Investec Plc · LSE:INVP
Investec — Investor Day (February 2019)
98 slides from Investec's investor day presentation, Feb 26, 2019
Slide 1: Investec Capital Markets Day: Bank and Wealth
Investec Group Investec Capital Markets Day Bank and Wealth 26 February 2019
Slide 2: Today's presenters
Today’s presenters Fani Titi Introduction Joint CEO of the Investec Group David van der Walt Joint Global Head of the Specialist UK Specialist Bank Bank and CEO of Investec Bank plc Richard Wainwright Joint Global Head of the Specialist SA Specialist Bank Bank and CEO of Investec Bank Ltd Steve Elli
Slide 3: Agenda
1 Introduction 4 2 UK Specialist Bank 23 3 SA Specialist Bank 47 4 Wealth & Investment business 64 5 Performance 77 6 Summary and Conclusion 88 7 Appendix 90 Page 3
Slide 4: Objectives for today's presentation
Objectives for today’s presentation Recap on the demerger rationale Focus on Investec’s strategic positioning Highlight initiatives to enhance returns Demonstrate sustainable organic capital generation Page 4
Slide 5: Rationale for the demerger
Rationale for the demerger Why we are proposing to demerge Investec Asset Management from Investec Bank and Wealth Conclusions of strategic review Demerger benefits • Investec Group comprises a number of • Simplifies the Group, allowing the Specialist Bank successful businesses operating across two
Slide 6: A business with nearly 40 years of heritage
A business with nearly 40 years of heritage Management FUM and core loans and advances (£’bn) succession 60 Focused on core markets Acquired Rensburg 50 Sheppards Leading specialist client franchises Growing connectivity between the 40 Investec specialist bank and wealth business FUM Core Loan
Slide 7: A distinctive specialist bank and wealth manager
A distinctive specialist bank and wealth manager… …facilitating the creation and management of wealth We are driven by a commitment to our core values and philosophies Dedicated Cast-iron Distinctive Client focus partnerships integrity performance Embodied in our distinctive culture We have a client
Slide 8: Overview of Investec post demerger
Overview of Investec post demerger A domestically relevant, internationally connected specialist banking and wealth management group March 2018 Group profit* 2 2 8,000+ 17% Principal geographies Core areas of activity Employees £573mn 27% 56% £24bn £30bn £57bn Core loans Customer deposits Third part
Slide 9: We have market-leading specialist client franchises
We have market-leading specialist client franchises SA Specialist Bank UK Specialist Bank Top Top Top Top #5 #1 tier tier tier tier 5th largest Top Corporate Specialist client franchises span Corporate Small Ticket Treasury Risk bank by assets Private Advisory and Infrastructure, fund finance, aviat
Slide 10: We have a diversified mix of businesses
We have a diversified mix of businesses Geography Business Income stream 2018 Operating income 2018 Operating income 2018 Operating income 21% 46% 44% 54% 56% 79% 2018 Operating profit1 2018 Operating profit2 Balance sheet driven Capital light 17% 36% 64% 83% UK and Other Southern Africa Specialist
Slide 11: We have positive organic capital generation across our business
We have positive organic capital generation across our business Healthy capital position Existing capital generation supports growth and dividends H1 2019 (standardised approach) as reported, including IAM Positive capital generation across all three core businesses Common equity Tier 1 ratio • All
Slide 12: We have successfully transitioned to the next generation of management
We have successfully transitioned to the next generation of management Smooth transition of senior leadership Long history working together at Investec with average tenure of 20 years for executive team Supported by strong management teams across the business units Average tenure of 18 years
Slide 13: Solid foundations but more to be done
Solid foundations but more to be done Solid foundations Current ROE* performance We are focused on improving • Client-centric approach is in our DNA Group ROE at ROE H1 2019: 11.0% • Market leading specialist client franchises with an • Our franchise businesses in 13.0% both SA and UK have ROEs esta
Slide 14: Our initiatives to enhance shareholder returns
