Investec plc · LSE:INVP
Investec — Investor Presentation (May 2023)
46 slides from Investec's investor presentation, May 2023
Slide 1: Investec plc Investor generic presentation May 2023
Investec plc Investor generic presentation May 2023 The information in this presentation relates to the year ended 31 March 2023, unless otherwise indicated.
Slide 2: Agenda
Agenda Contents 1. 2. 3. 4. 5. Investec Group Overview of Investec plc Further Appendix at a glance Investec plc operating information and fundamentals peer analysis 2
Slide 3: Investec Group at a glance
o Investec Investec Group at a glance OUT OF THE ORDINARY
Slide 4: Investec Dual Listed Company structure
Investec Dual Listed Company structure Non-Southern African operations Southern African operations • Investec plc and Investec Limited are separate legal entities and listings, but are Investec plc Investec Ltd bound together by contractual agreements and mechanisms Sharing 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 • Today, an efficient integrated 1992 international business platform employing approximately 8 700+ people Assets £28.4bn • Listed on the JSE and LSE (a FT
Slide 6: One Investec
One Investec Our purpose is to create enduring worth. Our values* 45+ years of Deep client partnerships, built on trust and out-of-the-ordinary service, are the bedrock of our business heritage. We are dedicated to building meaningful relationships with all our stakeholders Two core We uphold cast-i
Slide 7: Investment proposition
Investment proposition Well positioned to pursue long-term growth 1 Well capitalised and highly liquid balance sheet 2 Improved capital generation - returning excess capital to shareholders Diversified mix of earnings by geography and business, with significant annuity income underpin from leading 3
Slide 8: Fuelling a robust growth agenda
Fuelling a robust growth agenda Growth Objectives Continued execution with Accelerate and scale new Further develop connected discipline to drive growth initiatives client eco-systems across optimisation of returns business units & geographies Underpinned by Deepening our entrepreneurial culture (Ou
Slide 9: Group sustainability highlights
Group sustainability highlights Operate responsibly, finance and invest for a sustainable future and maintain our competitive ESG position PROGRESS MADE ON OUR IMPACT SDGs Net-zero commitments Equality commitments Zero thermal coal by 2030 Participated in Joined the Group Board Cost of living crisis
Slide 10: Overview of Investec plc
I~ o Investec Overview of Investec ple OUT OF THE ORDINARY
Slide 11: Investec plc
Investec plc A distinctive bank and investment manager with primary business in the UK Funds under Total assets Net core loans Customer deposits Employees management £28.4bn £15.6bn £19.1bn 3 500+ £42.4bn Key highlights Diversified revenue streams with high annuity base Sound balance sheet • Never r
Slide 12: Overview of Investec plc
Overview of Investec plc We provide our clients with a diversified, combined and integrated banking and wealth management offering with extensive depth and breadth of product and services Corporate / Institutional / Private Equity / Intermediary / Government Private clients (high net worth) / charit
Slide 13: Balanced business model
Balanced business model Focused on growing capital light businesses • We have significantly increased our funds under management, a key capital light annuity income driver, over the last 10 years by growing our Wealth & Investment business. Wealth & Investment FUM have grown from £24.7bn at 31 Mar 2
Slide 14: Specialist Banking
Specialist Banking Winning in under-serviced parts of the market through dynamic, full service offering Private equity and sponsor- Private clients Private companies Publically listed companies Specialist sectors backed companies For high net worth clients that For UK mid-market founder and For UK m
Slide 15: Wealth & Investment
Wealth & Investment A leading private client wealth manager in the UK with £42.4bn funds under management • Financial planning advice Total FUM £42.4bn1 Our service offering • Investment management, including bespoke portfolio management % UK Discretionary 87% • Private clients, including HNW and In
Slide 16: Investec plc ranks 9th for UK banks by revenue
th Investec plc ranks 9 for UK banks by revenue • Investec plc is a substantial business generating revenues of £1.3bn during the year to 31 March 2023. • The wealth business contributes £362mn of those revenues or 28% of Investec plc’s total revenues. The chart below shows the relative revenue gene
Slide 17: Investec plc's operating fundamentals
Investec plc’s operating fundamentals
Slide 18: Profitability supported by diversified revenue streams
