwC Banking survey) Strategic and emerging issues in SA banking 2003 Rankings 1 2 3 Score Change Investec 7 1 23 FirstRand RMB 1 3 1 10 Nedcor (Syfrets) 1 2 3 10 Standard Bank 1 3 5 ABSA 1 1 5 UBS Warburg 1 3 CSFB 1 2 HSBC 1 1
Slide 114: Key developments
Key developments ZAR Booksize R Growth % Growth Advances 19.3bn 2.1bn 12.17% Deposits 7.3bn 524m 7.69% AUM 5.2bn 131m 2.62% • Fee income increased by 31.02% • Increase in costs 4.33% compared to last 5 months of FY2003 • Scale in the transactional banking business • Exciting potential exists in priv
Slide 115: Key developments
Key developments • Innovative product development – Pinion – Cash management – Dividends • Launch of new branding campaign including: – TV – Print – Direct mail
Slide 116: From here you can take off.
From here you can take off. wewrrevitec cos sninineag Investec
Slide 117: Private banking.
Private banking. How do you know the path you're on is the right onal 18 thew (pelt ef ome sdb ht sont eewedibee Pivte ater Mla a part owed went Lat \ weit | Pal of tie Orem @ Investec
Slide 118: Key developments
Key developments • Tax and exchange control amnesty – Established amnesty task force utilising specialist group resources (legal, tax, exchange control, investment advisory) • Focused on advice for HNWI applying for amnesty for assets in excess of $1 million • Spin-off opportunities for global inves
Slide 119: Key developments
Key developments • Black Economic Empowerment – Penetrating new target market and adapting to changing demographics of the SA economy – Leverage off group empowerment transaction – Private client investment banking opportunities
Slide 120: Private banking - UK & Europe
2 Investec Private banking - UK & Europe
Slide 121: Key developments
Key developments GBP Booksize £ Growth % Growth Advances 984m 59m 6.35% Deposits 1.3bn -40m -2.89% AUM 287m 30m 11.67% • Fee income increased by 2.7% • Increase in costs 0.18% compared to last 5 months of FY2003
Slide 122: Key developments
Key developments • Property market is less active than it was, but we continue to see good deal flow • Have stress tested property exposures: – A reduction of 30% of property values could leave the bank exposed by £12 million • Establishing a rep office in Manchester • Relocation of the processing h
Slide 123: PCIB - gaining good traction in the UK market
PCIB - gaining good traction in the UK market FOOD RETAIL CONSUMER FINANCE Liquidity Finance Roll out of UK £3.0 million business plan mezzanine funding £4 million mezzanine funding February 2003 February 2003 GENERAL RETAIL LIGHT INDUSTRIAL FOOD Ownership Restructuring MBO Share buyback of partner
Slide 124: Key developments
Key developments • Banking presence in Geneva – Maximise synergies with Radcliffes Trustee Company – Focus on jurisdictional advantages • Trust and fiduciary services – Adapt to regulatory changes • Mauritius office – Strong admin engine but focus is on advice – Enjoying benefits of integration • Ir
Slide 125: Private banking - Australia
2 Investec Private banking - Australia
Slide 126: Key developments
Key developments Financial developments AUD Booksize A$ Growth % Growth Advances 502m 80m 18.96% Deposits 271m 7m 2.73% AUM 319m 55m 20.83% – Fee income increased by 25.34% – Increase in costs 24.8% compared to last 5 months of FY2003
Slide 127: Key developments
Key developments • Strong growth within Structured Property finance pillar – Smart use of capital • Off balance sheet A$282 million • Improved profile within the investment advisory industry • Leveraging off the Investec Wentworth brand and client base • In process of establishing a PCIB unit • Have
Slide 128: Private banking - Israel
@ Investec Private banking - Israel
Slide 129: Key developments
Key developments • Negative GDP growth = fall off in consumer spending – Managed to keep the loan book flat and stable (NIS1.4 billion) • With the introduction of tax reforms, global investment opportunities are arising • Pursuing alternative investment opportunities • Continue to focus cross border
Slide 130: SS ee es
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Slide 131: Treasury and Specialised Finance
Treasury and Specialised Finance
Slide 132: Scope of activity
Scope of activity Banking activities Financial markets activities Structured Project & Financial & Asset Resource Interest Foreign Equity Treasury Products Finance Finance Rates Exchange Derivatives Commodities
Slide 133: Banking activities
Banking activities Treasury operations deposit taking, liquidity management and corporate treasury activities Financial Products securities origination, financial engineering, credit derivatives, and structured products Structured & Asset structured finance and lending to corporate and public Financ