Our initiatives to enhance shareholder returns We are focused on five key initiatives to enhance returns for shareholders 1 2 3 4 5 Capital Growth Cost Connectivity Digitalisation Discipline Initiatives Management More disciplined Improved Continue to invest in approach to capital Clear set of manag
Slide 15: More disciplined approach to capital allocation
1 More disciplined approach to capital allocation Focusing on businesses generating below target ROEs Actions taken to date Planned actions • Simplified and de-risked our business • Optimise capital allocation through: • Review and address underperforming - Strategic sales business units Capital Str
Slide 16: Pursuing our growth plans
2 Pursuing our growth plans Multiple opportunities to drive further growth Extend Specialist Banking Further develop Wealth & UK Private Bank shift from proposition Investment offering platform build to client growth • More holistic client-centric offering to • Expand financial planning (UK) and mid
Slide 17: Increased focus on effective cost management
3 Increased focus on effective cost management Historical increases in our cost to income ratio reflect strategic investment in the business Improving cost to income ratio^ in the medium-term Historical cost to income ratio development • The increase in our cost to income ratio historically reflects
Slide 18: Connectivity: Locally relevant and internationally networked
4 Connectivity: Locally relevant and internationally networked Meeting the needs of our sophisticated, and internationally orientated clients Between Specialist Bank and Wealth & Between SA and the UK Investment • Seamlessly serving SA HNW and corporate clients • Private Bank / Wealth offering: One
Slide 19: Continuing to invest in Digitalisation
5 Continuing to invest in Digitalisation Our digitalisation strategy integrates services across business and geography, to bring to life a high-touch, high-tech experience Private clients Intermediary clients Corporate clients SA Investec for Business Integrated access to Investec’s banking and inve
Slide 20: Enhancing shareholder returns over the medium-term
Enhancing shareholder returns over the medium-term Narrowing gap between statutory and ongoing ROE Drivers for ROE enhancement ROE evolution since 2011 More efficient approach to capital > allocation 11.9% 11.9% 11.9% 11.1% 11.2% 11.3% 11.0% 10.6% Clear set of strategic initiatives to > support inco
Slide 21: Clear set of financial targets underpins our objectives
Clear set of financial targets underpins our objectives Which we aim to deliver on over the next three years Cost to Income Dividend Group ROE CET1 Ratio Ratio Payout Ratio 12% to 16%* < 63% > 10% 30% to 50% UK*: SA*: UK Bank: SA Bank: 11% to 15% 15% to 18% < 65% 49% to 52% UK Bank: SA Bank: UK Weal
Slide 22: Agenda
1 Introduction 4 2 UK Specialist Bank 23 23 3 SA Specialist Bank 47 4 Wealth & Investment business 64 5 Performance 77 6 Summary and Conclusion 88 7 Appendix 90 Page 22
Slide 23: UK Specialist Bank overview
Banking UK Specialist Bank overview UK Strong domestic client franchises complemented by international specialist capabilities Corporate and Investment Banking Private Banking Our Capital, advice and ideas, risk management and Lending, savings, transactional banking and offering treasury solutions f
Slide 24: We have evolved our business model and are strategically well positioned
Banking We have evolved our business model and are strategically well positioned UK • Simplified and de-risked our • Fully invested Private • Improved revenue mix – business as a basis from which to Banking franchise with a client-driven, high annuity grow clear market opportunity set and increased
Slide 25: Simplified and de-risked our business
1 Banking Simplified and de-risked our business UK Significantly reduced Legacy portfolio Run-off of Legacy assets Reduction of Legacy as % of UK loan book Increase in Legacy coverage £’bn Other Private Bank assets 31.7%* 4.8 9.9% Private Bank Irish planning and development assets Ongoing – 96.8% 26
Slide 26: UK Corporate and Investment Banking (CIB) overview
2 Banking UK Corporate and Investment Banking (CIB) overview UK Our value proposition • Client-centric, solution-driven offering – opportunity to drive client acquisition and increase market share • Tailored offering focused on UK mid-market corporates, financial sponsors and specialist internationa
Slide 27: CIB: Creating a leading Corporate Banking offering