Profitability supported by diversified revenue streams Revenue mix (£'mn) £'mn Costs and cost to income ratio (£'mn) 900 100% 800 700 71.3% 80% 65.3% 600 60% 500 400 40% 300 200 20% 100 0 0% Mar-18 Mar-23 2019 2020 2021 2022 2023 Investment & Associate Income Trading Income Other Fees and other oper
Slide 19: Profitability supported by diversified revenue streams
Profitability supported by diversified revenue streams Business mix percentage contribution to adjusted operating Adjusted operating profit1 (£'mn) profit1 600 3% 400 7% 23% 200 29% Mar Mar Specialist Banking Wealth & Investment 2023 2022 Group Investments 64% 74% 0 2019 2020 2021 2022 2023 Adjusted
Slide 20: 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 clients – Mid to large sized corporates – Public sector bodies and institutions • The majority of exposures reside within the UK • Our portfolios have performed well to date with l
Slide 21: Strong growth in loan book
Strong growth in loan book Continued growth in HNW mortgages and broad based increase in corporate Net core loans up 7.9% since Mar-22 lending activity • This was driven by growth in residential mortgages, continued client acquisition and strong demand for corporate credit across multiple portfolios
Slide 22: Sound asset quality
Sound asset quality Credit loss ratio trend bps 75 69 • Credit loss ratio increased to 56 37bps from 17bps at Mar 2022, within the through-the-cycle 50 range of 30 - 40 bps 38 37 • Total income statement ECL impairment charges amounted to 25 £67mn (Mar 2022: 25mn), mainly 17 driven by: – Increase in
Slide 23: Asset quality metrics
Asset quality metrics Asset quality metrics reflect the solid performance of core loans to date Balance sheet ECL provisions (£’mn) Gross core loans by Stage (£’mn) 200 1500 107 101 100 67 75 1000 108 31 42 35 32 14 1321 27 1242 37 27 32 39 0 500 992 2019 2020 2021 2022 2023 576 576 319 379 332 343
Slide 24: Consistent asset growth, gearing ratios remain low
Consistent asset growth, gearing ratios remain low Total assets composition Gearing1 remains low 30.0 12 10.4 10.4 10.4 4.7 4.3 9.9 9.9 25.0 10 5.6 6.9 20.0 5.1 8.6 8 8.9 6.9 5.7 £'bn 15.0 6.0 6 5.4 7.0 5 4.9 4.6 10.0 4 14.4 15.6 11.9 12.3 5.0 10.5 2 0.0 0 2019 2020 2021 2022 2023 2019 2020 2021 202
Slide 25: Diversified funding strategy and strong liquidity position
Investec plc – Diversified funding strategy and strong Liquidity position Credit Ratings Conservative and prudent funding strategy • On 11 Jan 2023, Moody's affirmed IBP's long-term deposit rating at A1 (stable 1 Maintaining a high base of high-quality liquid assets outlook) • On 1 Mar 2023, Fitch a
Slide 26: Primarily customer deposit funded with low loan to deposit ratio
Primarily customer deposit funded with low loan to deposit ratio • Loans as a percentage of customer deposits remains conservative at 81.4% Fully self funded: conservative loan to deposit ratio £'bn • Customer deposits have grown by 65% (13% CAGR) since 2019 to £19.1bn at 31 March 2023 25 100% 19.1
Slide 27: Maintaining robust surplus liquidity
Maintaining robust surplus liquidity • We maintain a high level of readily available, high-quality liquid assets – Cash and near cash composition targeting a minimum cash to customer deposit ratio of 25%. These balances have increased since Mar-13 (£4.6bn) to £8.6bn at 31 March 2023. 6.7% (represent
Slide 28: Sound capital ratios in excess of internal and regulatory minimums
Sound capital ratios in excess of internal and regulatory minimums Robust headroom of 3.8% above the MDA threshold based on the latest regulatory requirements Capital ratios : Investec plc Minimum CET 1 requirement % 5 31 Mar 20231 31 Mar 20221 Target 12.2% Investec plc: 2 11.3% 11.1% 10.9% lowest m
Slide 29: We inherently hold more capital per unit of risk
We inherently hold more capital per unit of risk As we use the standardised approach for RWA calculations, our capital ratios are not directly comparable with peers RWA density – Total RWA / Total Assets CET 1 / Total Assets (%) Total capital (£'bn) 75.0% 8.0% 4 7.0% 3 50.0% 6.0% 2 5.0% 25.0% 4.0% 1
Slide 30: Further information and peer analysis
Further information and peer analysis
Slide 31: UK high net worth banking: journey to scale
Private Clients UK high net worth (HNW) banking: journey to scale Journey to profitability Growth 6 £’mn Mar-21 Mar-22 Mar-23 5 4.9 Revenue 36.5 75.3 135.50 4 Loan book (£’bn) 4.3 3 ECL impairments (1.5) (2.4) (6.30) 2 Costs (38.0) (42.0) (59.0) 1 0 Profit (3.0) 30.8 70.2 2019 2020 2021 2022 2023 Ba
Slide 32: Investec plc: peer group comparisons
Investec plc: peer group comparisons Funding: Loans and advances to customers as a % Credit loss ratio: ECL impairment charges as a % of average core loans and advances of customer deposits (smaller number is better) (smaller number is better) 150% 4 3.6 131% 112% 116% 100% 81.4% 70% 71% 2 59% 50% 0