Slide 134: Financial markets activities
Financial markets activities Interest Rates traders of interest options, forward rate agreements, swaps, money market securities, government bonds, corporate bonds and repurchase agreements Foreign Exchange traders in spot, forward exchange currency swaps and currency options, principally in ZAR and
Slide 135: Positioning in respective markets
Positioning in respective markets • The division is characterised as being specialised and specialist. Survival is felt to be dependent upon ability to differentiate and add value • Essentially TSF is an Anglo-SA business, with offices in Ireland, Mauritius and Australia • A future growth in HK has
Slide 136: Positioning in South Africa
Positioning in South Africa • Generally in South Africa we aim to be amongst the top 3 in all areas of endeavour • Rated by PMR survey of corporates as top in the corporate market • Rated by Risk magazine as being in the top 3 in FRA’s, interest rate swaps • Second largest issuer of equities warrant
Slide 137: Positioning in UK
Positioning in UK • One of only three or four small/ medium sized UK banks excluding branches and subs of non-UK banks • Focus on banking activities e.g.: – PFI/ PPP advising work through Investec European Capital – Structured Finance - acquisition of team from UK bank – Commodities hedging for reso
Slide 138: Developments
Developments • Material turnaround in financial performance and activity in UK TSF operations • Cost base reduced significantly in the UK, through discontinuation or rationalisation of certain activities • Poor trading performance in South African operations • Good growth in deal pipeline both in UK
Slide 139: Key drivers
Key drivers • Remaining specialised and competing in areas where we can be differentiated • Leveraging off existing networks of South African contacts and clients in non-South African operations • Intense management of capital usage and returns thereon • Focus on cost containment • Developing sales
Slide 140: Industry developments
Industry developments • Compliance, corporate governance and other regulatory issues have intensified • Economic outlook in South Africa promising and the UK stable and has potential to improve • Accounting changes will introduce volatility in P&L and greater provisioning requirements generally • Fi
Slide 141: Prospects
Prospects • Pipeline of transactions in banking operations in South Africa and the UK is very good and significantly better than the previous comparative period • Further cost savings to be pursued • Prospects of rising interest rates in Europe, UK and US hold opportunities for investment products •
Slide 142: Prospects cont.
Prospects cont. • Global markets looking better than a year ago. Continued improvement in economics and equities markets will be good for operations • Concerted drive to get results from the JV established in Hong Kong to distribute investment and derivatives products • Expect better conditions for
Slide 143: Summary
Summary • UK: turned the corner - but we are not yet out of the woods • South Africa: maintain a strong position but have suffered poor trading performances • Other: investing in new opportunities which have the potential for good future performance
Slide 144: Asset Management
2 Investec Asset Management
Slide 145: Asset Management - scope of activity
Asset Management - scope of activity
Slide 146: Scope of activity
Scope of activity SA UK Offshore Investments Institutional 9 9 Retail 9 9 9 Operations
Slide 147: History and development
History and development 2003 Acceptance from UK consultants, strong UK IFA brand Managed shift from balanced to specialist in SA 2002 SA retail consolidated under SA Personal Investments 2001 Assets added from Fedsure transaction Worldwide leadership team finalised 2000 Rationalisation of UK busines
Slide 148: Asset Management - market positioning
Asset Management - market positioning
Slide 149: Market positioning
Market positioning An international specialist firm, focused on performance and client needs Area Position SA Institutional segregated Market leader Retail and portfolio products Market leader UK Public sector fixed income Market leader Retail Entrant to successful contender Institutional (pension)
Slide 150: Firmly on course in challenging industry conditions
Firmly on course in challenging industry conditions • South Africa once again proves its resilience • UK plan on track, early wins with stability and performance • Cost control without capacity destruction
Slide 151: Asset Management - developments