2 Banking CIB: Creating a leading Corporate Banking offering… UK …with a joined up, client-centric approach for our target market (£10mn - £100mn corporates) Our differentiation: Specialists Agile, personalised service, tailored to meet needs of small to mid cap corporates We offer: • Lending • Work
Slide 28: CIB: Uniquely positioned Investment Banking with a holistic proposition
2 Banking CIB: Uniquely positioned Investment Banking with a holistic proposition UK Boutique service with ‘Bulge Bracket’ capability and award winning franchises • Tailored offering to meet the needs of UK mid-market corporates (£100mn – £1bn revenue) and financial sponsors • Our specialist interna
Slide 29: CIB: Achieved considerable scale in the business
2 Banking CIB: Achieved considerable scale in the business UK Consistently contributed 35-40% of Global Specialist Bank revenue Improved revenue sustainability and Growth in sustainable core corporate client franchises mix underpinned by client franchises Corporate Banking Investment Banking 2011 86
Slide 30: CIB: Delivering attractive and sustained growth
2 Banking CIB: Delivering attractive and sustained growth UK Growth in corporate loan book Diversified corporate loan book Net book size in £’bn and as a % of total UK net core loans Net corporate loan book by risk category* £’bn CAGR: 17% 7 62% 8% 61% Project finance 6 6% 26% Large ticket asset Cor
Slide 31: Evolved to build a capital sustaining business model
2 Banking Evolved to build a capital sustaining business model UK Highly successful origination and distribution capability and growing fund management capability Allows us to Provides Raises Enhances Generates punch above Increases valuable Investec’s Maintains returns by additional our client mark
Slide 32: Evolved to build a capital sustaining business model (cont.)
2 Banking Evolved to build a capital sustaining business model (cont.) UK Case study: Building a world-leading Aviation franchise • Well-established aviation franchise built on deep sector expertise and client Client franchise relationships c.US$1.1bn Innovation and • We continually innovate to rema
Slide 33: UK Private Banking overview
3 Banking UK Private Banking overview UK HNW Retail savings and SA clients Our value • Client led (not product) • Product led proposition • High touch, relationship based • High tech, digital, self service • Expertise and speed • Innovative products Ambition • To build an aspirational HNW private ba
Slide 34: Private Banking: Clearly defined target market
3 Banking Private Banking: Clearly defined target market UK Our proposition is aligned with a clearly defined target client base Size of opportunity*… 296,000 meet NAV criteria £3mn NAV Quantitative + criteria 178,000 £300k earnings Allows us to deal meet NAV + directly with Earnings criteria client
Slide 35: Private Banking: Clear market opportunity
3 Banking Private Banking: Clear market opportunity UK Traditional Retail Banks A different kind of private bank Traditional Private Banks For customers that need a For clients that need a risk-partner to For clients that need wealth homogenous product grow their wealth preservation • High volume an
Slide 36: Private Banking: Fully invested for the future
3 Banking Private Banking: Fully invested for the future UK New Banking proposition – invested to achieve a scalable platform £’mn 30 • Investment phase complete - c.£67mn will have been invested by 25 Investment Mar 2019: 20 into new • People Banking 15 • Platforms proposition 10 5 • Marketing 0 •
Slide 37: Enhancing connectivity across the business
4 Banking Enhancing connectivity across the business UK Connecting Specialist Banking and Wealth & Investment We seek to establish greater connectivity by pursuing: • Cross referrals between the Private Bank and Wealth & Opportunity to seamlessly service the Investment for the HNW and family office
Slide 38: Case study: Supporting our clients through their lifecycle
Banking 4 Case study: Supporting our clients through their lifecycle UK Advised, floated company, then provided ongoing strategic and corporate broking advice Investment Banking Management became personal clients of Wealth & Investment Leading Wealth & consumer brand Corporate Advised on FX hedging
Slide 39: Case study: Private bank and wealth collaboration across border
