Slide 1: Investec Group Ltd Analyst Presentation 2002
Investec Group Ltd Analyst Presentation 2002
Slide 2: Forward-looking statements
“Please note that except for historical information, matters discussed in today’s conference call may contain forward looking statements which are subject to various risks and uncertainties and other factors, some of which are beyond the Company’s control. These factors may cause the Company’s resul
Slide 3: Summary of Results
Summary of Results > -"
Slide 4: Snapshot of 2002 results
Snapshot of 2002 results 31 March 31 March % 2002 2001 Change Headline attributable earnings 1 684 1 314 28.2 ( R’mn) Headline EPS (cents) 1 840.4 1 628.2 13.0 DPS (cents) 825 750 10.0 Return on equity (%) 27.6 25.8 Cost to income ratio (%) 65.5 63.2 Assets under administration 758 858 514 629 47.5
Slide 5: Reconciliation to headline earnings
Reconciliation to headline earnings R’mn 31 March 2002 Attributable earnings 626 Exceptional items 1 058 Amortisation of goodwill for the year 747 Goodwill impairment 512 Loss on disposal of subsidiaries and 21 fixed assets Profit on disposal of non-trading loans (267) Share of associate’s exception
Slide 6: Goodwill impairment
Goodwill impairment • AC 128 and AC 131: annual review of carrying value of all assets and test on goodwill arising from acquisitions for impairment losses • Result of exercise: Impairment of R472mn with respect to goodwill on Fedsure insurance business and R40mn on Private Client Group in the US
Slide 7: Headline EPS, DPS and ROE
Headline EPS, DPS and ROE cents (%) DPS Headline EPS ROE 2000 28 1800 26 1600 10 Year CAGR 1400 24 Headline EPS: 28.9% 1200 DPS: 28.0% 22 1000 800 20 600 18 400 16 200 0 14 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Slide 8: Global Positioning and Review
Global Positioning and Review
Slide 9: Operating environment: It was the best of times, it was the worst of times
Operating environment “It was the best of times, it was the worst of times...” - Charles Dickens
Slide 10: It was the best of times...
It was the best of times... - Charles Dickens
Slide 11: Operating environment: Best of times...
Operating environment Best of times... • Fedsure rationalised and integrated • Received permission to dual list: > Key to internationalisation strategy > Expected to raise the international profile and perception of the Group > Provides clear strategic direction • The Group demonstrated resilience i
Slide 12: It was the worst of times...
It was the worst of times... - Charles Dickens
Slide 13: Operating environment: Worst of times...
Operating environment Worst of times... • Negative sentiment surrounding Fedsure • Delays on the UK listing permission • SA banking sector experienced a difficult period • Depressed global markets • Regional political upheaval • Exceptionally challenging operating environment
Slide 14: Operating environment
Operating environment • Overall, the environment was not very conducive for a specialist banking group like Investec • Notwithstanding the difficult environment, Investec has grown earnings below historic levels but still above other international investment banks
Slide 15: Geographic review
Geographic review For the year ended Headline Headline 31 March 2002 NIBT Earnings UK & Europe Ð 5.2% Ð 5.3% Southern Africa & Other Ï 89.3% Ï 97.5% USA Ð 82.4% Ð 1.7% Israel Ï 61.5% Ï 78.6%
Slide 16: Assets by geography
Assets by geography USA Israel 3.0% (4.5%) 4.8% (5.8%) SA & Other UK & Europe 36.3% (31.3%) 55.9% (58.4%) Year ended 31 March 2002 (31 March 2001)
Slide 17: Tangible NAV by geography
Tangible NAV by geography USA Israel 3.6% (9.0%) 7.0% (8.0%) UK & Europe 51.0% (41.0%) SA & Other 38.4% (42.0%) Year ended 31 March 2002 (31 March 2001)
Slide 18: Headline NIBT by geography
Headline NIBT by geography USA Israel 0.7% (5.0%) 4.4% (3.5%) UK & Europe 38.6% (52.9%) SA & Other 56.3% (38.6%) Year ended 31 March 2002 (31 March 2001)
Slide 19: Headline earnings by geography
Headline earnings by geography Israel USA 3.0% (2.1%) 3.3% (4.4%) UK & Europe 46.4% (62.8%) SA & Other 47.3% (30.7%) Year ended 31 March 2002 (31 March 2001)
Slide 20: UK and Europe
UK and Europe • Headline NIBT declined marginally in Rand terms: > Equity related activities suffered from market volatility > Stronger performances from private banking, treasury and specialised finance
