Investec Plc · LSE:INVP
Investec — H1 FY2025 Earnings Presentation
54 slides from Investec's earnings presentation, November 2024
Slide 1: Results presentation for the six months ended 30 September 2024
Results presentation for the six months ended Month Year 30 September 2024
Slide 2: Agenda
Agenda 01 Overview 02 03 04 05 Financial review Geographic review Geographic review Closing and Q&A Fani Titi Nishlan Samujh UK & Other Southern Africa Fani Titi Group Chief Group Finance Group Chief Ruth Leas Cumesh Moodliar Executive Director Executive Investec Bank plc CEO Investec Bank Ltd CEO 2
Slide 3: Overview
Agenda Overview Fani Titi Group Chief Executive 3
Slide 4: Key takeaways
Key takeaways Earnings continue to Deep client franchises, Strong capital Returns to shareholders show resilience diversified earnings generation within target £’bn Revised target range: 13 - 17% FUM - SA Loans Deposits Adjusted EPS (p) NAV per share (p) ROE (%) Rathbones Group FUMA: £108.8bn 41.25%
Slide 5: Results highlights
Results highlights Pre-provision adjusted operating profit Cost to income Credit loss ratio £541.6mn 50.8% 42bps (Sept-23: £487.7mn) (Sept-23: 53.3%) (Sept-23: 32bps) 11.1% ahead of prior year Up 10.7% in Rands Adjusted operating profit Return on equity Net asset value per share £474.7mn 13.9% 575.7
Slide 6: Geographic highlights
Geographic highlights UK & Other SA Loan book £16.7bn ▲ 2.3% annualised £15.0bn ▲ 8.9% annualised (▲ 1.5% annualised in Rands) Deposits £21.6bn ▲ 8.1% annualised £18.8bn ▲ 1.0% annualised (▼ 6.2% in Rands) FUM £108.8bn Rathbones Group plc FUMA* £23.4bn ▲ 11.9% (▲ 7.9%in Rands) Adjusted £222.7mn ▼ 5.
Slide 7: Investec's commitment to sustainability: our pathway to net zero
Investec’s commitment to sustainability: our pathway to net zero Three channels of impact 1 Meet our fossil fuel exposure commitments 2 Driving sustainable and transition finance activities 3 Influencing and advocating for our clients and suppliers to effectively pursue decarbonisation Milestones: N
Slide 8: Financial review
Agenda Financial review Nishlan Samujh Group Finance Director 8
Slide 9: Subdued growth environment...
Subdued growth environment... • SA economy expected to expand 1.0% y/y South 2010 – 2019 or pre- in calendar year 2024 vs 0.7% in 2023 Africa pandemic Mean: 1.7% • Freight and logistics crisis, together with GDP electricity outages in Q1 2024 and over 2023, growth have been headwinds to growth • GDP
Slide 10: ...upward trending market...
…upward trending market... Markets 1H2024 1H2025 JSE – LHS FTSE – RHS Closing rates Average rates Market indices Sept-24 Sept-23 % change Mar-24 Sept-24 Sept-23 % change JSE All Share 86 548 72 383 19.6% 74 536 79 581 76 294 4.3% FTSE All Share 4 511 4 127 9.3% 4 338 4 481 4 140 8.2% Dow Jones 42 33
Slide 11: ...and a strengthening GBP / ZAR exchange rate
…and a strengthening GBP / ZAR exchange rate Exchange rate GBP/ZAR 1H2024 1H2025 Closing rates Average rates Currency £1.00 Sept-24 Sept-23 % change Mar-24 Sept-24 Sept-23 % change South African Rand 23.11 22.99 0.5% 23.96 23.40 23.48 (0.3%) 11
Slide 12: Global interest rates
Global interest rates USA 10-year treasury bonds (%) • Majority of central banks have begun a rate easing policy • Inflation is trending towards target in many December jurisdictions 2019 • Interest rates expected to fall to close to neutral levels by end 2025. 12
Slide 13: UK and SA interest rate history
UK and SA interest rate history Sept 24: Sept 24: 5.00 11.50 Closing rates Average rates Interest rates Sept-24 Sept-23 Sept-24 Sept-23 SA prime overdraft rate 11.50% 11.75% 11.74% 11.60% UK Base rate 5.00% 5.25% 5.17% 4.80% 13
Slide 14: Earnings drivers
Earnings drivers £’bn Diversified core loan book ▲ 8.0% annualised ▲ 6.9% annualised ▲ 0.5% in neutral currency FUM - SA Loans Deposits £31.7bn ▲ 5.4% annualised FUM for IW&I SA Net core loans 11.9% 2.7% 8.4% in neutral currency 1.0% in neutral currency ▲ 9.6% annualised ▲ 2.1% in neutral currency D