Banking 4 Case study: Private bank and wealth collaboration across border UK August June 2015 2017 2018 2015 Assisted a Private Bank Private Bank All client HNW SA UK provided UK referred funds non-client client with a client to transferred open HNW private Private from a offshore bank bank account
Slide 40: Improved revenue sustainability by growing our client franchises
Banking 5 Improved revenue sustainability by growing our client franchises UK Evolution of revenue mix Annuity income* • Increased level of annuity* income 2018: 56% £’mn 800 • Improved revenue mix - increase in quality, quantum Annuity income* 713 and sustainability of earnings: 700 2011: 31% 58 -
Slide 41: Going forward: Growth strategies
6 Banking Going forward: Growth strategies UK Corporate and Private Investment Banking Banking • More joined-up, client-centric approach driving • Shift from platform build to client growth, with increased client relevance and client acquisition; focus on client acquisition and retention aided by ou
Slide 42: Going forward: Focused on cost discipline
6 Banking Going forward: Focused on cost discipline UK Costs and cost to income ratio A clear path for achieving our targets £’mn Leverage substantial investment in our 600 100% > Private Banking business which is fully expensed 500 No longer incurring double premises 77% 75% 74% 76% 71% 73% 76% 77%
Slide 43: Going forward: Capital generation and allocation
6 Banking Going forward: Capital generation and allocation UK Capital strategy • Specialist Bank internal capital generation sufficient to sustain growth and achieve target ROE • Dividend from Wealth & Investment business passed through to shareholders • Able to self-sustain c.7-8% RWA growth p.a. •
Slide 44: Going forward: Focused on ROE
6 Banking Going forward: Focused on ROE UK UK Specialist Bank ROE** trend A clear path for achieving our targets • ROE track record of ongoing business excluding new Banking proposition is within target range > RWA growth of c.7%-8% p.a. Accelerated legacy 13.5% impairments Growing our client base a
Slide 45: Initiatives to enhance shareholder returns: UK Specialist Bank
Banking Initiatives to enhance shareholder returns: UK Specialist Bank UK We are well aligned to the Group’s identified five key initiatives to improve returns for shareholders 1 2 3 4 5 Capital Growth Cost Connectivity Digitalisation Discipline Initiatives Management Driving a Target market high-te
Slide 46: Agenda
1 Introduction 4 2 UK Specialist Bank 23 3 SA Specialist Bank 47 47 4 Wealth & Investment business 64 5 Performance 77 6 Summary and Conclusion 88 7 Appendix 90 Page 46
Slide 47: SA Specialist Bank overview
Banking SA Specialist Bank overview SA Investment Banking Corporate and Private Banking Investec for Business and Principal Institutional Banking Investments Advisory, debt, ECM, Import and trade Our Global markets and Lending, transactional client led private equity, finance, borrowing and offering
Slide 48: We have a solid franchise and positioning in the market
Banking We have a solid franchise and positioning in the market SA We have a specialised niche offering to a select target market • Invested in our • Deepening our existing client business, sustainably relationships and client acquisition growing our client through the collaboration of product base
Slide 49: SA Corporate and Institutional Banking overview
1 Banking SA Corporate and Institutional Banking overview SA Strong franchise value and leading market position in our niche markets Our value • Diversified client-centric offering proposition • Sustainable growth driven through collaboration between business units Ambition • To be a top tier corpor
Slide 50: Growth in our corporate client base and franchise
1 Banking Growth in our corporate client base and franchise SA Corporate client positioning Number of clients: 4,950 c. Loan book: R80bn Number of Average Number of Overall clients Specialist activities transaction Book size clients size Large corporates (NAV>R3bn) c.150 Fund Finance c.25 R180mn R5b
Slide 51: SA Private Banking overview
1 Banking SA Private Banking overview SA Our value • Bank, borrow, save and invest in One Place proposition Ambition • To be a leading domestic and international Private Bank • HNW individuals, emerging entrepreneurs, Clear target market professionals Structured Private Niches property capital UK Pr
Slide 52: Growth in our private client base and franchise