Slide 21: UK and Europe
UK and Europe • Continued to focus on developing core areas: > Acquisition of European Capital team > Established structured finance and financial products operations > Made several key recruitments
Slide 22: UK and Europe: Salient financial features
UK and Europe Salient financial features 31 March 31 March % 2002 2001 change Assets (R’bn) 170 114 49.1 Headline NIBT (R’mn) 915 965 (5.2) Headline earnings (R’mn) 781 825 (5.3) Staff 1 492 1 432 4.2 Return on tangible NAV (%) 24.1 34.4 Cost to income ratio (%) 72.7 61.4
Slide 23: Southern Africa and Other
Southern Africa and Other • Strong performance from SA operations • Particularly good performances from treasury and specialised finance, investment banking, private banking and the property division • Inclusion of the Fedsure acquisition for 10 months enhanced overall results
Slide 24: Southern Africa and Other: Salient financial features
Southern Africa and Other Salient financial features** 31 March 31 March % 2002 2001 change Assets (R’bn) 110 61 80.3 Headline NIBT (R’mn) 1 333 704 89.3 Headline earnings (R’mn) 796 403 97.5 Staff 3 111 2 303 35.1 Return on tangible NAV (%) 36.7 23.2 Cost to income ratio (%) 49.6 59.3 **Includes: M
Slide 25: USA
USA • Negative earnings growth as a result of: > Subdued state of the equity markets > Investment banking and private client operations negatively impacted • Enhanced investment banking capability – select recruitment • Decided to exit Private Client Stockbroking business in March 2002
Slide 26: USA: Salient financial features
USA Salient financial features 31 March 31 March % 2002 2001 change Assets (R’bn) 9 9 - Headline NIBT (R’mn) 16 91 (82.4) Headline earnings (R’mn) 57 58 (1.7) Staff 688 859 (19.9) Return on tangible NAV (%) 14.0 13.2 Cost to income ratio (%) 98.2 84.1
Slide 27: Israel
Israel • Posted creditable results off a low base • Extremely difficult political and economic environment • Rationalisation of the business in process which will result in reductions in headcount and costs
Slide 28: Israel: Salient financial features
Israel Salient financial features 31 March 31 March % 2002 2001 change Assets (R’bn) 15 11 36.4 Headline NIBT (R’mn) 105 65 61.5 Headline earnings (R’mn) 50 28 78.6 Staff 238 242 (1.7) Return on tangible NAV (%) 9.8 6.6 Cost to income ratio (%) 59.7 66.1
Slide 29: Australia
Australia • Creditable performance, particularly from Investec Wentworth > Headline NIBT of R15mn • Banking license application in process • Robust and scalable business platforms are being created
Slide 30: Divisional Review
Divisional Review
Slide 31: Divisional review
Divisional review Headline NIBT Investment Banking 7.7% Decline reflecting difficult market conditions Treasury and Specialised Finance 22.7% Good results despite market volatility Private Client Activities 42.3% Strong performance from private banking in UK and SA Asset Management 22.8% Sound contr
Slide 32: Contribution analysis
Contribution analysis Asset Management Investment Banking & Assurance 24.6% (34.2%) 21.0% (12.3%) Treasury & Specialised Finance Private Client 30.5% (31.9%) Activities 23.9% (21.6%) Year ended 31 March 2002 (31 March 2001)
Slide 33: Investment Banking
Investment Banking • Performance reflects the weak market conditions • Decline primarily from the UK and the US • Internationalisation strategy continued: > Focus on key sectors > Senior appointments made in SA and UK
Slide 34: Investment Banking: Salient financial features
Investment Banking Includes: Corporate Finance, Institutional Stockbroking, Private Equity, Direct Investments Salient financial features 31 March 31 March % 2002 2001 Change Net operating income (R’mn) 1 324 1 021 29.7 Operating expenses (R’mn) 740 388 90.7 Headline NIBT (R’mn) 584 633 (7.7) Cost t
Slide 35: Investment Banking: South Africa
Investment Banking South Africa • Corporate Finance - continued to perform strongly relative to local peers • Institutional Stockbroking - structured equity desk performed well in its first year of operation • Private Equity and Direct Investments - performed better than expected and select investme
Slide 36: Investment Banking: United Kingdom and Europe