Asset Management - developments
Slide 152: General developments
General developments • Optimise resources and focus between major business units • Aggressive promotion of specialist products • Keep narrowing the focus (geographically and product wise) • In process of changing a “fixed cost culture” to a “variable cost culture” • Combining the need to outsource m
Slide 153: SA Institutional Investments
SA Institutional Investments • Establishing leadership in specialist products (e.g. fixed income, aggressive equities) well on track • Appointed to manage significant new mandates – R1.5 billion of SA equity mandates won outside SA – Major municipal funds selecting our multi-specialist platform • Gr
Slide 154: SA Personal Investments
SA Personal Investments • Successful expansion of absolute return range of unit trusts • Gross unit trust inflows of R7.4 billion and net inflows of R1.6 billion (including money market) to 31 July 2003 • Successful implementation of variable reward structure for sales staff • Investec stronger rela
Slide 155: UK Institutional
UK Institutional • Short-listed for Financial News awards (since the beginning of FY2004) – UK Asset Management Firm of the Year – European Specialist Firm of the Year • Continued strong performance across the product range • Three-year global equity record in place • Healthy inflows received into t
Slide 156: UK Retail (including European sales)
UK Retail (including European sales) • Onshore funds under management increased from £666m to £806 million (as at 31 July 2003) • Core focus on UK Blue Chip Fund, American Fund, Cautious Managed Fund and European Fund • Growing access to major distributors, but opportunities in the UK for new “multi
Slide 157: Investec Asset Management in the UK Retail Fund Industry
Investec Asset Management in the UK Retail Fund Industry £ million 30-Jun-99 30-Jun-00 30-Jun-01 30-Jun-02 30-Jun-03 IAM assets under management 381 458 525 679 806 Total industry size 214,271 265,081 251,010 222,221 214,695 Size ranking in industry 76 / 151 79 / 153 72 / 150 60 / 132 57 / 130 Indus
Slide 158: Asset Management - funds under management
Asset Management - funds under management
Slide 159: Funds under management
Funds under management Business Type Geographic Asset Class South Africa Hedge Funds Retail 0.8% 26.5% 57.8% Equity 39.6% UK & Other Institutional 42.2% Fixed Income 73.5% and Cash 59.6% Total funds under management £18.3 billion / R218.9 billion (as at 31 July 2003)
Slide 160: Movements in funds under management
Movements in funds under management Total Institutional Retail SA UK & Other £ million 31 March 2003 16,828 12,478 4,350 9,303 7,525 31 July 2003 18,278 13,440 4,838 10,562 7,716 R million 31 March 2003 210,560 156,125 54,435 116,401 94,159 31 July 2003 218,928 160,975 57,953 126,510 92,418 % of Tot
Slide 161: Sales (gross inflows)
Sales (gross inflows) Four months to 31 July 2003 Clients £ million Products £ million Institutional 757 Fixed interest & cash 1,329 Retail 993 Equity 284 1,750 Balanced 137 1,750
Slide 162: Asset Management - investment performance
Asset Management - investment performance
Slide 163: Retail performance
Retail performance To 31 July 2003 1yr 2yrs 3yrs 5yrs Global Equity Funds IAF Global Growth 2nd 1st 1st 2nd GSF Global Equity 2nd 1st 1st 2nd UK Equity Funds GSF UK Equity 1st 1st 1st 1st UK Blue Chip 2nd 1st 1st 1st UK Smaller Companies 1st 1st 1st 1st UK Opportunities 2nd 1st 1st 1st UK Value 1st
Slide 164: UK Equities – competition and benchmark beating results
UK Equities – competition and benchmark beating results Investec UK Value Inc (UT) rel FTSE All Share UK equities (pension fund composite) rel FTSE All Share 115 Investec UK Value Inc (UT) rel S&P UT Fd UK All Companies (NX) 113 150 111 140 109 107 130 105 120 103 101 110 99 100 97 95 90 Dec Mar Jun
Slide 165: Global Equities – winning the race in different categories
Global Equities – winning the race in different categories Investec GSF Global Eq A (OS) rel MSCI World Investec IAF Global Growth (OS) rel MSCI World Investec GSF Global Eq A (OS) rel S&P OS Fd EQ Global (NX) Investec IAF Global Growth (OS) rel S&P OS Fd EQ Global (NX) 115 115 113 113 111 111 109 1
Slide 166: Global Fixed Income – up, but volatile
Global Fixed Income – up, but volatile Investec GSF Global HI Bd A (OS) rel (1/3 WGBI + 1/3 EMBI+ + 1/3 ML G.HY) Investec GSF Global Bond A (OS) rel Citigroup WGBI All Maturities ($) Investec GSF Global HI Bd A (OS) rel S&P OS Fd FI Global High Yld (NX) Investec GSF Global Bond A (OS) rel S&P OS Fd
Slide 167: Sterling Fixed Income