1 Banking Growth in our private client base and franchise SA Private client positioning 75,000 Number Private Of which are Number of clients: c. Bank clients Wealth clients c.75,000 clients Private clients c.9,000 clients c.113,000 accounts Loan book: R180bn Property clients c.900 Recognition Privat
Slide 53: SA Investec for Business overview
1 Banking SA Investec for Business overview SA Our value • Combining bespoke lending with Investec’s other transactional, advisory and investment offerings proposition • High-touch and high-tech tailored offering that affords simplicity to clients Ambition • Develop an integrated niche offering to o
Slide 54: SA Investment Banking and Principal Investments overview
1 Banking SA Investment Banking and Principal Investments overview SA Investment Banking Principal Investment activities • Focus on co-investment alongside clients to fund Our value • To leverage our capabilities, relationships and capital investment opportunities or leverage third party proposition
Slide 55: We have a high-tech and high-touch specialised offering
2 Banking We have a high-tech and high-touch specialised offering SA Technological and digital leadership are real differentiators for our clients… …Our One Place offering is one such example Private Bankers and Wealth managers, Private Capital team, Property Finance team, Global How we engage CSC,
Slide 56: Deepening our client relationships and focused on our growth initiatives
3 Banking Deepening our client relationships and focused on our growth initiatives SA • Investec Specialist Investments business Corporate and • Investec Life* Institutional • One Place for intermediaries: creating a digital product Banking that is seamless • Transactional business banking to reduce
Slide 57: Solid growth in revenue with a high annuity income base
4 Banking Solid growth in revenue with a high annuity income base SA Growth in revenue over time R’mn Annuity income* 16,000 2018: 77% • CAGR in revenue since 2011 of c.10% 14,000 13,469 12,000 1,808 • Increased level of annuity* income Annuity income* 423 854 10,000 2011: 64% • Strong lending franc
Slide 58: We are maintaining efficiency in our cost base
Banking 5 We are maintaining efficiency in our cost base SA Costs and cost to income ratio^ Overview and objectives R’mn 7,000 60% Invested in the business while 53% 54% 55% 53% 50% 51% 51% > maintaining the cost to income ratio 50% 50% 6,000 50% Going forward: aim to create 5,000 > positive jaws 40
Slide 59: Optimise capital by focusing on client driven private equity activity
6 Banking Optimise capital by focusing on client driven private equity activity SA SA investment portfolio* excluding investments in What are we seeking to do franchise businesses (H1 2019) Ave capital • Focus on co-investment alongside clients to fund Book size allocated Post-tax R’bn ROE investmen
Slide 60: Capital generation and allocation
6 Banking Capital generation and allocation SA Capital strategy • Supported by sound capital position and strong capital generation • Able to self-sustain 8%-10% RWA growth p.a. • Capital resources are allocated based on our internal capital generation and maintenance targets • We will manage down o
Slide 61: Focused on ROE
6 Banking Focused on ROE SA SA Specialist Bank ROE trend A clear path for achieving our targets • Underlying franchise businesses have an ROE in excess of 14% Growing our client base and • ROE drag from SA investment portfolio^, where the ROE is less than 7% > franchise 20% 18% > Continued cost disc
Slide 62: Initiatives to enhance shareholder returns: SA Specialist Bank
Banking Initiatives to enhance shareholder returns: SA Specialist Bank SA We are well aligned to the Group’s identified five key initiatives to improve returns for shareholders 1 2 3 4 5 Capital Growth Cost Connectivity Digitalisation Discipline initiatives Management Maintain a Ensuring we remain a
Slide 63: Agenda
1 Introduction 4 2 UK Specialist Bank 23 3 SA Specialist Bank 47 4 Wealth & Investment business 64 64 5 Performance 77 6 Summary and Conclusion 88 7 Appendix 90 Page 63
Slide 64: Investec Wealth & Investment (IW&I) overview
IW&I Investec Wealth & Investment (IW&I) overview SA & UK FUM development • Wealth management FUM (£’bn) Our 60 £57bn • Discretionary investment management offering 50 • Stockbroking 40 £29bn 30 20 • Private clients 10 Our clients • Charities 0 • Trusts 2011 2012 2013 2014 2015 2016 2017 2018 H1 201
Slide 65: What differentiates IW&I?