Investment Banking United Kingdom and Europe • Investment Banking & Securities > Slowdown in IPO’s and secondary fundraisings > Growth in large cap agency business and market making offset difficult secondary market > Concluded 21 M&A transactions • Private Equity and Direct Investments > Focused on
Slide 37: Investment Banking: USA
Investment Banking USA • Acquired PMG Capital in June 2001 • Particularly vulnerable to weak US markets • Acquired teams to boost niche sectors of TMT and Healthcare
Slide 38: Investment Banking: Australia
Investment Banking Australia • Corporate advisory capability established with the acquisition of Wentworth Associates in March 2001 • Good deal flow with contribution to headline NIBT of R34mn • Private Equity capability established
Slide 39: Treasury and Specialised Finance
Treasury and Specialised Finance • Banking activities performed well, particularly: > Treasury, financial products, structured finance and project and resource finance • Financial market activities produced mixed performances: > Good results from the commodities unit
Slide 40: Treasury and Specialised Finance: Salient financial features
Treasury and Specialised Finance Includes: non-private client deposit-taking, corporate and public sector lending, structuring and proprietary trading activities Salient financial features 31 March 31 March % 2002 2001 Change Net operating income (R’mn) 1 320 1 006 31.2 Operating expenses (R’mn) 595
Slide 41: Treasury and Specialised Finance: South Africa
Treasury and Specialised Finance South Africa • Project Finance: > N1-N4 Platinum Toll Road project - joint lead arranger > Arranged, underwrote and placed R1bn of CPI-linked bonds in SA capital market
Slide 42: Treasury and Specialised Finance: South Africa contd.
Treasury and Specialised Finance South Africa contd. • Structured Finance benefited from low interest rate levels in SA which stimulated demand for long term funding • Interest rate desk suffered from volatility experienced in the market in December
Slide 43: Treasury and Specialised Finance: International Operations
Treasury and Specialised Finance International Operations • Further expansion and development of international capabilities • UK and Europe: > Acquired European Capital team > Good progress made by structured finance in its first year of operation > Financial products and resource teams were establi
Slide 44: Private Client Activities
Private Client Activities • Strong results • Particularly strong performances from private banking in the UK and SA • Global lending book grew 39.1% to R28.1bn
Slide 45: Private Client Activities: Salient financial features
Private Client Activities Includes: Private Banking, Private Client Stockbroking and Portfolio Management Salient financial features 31 March 31 March % 2002 2001 Change Net operating income (R’mn) 2 048 1 585 29.2 Operating expenses (R’mn) 1 479 1 185 24.8 Headline NIBT (R’mn) 569 400 42.3 Cost to
Slide 46: Private Client Activities
Private Client Activities • Total headline NIBT for Private Client Activities > Private Banking increased from R200mn to R352mn > Private Client Stockbroking and Portfolio Management increased from R200mn to R217mn
Slide 47: Private Client Activities: Private Banking
Private Client Activities Private Banking • South Africa: > Solid performance driven by strong growth in advances, assets under administration and non-interest income > Loan portfolio grew 36% to R13.7bn > Product innovation and differentiation continued to be a core focus
Slide 48: Private Banking contd.
Private Client Activities Private Banking contd. • UK and Europe: > Strong performance supported by healthy growth in advances > Commendable performance from the trust and fiduciary businesses > Loan portfolio grew 28% to £797mn • Australia: > Private Banking still in its development phase and has b
Slide 49: Private Client Stockbroking
Private Client Activities Private Client Stockbroking • South Africa: > Ongoing consolidation in the industry > Acquired Merrill Lynch South Africa’s private client operation in Cape Town • UK: > Reduction in income partially offset by high level of net new FUM: £505mn > Supported by the two teams a
Slide 50: Private Client Stockbroking contd.