Slide 15: Unpacking Group performance
Unpacking Group performance NII benefitted from growth in average lending books and higher average rates £’mn Sept-24 Sept-23 % change Net interest income (NII) 684 671 2.0% NIR growth reflects increased fee income from our banking businesses, strong growth in fees from our SA Wealth & Investment bu
Slide 16: Technology investment update 1H2025
Technology investment update 1H2025 STRATEGIC PRIORITIES WHAT WE ARE DELIVERING Continue to personalise client digital experiences across our web and mobile channels We’re modernising our core platforms for scale and growth Deliver out of the ordinary experiences Enhancing our Digital Workpla
Slide 17: Key takeaways
Key takeaways Progress on technology strategic priorities Technology spend for Investec Group for 1H2025 is £109.2mn Technology spend is c.20% of overall Investec Group operating expenses Capitalised software on the balance sheet is £9.9mn Cloud modernisation journey is progressing well, with 48% of
Slide 18: Divisional review
Agenda Divisional review 18
Slide 19: UK & Other adjusted operating profit
UK & Other adjusted operating profit £222.7mn Sept 2023: £235.4mn Adjusted operating profit £’mn Sept-24 Sept-23 % change Wealth & Investment* 32.3 35.9 (10.0)% Specialist Banking 202.3 207.4 (2.4)% Group Investments 6.0 6.2 (3.1)% Group costs (17.9) (14.1) 27.2 % Total 222.7 235.4 (5.4)% Note: The
Slide 20: Unpacking the credit loss ratio - UK & Other
Unpacking the credit loss ratio - UK & Other ECL impairment charge 1H2024 2H2024 1H2025 CLR increased to ECL impairment charge (£'mn) 39.3 46.7 52.8 Credit loss ratio (bps) 55 60 67 67bps (Sept-23: 55bps) in line with September 2024 pre-close guidance Gross core loans and coverage Stage 1 Stage 2 St
Slide 21: SA adjusted operating profit
Adjusted operating profit up 21.9% SA adjusted operating profit R5 892mn 1H2024: R4 832mn R’mn Sept-2024 Sept-2023 % change Wealth & Investment 519 411 26.3% Specialist Banking 5 251 4 616 13.8% Group Investments 309 (31) >100.0% Group costs (187) (164) 14.0% Total 5 892 4 832 21.9% 21
Slide 22: Unpacking the credit loss ratio - Southern Africa
Unpacking the credit loss ratio - Southern Africa ECL impairment charge 1H2024 2H2024 1H2025 ECL impairment charges on loans subject to ECL increased resulting ECL impairment charge (R'mn) 167.0 (330.0) 328.0 in a credit loss ratio of Credit loss ratio (bps) 8 (15) 16 16bps (Sept-23: 8bps) driven by
Slide 23: Wealth & Investment
Wealth & Investment Strong financial performance in a challenging operating environment Funds under management Adjusted operating profit Operating margin R’bn R’mn Discretionary and annuity Non-discretionary FUM increased by 7.9% to Adjusted operating profit up 26% to Operating margin at R540.9bn R5
Slide 24: Solid underlying performance
Solid underlying performance Adjusted operating profit* largely driven by strong performance from our client franchises £’mn SA^ ▲ 22% (▲ 22% in ZAR) UK & Other^ ▼ 5% ▲ 8% ▲ 14% ▲ 27% in GBP ▲ >100% in GBP ▼ 2% ▼ 10% ▼ 4% ▲ 14% in ZAR ▲ 26% in ZAR ▲ >100% in ZAR ROE 19.9% (Sept-23: 16.2%) 10.3% (Sep
Slide 25: ROE and ROTE
ROE and ROTE UK & Other SA Group Return on equity (ROE) Return on Equity 10.3% 19.9% 13.9% 13.9% (Sept-23: 14.6%) within the Group’s upgraded medium-term 13% to 17% target range Return on Tangible Equity 13.5% 19.9% 16.4% Average allocated Equity £3 022mn £1 833mn £4 854mn Average Allocated Tangible
Slide 26: Net Asset Value
Net Asset Value Underpinned by strong earnings growth and gains from strategic actions Net asset value per share Tangible net asset value per share Pence Pence 26
Slide 27: Capital and liquidity
Capital and liquidity Group cash and near cash £’bn Group liquidity summary • Strong liquidity positions to support growth 17.2bn Min • Loans to customers as % of customer deposits of 77.7% (Mar- 11.5bn 24: 77.6%) Max Capital summary Average 18.0bn • CET1 ratio well in excess of >10% target for Inve