IW&I What differentiates IW&I? SA & UK Single consistent global investment process, delivering tailor-made and innovative solutions across jurisdictions Domestically relevant with international offering, including offshore capabilities and providing access to clients to leading global financial cent
Slide 66: Our growth story
IW&I Our growth story SA & UK IW&I has a strong track record of consistent growth, with over 40% of the increase in FUM since 2011 driven by net inflows Net Flows: £1.7bn £(0.2)bn* £0.7bn £1.4bn £2.7bn £2.1bn £1.2bn £2.0bn £0.7bn FUM (£’bn) CAGR: 9% 60 UK and Other SA UK & Other: 50 Williams de Broe
Slide 67: A single global investment process
IW&I A single global investment process SA & UK Exceptional global research capabilities Access to broad investment universe Research Meetings with Quantitative External from major Equities Alternatives fund and technical information investment managers analysis houses Open tool box to Research inpu
Slide 68: Snapshot of IW&I UK & Other
IW&I Snapshot of IW&I UK & Other SA & UK A leading UK private client manager, offering bespoke discretionary investment management services to a higher-end mass affluent and increasing high-net-worth client base Key facts* Future growth drivers Total FUM £39.4bn^ 16% % UK Discretionary 84% • Attract
Slide 69: Snapshot of IW&I SA
IW&I Snapshot of IW&I SA SA & UK A leading private client manager in SA, providing domestic and offshore wealth management to an international-minded client base Key facts* Future growth drivers Total FUM R320bn % Discretionary and • Our wealth managers, working 40% 40% annuity with our fiduciary an
Slide 70: Enhancing connectivity across the Group
IW&I Enhancing connectivity across the Group SA & UK IW&I has a collaborative approach with the Specialist Bank to serving private clients and is widely recognised as one of the top international private bank and wealth managers • Access to IW&I’s leading wealth One Place proposition in SA managemen
Slide 71: Digital case study: Investment in Click & Invest
IW&I Digital case study: Investment in Click & Invest SA & UK Click & Invest proposition Presents significant market opportunity • “Robo-advice” – automated simplified advice service for UK clients Forecast Robo-Advice Market • “Robo-advice” market already who fall below the threshold for core discr
Slide 72: IW&I key financials
IW&I IW&I key financials SA & UK Operating income Operating profit before tax £’mn £’mn Operating cost base of £306mn 450 120 comprises £223mn of staff costs 40% 405 and £83mn of non-staff costs 400 35% 361 98 100 93 350 91 325 86 313 30% 288 84 79 29 300 68 80 28 249 62 23 25% 59 66 250 22 196 54 2
Slide 73: Investment whilst maintaining cost discipline
IW&I Investment whilst maintaining cost discipline SA & UK We will continue to invest in our franchise… …while maintaining our cost discipline • Recruitment: We continue to invest in hiring experienced • Experienced management team across the UK and SA investment managers and financial planners to d
Slide 74: IW&I's strategic focus areas
IW&I IW&I’s strategic focus areas SA & UK 6 Continue to build a scalable operating platform to support future growth and margin expansion in the medium-term 5 Consolidate internal collective fund platforms (e.g. World Axis, Fund of Funds) and market externally 4 Extend breadth of global investment o
Slide 75: Initiatives to enhance shareholder returns: Wealth & Investment
Initiatives to enhance shareholder returns: Wealth & Investment We are well aligned to the Group’s identified five key initiatives to improve returns for shareholders 1 2 3 4 5 Capital Growth Cost Connectivity Digitalisation Discipline Initiatives Management We will continue to Focus on increasing W
Slide 76: Agenda
1 Introduction 4 2 UK Specialist Bank 23 3 SA Specialist Bank 47 4 Wealth & Investment business 64 5 Performance 77 77 6 Summary and Conclusion 88 7 Appendix 90 Page 76
Slide 77: Summary of key financials
Summary of key financials Strong growth in key earnings drivers… …supported by robust balance sheet • We have strong momentum across our businesses, underpinned by our high- Net core loans and advances Customer deposits quality client franchises £’bn £’bn 35 • Net core loans and advances 30 UK and O
Slide 78: Summary of key financials (cont.)