Private Client Activities Private Client Stockbroking contd. • USA: > Particularly impacted by poor market conditions > In March 2002, corporate management decided to exit the retail brokerage business with the current management of the business identified as the primary buyers
Slide 51: Asset Management
Asset Management • Sound performance supported by Fedsure acquisition • Strong performance in SA • Effectively integrated Fedsure assets and retail business • Grew the offshore funds • Strong net sales in UK retail • Continued success in UK equities • Strong global fixed income performance
Slide 52: Asset Management: Salient financial features
Asset Management Includes: Institutional, Retail and Investment Trust Asset Management and Linked Product Provider Business Salient financial features 31 March 31 March % 2002 2001 Change Net operating income (R’mn) 1 097 881 24.5 Operating expenses (R’mn) 817 653 25.1 Headline NIBT (R’mn) 280 228 2
Slide 53: Asset Management: South Africa top 3 performer
Asset Management South Africa - Top 3 performer over last 5 years1 10 10 # times 9 8 in top 3 8 over 10 7 5-year 6 5 periods 5 4 ending 4 Dec and 3 2 June 2 1 annually 1 0 on n* l y M c ua et lib am ra E te io A pl O ut G an s at B nl B m ve M M n on St Sa Te lla R In ld or A O in C 1 Measured for t
Slide 54: Asset Management: South Africa retail performance
Asset Management South Africa - retail performance • Improvement in SA investment performance • Percentile ranking of in-house managed funds on avg., top quartile 80% 70% 60% Including Multi- 50% manager 40% 30% Jan-01 Mar-01 May-01 Jul-01 Sep-01 Nov-01 Jan-02 Mar-02
Slide 55: Asset Management: FUM
Asset Management • Total FUM increased from R172bn to R263bn > Inclusion of Fedsure assets > Depreciation of the Rand > Reasonable inflows
Slide 56: Assurance Activities: Investec Employee Benefits
Assurance Activities Investec Employee Benefits • Completed restructuring of policyholder portfolios • Significant cost reductions • Improvement in compliance
Slide 57: Assurance Activities: Investec Employee Benefits
Assurance Activities Investec Employee Benefits March May 2002 2001 Embedded value (R’mn) 2 951 2 478 Net asset value (R’mn) 2 523 2 308 Qualifying capital (net of inadmissable assets) (R’mn) 2 368 2 271 CAR cover 2.73 1.85 Operational income (R’mn) 220 -
Slide 58: Other Activities
Other Activities 31 March 31 March % R’mn 2002 2001 Change Net Income - International Trade Finance 34 65 (47.7) Net Income - Property Worldwide 261 81 222.2 Net Income - USA Clearing and Execution 44 58 (24.1) Traded Endowments 46 - - Net Return on Surplus Capital 317 354 (10.5) Central Costs (502)
Slide 59: Other Activities: Property Group
Other Activities • Investec Property Group > Significant enhancement to Property Group took place during the period with: – the acquisition of Fedsure; – the merger of Growthpoint with the Mines Pension Fund properties; and – the management contract of Melrose Arch > Benefited from the low long term
Slide 60: Other Activities: US Clearing and Execution
Other Activities • US Clearing and Execution Activities: > Highly dependent on transactional activity > Negatively impacted by market conditions > Partially offset by acquisition of the clearing arm of Herzog Heine Geduld
Slide 61: Group Performance
Group Performance @ Investec
Slide 62: Salient financial features: Balance Sheet
Salient financial features Balance Sheet 31 March 31 March % R’mn 2002 2001 Change Shareholders’ funds 13 230 9 028 46.5 Total capital resources 16 016 11 240 42.5 Total assets 303 841 194 732 56.0 Advances 54 413 38 062 43.0 Third party FUM 455 017 319 897 42.2
Slide 63: Salient financial features: Income Statement
Salient financial features Income Statement 31 March 31 March % R’mn 2002 2001 Change Net interest income 2 183 1 878 16.3 Provision for bad & 202 198 2.0 doubtful debts Other income 5 273 3 621 45.6 Operating expenses 4 885 3 476 40.5 Headline NIBT 2 369 1 825 29.8 Headline earnings 1 684 1 314 28.