Slide 28: Geographic review – UK & Other
Agenda Geographic review – UK & Other Ruth Leas Investec Bank plc CEO 28
Slide 29: Strategic positioning
Strategic positioning Building scale & relevance - by bringing the best of Investec to every client relationship and interaction DELIVERING A UNIQUE BREADTH OF CAPABILITIES IN THE MID-MARKET “Hi-touch & Hi-tech” Accelerated drive to increase clients and share of wallet Private Private Private Client
Slide 30: Operating environment
Operating environment Macro-economic and geopolitical influences • Further reductions in Bank rate are expected to follow this year’s two cuts given inflation’s progress to target • A fairly robust economic performance in the year-to-date following 2023’s stagnation. A strong household real income b
Slide 31: Specialist Bank Strategy
Specialist Bank Strategy Areas of focus Strategic Progress Accelerate our current strategy to grow and Investing for long-term growth, strengthening our unique positioning across our regions deepen our diversified franchises, continue Continued to successfully execute our client acquisition strategi
Slide 32: Geographic review – Southern Africa
Agenda Geographic review – Southern Africa Cumesh Moodliar Investec Bank Limited CEO 32
Slide 33: Strategic positioning
Strategic positioning A distinctive banking and wealth management business creating sustainable, long-term value for our stakeholders Connected client eco-systems across business units Lending Discretionary wealth management Advisory Stockbroking / execution only Differentiated client franchises Res
Slide 34: Operating environment
Operating environment Macro-economic • Inflation moderating to below midpoint of target range • Increasing expectations for further rate cuts • Freight and logistics constraints still persist, further work to be done on rail and port infrastructure • GDP growth for 2025 calendar year expected to be
Slide 35: Specialist Bank Strategy
Specialist Bank Strategy Areas of focus Strategic Progress Private Bank Core Clients Investec Life Core Clients Increase our Private Banking client acquisition 111 984 11 307 6.7% from Mar-24 19.3% from Mar-24 Continue to evolve our international offering Swiss FUM SA clients with UK accounts across
Slide 36: Closing and Q&A
Agenda Closing and Q&A Fani Titi Group Chief Executive 36
Slide 37: Financial outlook
Financial outlook FY25 guidance based on current economic forecast and expected business activity levels Revenue momentum is expected to be underpinned by average book growth, stronger client activity levels given expected improvement in GDP growth and continued success in our client acquisition str
Slide 38: In closing
In closing We are a focused business with deep client franchises Our client franchises have scale and relevance in our chosen markets Strong capital generation to support growth and returns to shareholders Clear set of scalable opportunities to deliver sustainable growth We are dedicated to our purp
Slide 39: Thank you
~ & Investec Thank you
Slide 40: Appendix
Appendix 40
Slide 41: Proviso
Proviso • Please note that matters discussed in today’s presentation may contain forward looking statements which are subject to various risks and uncertainties and other factors including, but not limited to: – changes in the political and/or economic environment that would materially affect the In
Slide 42: Taking stock
Taking stock Consistent execution of our strategy underpinned the achievement of all our medium-term targets £’mn FY21 FY22 FY23 FY24 1H25 Adjusted EPS - pence per share 28.9 55.1 68.9 78.1 39.5 Sustained earnings growth Total operating income 1807 1990 1986 2 085.00 1 103 Total costs 1 186 1234 108
Slide 43: Macro-economic scenarios – 30 September 2024