Slide 33: Appendix
Appendix
Slide 34: IFRS 9 macro-economic scenario forecasts
IFRS 9 macro-economic scenario forecasts For Investec plc, four macro economic scenarios are used in the measurement of ECL. These scenarios incorporate a base case, an upside case and two downside cases. The table below shows the key factors that form part of the macro economic scenarios and their
Slide 35: Investec plc: salient financial features
Investec plc: salient financial features Key financial statistics 31 Mar 2023 31 Mar 2022 % Change Total operating income before expected credit loss impairment charges (£'000) 1 308 801 1 087 969 20.3 % Operating costs (£'000) 854 875 775 866 10.2 % Adjusted operating profit (£'000) 387 174 286 944
Slide 36: Investec plc: income statement
Investec plc: income statement Year to Year to £'000 31 Mar 2023 31 Mar 2022 % Change Interest income 1 435 214 718 446 100 % Interest expense (698 226) (235 727) >100.0% Net interest income 736 988 482 719 53 % Fee and commission income 456 703 510 228 (10) % Fee and commission expense (15 442) (14
Slide 37: Investec plc: balance sheet
Investec plc: balance sheet £'000 At 31 Mar 2023 31 Mar 2022 Assets Cash and balances at central banks 5 400 401 5 379 994 Loans and advances to banks 893 297 1 467 770 Reverse repurchase agreements and cash collateral on securities borrowed 1 338 699 1 447 473 Sovereign debt securities 1 221 744 1
Slide 38: Investec plc: balance sheet (continued)
Investec plc: balance sheet (continued) £'000 31 Mar 2023 31 Mar 2022 Liabilities Deposits by banks 2 172 171 2 026 601 Derivative financial instruments 704 816 863 295 Other trading liabilities 28 184 42 944 Repurchase agreements and cash collateral on securities lent 139 529 154 828 Customer accou
Slide 39: Investec plc: segmental analysis of operating profit
Investec plc: segmental analysis of operating profit Specialist Banking For the year ended 31 Mar 2023 Wealth & Private Group £'000 Investment Banking CIB & Other Investments Group Costs Total Group Net interest income 28 150 128 945 579 893 — — 736 988 Fee and commission income 333 192 2 120 121 39
Slide 40: Investec plc: segmental analysis of operating profit (continued)
Investec plc: segmental analysis of operating profit (continued) Specialist Bank For the year ended 31 Mar 2022 Wealth & Private Group £'000 Investment Banking CIB & Other Investments Group Costs Total Group Net interest income 2 268 70 692 409 759 — — 482 719 Fee and commission income 344 685 1 579
Slide 41: Investec plc: asset quality under IFRS 9
Investec plc: asset quality under IFRS 9 £‘mn 31 Mar 2023 31 Mar 20221 Gross core loans 15 709 14 557 Gross core loans at FVPL 551 609 Gross core loans subject to ECL1 15 158 13 948 Stage 1 13 494 12 665 Stage 2 1 321 992 of which past due greater than 30 days 35 28 Stage 3 343 291 ECL (146) (134) S
Slide 42: Investec plc: capital adequacy
Investec plc: capital adequacy £‘mn At 31 Mar 2023 31 Mar 20221 Tier 1 Capital Shareholders’ equity 2 373 2 340 Non-controlling interests — — Regulatory adjustments to the accounting basis 16 71 Deductions (318) (480) Common equity tier 1 capital 2 071 1 931 Additional Tier 1 instruments 250 250 Tie
Slide 43: Group sustainability highlights
Group sustainability highlights Other highlights Consistently strong ESG ratings and rankings • Investec Group included as one of the top 100 most sustainable companies in the world (Corporate Knights) • Investec Group joined the African Natural Capital Alliance • Investec Group joined the Partnersh
Slide 44: UK sustainability highlights
UK sustainability highlights Operate responsibly, finance and invest for a sustainable future and maintain our competitive ESG position PROGRESS MADE ON OUR IMPACT SDGs Net-zero commitments Equality commitments Zero coal by 31 March Participated in Group Board Cost of living crisis Transformation 20
Slide 45: Focused on doing well and doing good
Focused on doing well and doing good Other highlights Specialist banking Wealth & Investment • Rolled out a sustainability awareness programme aimed at identifying • Continued inflows into the Investec Global Sustainable Equity Fund - sustainability business opportunities $46.2mn (since launch in Ma
Slide 46: Top of UK peers across the most credible international ESG ratings
Top of UK peers across the most credible international ESG ratings 1 MSCI ESG Ratings 2 Sustainalytics Ratings 3 S&P Corporate Sustainability Assessment TOP 2% in the financial services sector in the TOP 14% of globally assessed companies in TOP 2% of diversified financials in the S&P MSCI Global Su