Summary of key financials (cont.) £’mn 2,000 UK and Other Southern Africa 1,800 1,600 1,400 Resulting in a 1,200 We have delivered strong growing 1,000 growth in our revenue revenue base 800 base, with over 50% generated in the UK 600 400 200 0 2014 2015 2016 2017 2018 H1 2019 £’mn 1,400 71% 1,200 6
Slide 79: Impairments have reduced in recent years
Impairments have reduced in recent years Core loans and credit loss ratio • Asset quality has improved as the legacy portfolio has been managed down (less than 0.8% of global loan book) £’bn 30 5% • Ongoing portfolio continues to have low levels of 25 impairments and defaults 4% 20 3% - Credit loss
Slide 80: A balanced portfolio of businesses with a solid capital light revenue base
We have a balanced portfolio of businesses with a solid capital light revenue base Stable With significant capital light And growing recurring geographic balance businesses revenues Operating income Operating income Operating income 2014 42% 39% 43% 57% 58% 61% 29% 46% 44% 2018 54% 56% 71% UK and Ot
Slide 81: We are focused on cost discipline
We are focused on cost discipline Breakdown of costs (2018) • We are focused on cost discipline By business unit By type 4% 5% 2% - Targeting a Group cost to income 5% 5% ratio of less than 63% in the medium- 4% term 19% 11% 43% • We have set clear divisional cost to income £1,271mn £1,271mn 51% tar
Slide 82: Contribution to Group ROE by business
Contribution to Group ROE by business IWI SA and SA Specialist Bank1 UK Specialist Bank 3Bank UK Specialist Group Costs Investec Investec Group UK Group H1 2019 ROE, in £’s unless otherwise stated 4 Group: 26.4% 11.0% 14.0% 13.0% 12.4% 11.6% 9.3% 9.1% 6.9% -47.8% n.m. SA Bank ex Investment Total UK
Slide 83: Simplifying and refocusing the Group to improve ROE in the medium-term
Simplifying and refocusing the Group to improve ROE in the medium-term A number of our specialist businesses are already operating at attractive ROEs, however, we recognise that we need to address a number of areas to improve ROE • We are focused on managing down our non-core equity investments port
Slide 84: Diversified funding strategy
Diversified funding strategy Conservative and prudent funding strategy Funding primarily consists of customer deposits Global – March 2018. Total funding £38.4bn 4% 1% 1 Maintaining a base of high quality liquid assets 7% Customer deposits 8% Interbank deposits Debt securities in issue Diversifying
Slide 85: Underlying capital generation supports future growth and dividends
Underlying capital generation supports future growth and dividends • There is positive capital generation across all our core businesses, with all businesses self-sufficient Target Group RoE*: • UK Bank has sufficient capital to grow the Private 12%-16% Bank to scale, while also supporting c.7%-8% g
Slide 86: Clear set of financial targets underpins our objectives
Clear set of financial targets underpins our objectives Which we aim to deliver on over the next three years Metric: FY 2018 H1 2019 Medium-term Commentary** target UK Combined Target: 11% to 15%* UK Bank Target: 10% to 13% Group ROE 9.8% 11.0% 12% to 16%* SA Combined Target: 15% to 18%* SA Bank Tar
Slide 87: Agenda
1 Introduction 4 2 UK Specialist Bank 23 3 SA Specialist Bank 47 4 Wealth & Investment business 64 5 Performance 77 6 Summary and Conclusion 88 88 7 Appendix 90 Page 87
Slide 88: Objectives for today's presentation