Sterling Fixed Income Investec Sterling Bond Inc (UT) rel Sterling Bond BM Investec Sterling Bond Inc (UT) rel S&P UT Fd UK Corporate Bond (NX) Investec IAF Stlg High Yld Bd (OS) rel M Lynch European Curr HY £ Hedged) 105 140 104 135 103 130 102 125 101 120 100 115 99 110 98 97 105 96 100 95 95 Dec
Slide 168: UK and Global Balanced – strong propositions
UK and Global Balanced – strong propositions Balanced Pension Fund rel Total Pension Index 110 108 106 104 102 100 98 Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- 99 00 00 00 00 01 01 01 01 02 02 02 02 03 03 Investec Cautious Mgd Inc (UT) rel 60% FTSE 350 HY + 40% FTA B
Slide 169: SA Retail Performance
SA Retail Performance Rolling 12-month average percentile ranking 80 75 70 65 60 55 50 45 40 Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Investec excl Analytics All Investec Source: S&P Micropal
Slide 170: SA Specialist Institutional Performances
SA Specialist Institutional Performances Year to Date Performance Relative to Benchmark Institutional bonds 0.8% Dynamic bonds 1.2% Gilt fund 0.7% Core equities 1.4% House equities 2.7% Value equities 4.5% Growth equities 6.0%
Slide 171: Asset Management - industry developments
Asset Management - industry developments
Slide 172: SA Institutional Industry
SA Institutional Industry • Disappointing absolute returns of major equity indices support active managers and new approaches. Passive is out • Clients are actively investigating their international investment options – Investec Asset Management well placed • Financial Services Charter will clarify
Slide 173: SA Personal Investment Industry
SA Personal Investment Industry • The recent bounce has brought the market alive, although IFA community still cautious • Strong Rand is hurting the international sales effort • Major competitors in organisational upheaval due to industry consolidation • More consolidation expected • Amnesty
Slide 174: UK Institutional Industry
UK Institutional Industry • Industry consolidation continues • The pension liability problem is the key issue, manager selection is on the backburner • Innovative consultant driven strategies being adopted or talked about by trustees – we must stay close to these discussions • Market churn has incre
Slide 175: UK Retail Industry
UK Retail Industry • IMA net inflows up 53% for the first four months (April to July) year-on-year • UK corporate bond and UK all companies sectors continue to be key money takers in first half of year • IFAs continue to account for majority of inflows (65%) • CP121 opening up opportunities for pure
Slide 176: Asset Management - prospects
Asset Management - prospects
Slide 177: Prospects
Prospects • Investment performance remains the focus • In UK the emphasis is on new business (revenue growth) • In South Africa the emphasis is on quality and costs • A low return world requires investment excellence and strong client relationships More of the same
Slide 178: Investec Employee Benefits
2 Investec Investec Employee Benefits
Slide 179: History
History • 31st May 2001: – Fedsure acquisition – Reinsurance of Individual Life Business with Capital Alliance Life Limited (CAL) • 30th September 2002: – Reinsurance of Annuity book with CAL • 31st March 2003: – “Sale” of Pension Administration business to Liberty
Slide 180: History (continued)
History (continued) Fedsure Life / Investec Employee Benefits Limited (statutory accounts) 31/12/00 31/03/02 31/09/02 31/03/03 R million R million R million R million Assets 43 106 27 708 26 816 21 072 Liabilities 41 548 25 340 23 697 17 612 Linked 18 504 13 670 16 907 12 351 Guaranteed 23 044 11670
Slide 181: Current status
Current status • Competition Commission approval for Liberty deal granted in August • Administration outsource to Liberty 1st October – 260 people to transfer • IEB now consists of: – Risk underwriting business – Market-linked investments business – Guaranteed Investments business
Slide 182: Current status (continued)
Current status (continued) • Risk Underwriting: – 4th largest player in the country – Market share of ± 16% – Objective is to be a niched player and to grow premium income via marketing and product development • Market Linked Investments: – No new inflows are accepted – Transferring the business to
Slide 183: Current status (continued)
Current status (continued) Focus for 2003 / 2004: • Implement Liberty deal • Reshaping existing business: - Systems - People - Costs - Capital • Development of Risk business
Slide 184: Future
Future • Niched Risk Underwriting Business with no administration and small staff complement • Product provider using Life Licence and for innovative investment solutions
Slide 185: Investec Investor Briefing
Investec Investor Briefing 8 September 2003