Macro-economic scenarios – 30 September 2024 At 30 September 2024 Base case average 2024 – 2029 Macro-economic scenarios Downside 1 Downside 2 % 2024/2025 2025/2026 2026/2027 2027/2028 2028/2029 Upside Base case inflation global stress UK GDP growth 1.6 1.8 1.8 1.8 2.0 2.2 1.8 0.0 0.4 Unemployment r
Slide 44: Investec
Investec Our purpose is to create Investec is a distinctive bank and We are a people backed business, enduring worth wealth manager, operating in two our distinction is embodied in our core geographies entrepreneurial culture Partner for the long term, guided by Rich heritage in Private Banking, Sup
Slide 45: Our strategic objectives
Our strategic objectives Growth Objectives Continued execution with Accelerate and scale Further develop connected discipline to drive growth initiatives client eco-systems across optimisation of returns business units & geographies Underpinned by Deepening our entrepreneurial culture (Out of the or
Slide 46: A distinctive banking and wealth management business
A distinctive banking and wealth management business creating sustainable, long-term value for our stakeholders Funds under management Principal geographies Total Employees Core loans Customer deposits IW&I SA Rathbones Group plc 2 c.7 700+ £31.7bn £40.4bn £23.4bn FUMA*: £108.8bn Key client groups a
Slide 47: Divisional highlights
Divisional highlights UK & Other Southern Africa Specialist Bank Specialist Bank Loan book Deposits Loan book Deposits grew by 2.3% annualised to grew by 8.1% annualised to up 1.5% annualised to down 6.2% annualised to £16.7bn £21.6bn R346.2bn R434.7bn Continued client acquisition and Adjusted opera
Slide 48: Diversified, quality revenue mix across geographies and businesses
Diversified, quality revenue mix across geographies and businesses By Geography By Division Sept-24 Sept-24 Operating income^ up 5.6% to £1 102.6mn Adjusted operating profit* up 7.6% to £474.7mn Southern Africa UK and other Wealth & Investment Specialist Banking Group Investments ^ Total operating i
Slide 49: UK & Other net core loans up 2.3% to £16.7bn
Mar-24 Sept-24 £’mn HNW & Other private client lending Property Corporate & Other Lending UK & Other net core loans up 2.3% to £16.7bn • Strong growth in our Fund Solutions loan book as well as moderate growth across the corporate loan book • The UK residential mortgage as well as corporate portfoli
Slide 50: Investec Limited net core loans up 1.5% annualised to R346.2bn
Mar-24 Sept-24 R’bn HNW & Other private client lending Property Corporate & Other Lending Investec Limited net core loans up 1.5% annualised to R346.2bn • Private Client loan book up 5.3% annualised with strong growth in residential mortgages • Growth in certain corporate credit portfolios was partl
Slide 51: Sustainability highlights
Sustainability highlights Operate responsibly, finance and invest in a sustainable future, and maintain our competitive sustainability position OUR IMPACT SDGs SUSTAINABLE FINANCE • Raised $64mn (since inception) through our Global Sustainable Net-zero commitments Equity Fund at 30 September 2024 •
Slide 52: Net-zero climate impact roadmap
Net-zero climate impact roadmap We acknowledge that climate change is material and poses significant risks, and opportunities, including its ability to generate value for stakeholders over time. We recognise and support the aims of the Paris Agreement goals. We are committed to achieve net-zero emis
Slide 53: Group Investments
Group Investments Group Investments pillar consists of equity investments held outside the Group’s banking activities Carrying Income % £’mn value yield Holding Ninety One 162 7.4% 10.0% Burstone Group (formerly IPF) 81 58.5% 24.3% The Bud Group Holdings 109 0.9% 36.4% (formerly IEP) Equity investme
Slide 54: Strategic execution
Strategic execution Significant strategic actions taken over the past two years Completion of combination between Investec Wealth & Disposal of property management companies to Burstone Investment UK (‘IW&I UK’) and Rathbones Group plc* Group Limited (formerly Investec Property Fund (IPF)) and Creat