Objectives for today’s presentation Recap on • Simplification and greater focus to enhance the long-term prospects of both businesses demerger rationale • Opportunity to build on linkages between the Specialist Bank and Wealth & Investment businesses Focus on • International specialist bank with lea
Slide 89: Agenda
1 Introduction 4 2 UK Specialist Bank 23 3 SA Specialist Bank 47 4 Wealth & Investment business 64 5 Performance 77 6 Summary and Conclusion 88 7 Appendix 90 90 Page 89
Slide 90: Our commitment to sustainability
Our commitment to sustainability At Investec, sustainability is about building resilient profitable businesses that are focused on growing and preserving stakeholders long-term wealth, whilst contributing in a responsible way to the health of our economy, our people, our communities and the environm
Slide 91: Our environmental, social and governance (ESG) performance
Our environmental, social and governance (ESG) performance UK Banking peer group Included in the following CDP (Carbon disclosure project) Carbon footprint sustainability indices: A A A- tCO2 A Investec plc ranked in the Dow Jones B A- 350,000 Sustainability Investment (DJSI) Index B C C 300,000 as
Slide 92: Driving ESG impact
Driving ESG impact Examples of how we are deploying our balance sheet to maximise social and environmental impact Power and infrastructure finance • Participated in £1.2bn of renewable energy projects Committed to supporting the transition • Clean energy makes up 88% of our total energy lending port
Slide 93: Embedding ESG into daily operations
Embedding ESG into daily operations Investec supports the transition to a low carbon economy and believe we can make a Climate change statement meaningful impact in addressing climate change Our ESG Lending policy requires an evaluation of lending exposures to manage Lending policy potential adverse
Slide 94: Uncertainty with respect to Brexit, but our business remains resilient
Uncertainty with respect to Brexit, but our business remains resilient Key points • We have limited European business outside of Ireland and so the overall impact of Brexit on our client franchise will be limited • Brexit will result in a restructure and downscaling of our Irish operations, giving r
Slide 95: UK Specialist Bank: Key metrics
UK Specialist Bank: Key metrics Customer loans and deposits £’bn 14 90% 80% 12 70% 10 60% 8 50% 6 40% 30% 4 20% 2 10% 0 0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 Customer accounts (deposits) Net core loans and advances Loan to deposit ratio Net interest margin RoA and RoRWA £’mn £’mn 20,000
Slide 96: UK Specialist Bank: Key metrics (cont.)
UK Specialist Bank: Key metrics (cont.) Revenue Costs £’mn £’mn 800 100% 600 100% 700 500 76% 73% 76% 77% 80% 77% 75% 74% 80% 600 70% 71% 60% 400 500 56% 57% 60% 56% 60% 400 47% 48% 300 43% 40% 300 31% 35% 40% 200 200 20% 20% 100 100 0 0% 0 0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 2011 201
Slide 97: SA Specialist Bank: Key metrics
SA Specialist Bank: Key metrics Customer loans and deposits R’bn 350 90% 80% 300 70% 250 60% 200 50% 150 40% 30% 100 20% 50 10% 0 0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 Customer accounts (deposits) Net core loans and advances Loan to deposit ratio Net interest margin* RoA and RoRWA R’mn
Slide 98: SA Specialist Bank: Key metrics (cont.)
SA Specialist Bank: Key metrics (cont.) Revenue Costs* R’mn R’mn 7,000 60% 16,000 90% 54% 55% 76% 77% 53% 53% 50% 51% 51% 50% 73% 72% 80% 6,000 50% 14,000 70% 50% 68% 65% 68% 64% 70% 12,000 5,000 60% 40% 10,000 50% 4,000 8,000 30% 40% 3,000 6,000 30% 20% 2,000 4,000 20% 1,000 10% 2,000 10% - 0% 0 0%