Slide 64: Growth in net tangible asset value per share
Salient financial features Growth in net tangible asset value per share 70 60 10 Year CAGR: 20.0% 50 Rands 40 30 20 10 0 1992 1994 1996 1998 2000 2002
Slide 65: Growth in total assets
Salient financial features Growth in total assets 350 300 250 10 Year CAGR: 54.2% R’bn 200 150 100 50 0 1992 1994 1996 1998 2000 2002
Slide 66: Growth in assets under administration
Salient financial features Growth in assets under administration 800 700 600 10 Year CAGR: 55.8% 500 R’bn 400 300 200 100 0 1992 1994 1996 1998 2000 2002
Slide 67: Operating income by type
Salient financial features Operating income by type Commission & fees - recurring 10.1% 3.1% (12.2% ) 41.2% Margin income (44.1% ) Principal transactions 18.3% & trading income (12.0% ) Commission & fees - non-recurring Income from long term assurance business 27.3% Year ended 31 March 2002 (31.7% )
Slide 68: Annuity income as a % of total income
Salient financial features Annuity income as a % of total income 90 80 83.2 81.1 70 77.4 76.1 73 70.7 60 69 71.8 60 % 50 40 30 20 10 0 1994 1995 1996 1997 1998 1999 2000 2001 2002
Slide 69: Organic growth in income
Salient financial features Organic growth in income 22.2% 7000 6000 19.2% 5000 29.7% R’mn 4000 3000 37.3% 2000 32.2% 34.7% 1000 41.3% 30.7% 18.8% 0 1994 1996 1998 2000 2002
Slide 70: Organic growth in expenses
Salient financial features Organic growth in expenses 25.5% 5000 4500 4000 20.4% 3500 3000 R’mn 27.9% 2500 2000 1500 35.6% 1000 20.1% 28.1% 500 15.3%16.6%38.2% 0 1994 1996 1998 2000 2002
Slide 71: Organic growth in net income
Salient financial features Organic growth in net income 2500 16.0% 2000 16.9% 33.0% 1500 R’mn 54.9% 1000 71.3% 46.2% 500 58.9% 60% 57.6% 0 1994 1996 1998 2000 2002
Slide 72: Additional information
Additional information • Fedsure acquisition • Foreign currency translation gains from integrated operations • Employee share incentive schemes
Slide 73: Operational Issues
Operational Issues
Slide 74: Risk Management
Risk Management • Bradley Tapnack was appointed as the Global Head of Corporate Governance and Compliance • Introduced a Global Risk Committee that supervises global risk as a sub-committee of the Board • Developed Operational Risk Management as a separate discipline within the Group risk management
Slide 75: Adequacy of provisions: Bad debt charge
Adequacy of provisions Bad debt charge as % of average advances 1.2 1 1.13 0.8 0.8 0.75 % 0.6 0.71 0.58 0.54 0.53 0.4 0.43 0.2 0 1995 1996 1997 1998 1999 2000 2001 2002
Slide 76: Adequacy of provisions: Gross NPLs
Adequacy of provisions Gross NPLs as a % of total loans and advances 3.5 3 3.0 2.5 2.6 2.7 2 2.1 % 2.0 1.5 1.8 1.65 1 1.11 0.5 0 1995 1996 1997 1998 1999 2000 2001 2002
Slide 77: Capital resources
Capital resources • Total capital resources increased by 42.5% to R16 016mn, attributable to: > Net increase of R2 755mn in shares and debenture issues following the Fedsure acquisition and share buy-back > Foreign currency translation reserve increased R1.6bn > Issue of additional R300mn subordinat
Slide 78: Capital adequacy
Capital adequacy 31 March 31 March R’mn 2002 2001 Tier 1 12 109 7 378 Tier 2 - Permanent 2 915 2 676 Tier 2 - Redeemable 1 955 1 781 Total 16 979 11 835 Capital Reserved for Non-Banking (3 017) (1 516) Activities Impairments (5 544) (2 955) Capital available for Banking Activities 8 418 7 364 Risk W
Slide 79: Deploying capital productively
Deploying capital productively 31 March 31 March 2002 2001 Return on Equity (%) 27.6 25.8 Return on Investment (%) 17.2 17.1 Return on RWA (%) 3.0 3.0
Slide 80: Cost Control
Cost Control • Operating expenses increased 40.5%: > Acquisitions included for the full period - 15% > Devaluation of the Rand - 18.3% > Underlying organic growth - 7.2% • Cost to income ratio increased to 65.5% from 63.2%: > Reflecting reduced revenues generated from the UK Investment Banking activ
Slide 81: Cost Control: Expenses by type
Cost Control Expenses by type 7.1% 4.4% (5.8% ) (7.1% ) Personnel 55.8% Business (53.5% ) 12.0% Equipment (13.7% ) Premises Marketing 20.7% (19.9% ) Year ended 31 March 2002 (31 March 2001)
Slide 82: Cost Control: Cost to income by geography
Cost Control Cost to income by geography 98.2 2001 100 90 2002 84.1 80 72.7 65.5 70 66.1 63.2 59.3 61.4 59.7 % 60 49.6 50 40 30 20 10 0 SA & UK & USA Israel Group Other Europe
Slide 83: People
People 6000 5529 5000 4836 4441 4000 3721 3000 2706 2238 2000 1659 1345 1067 1000 806 826 0 1992 1994 1996 1998 2000 2002
Slide 84: Headline earnings per employee
Headline earnings per employee R’000 400 363 360 339 307 320 320 280 236 240 216 188.921 200 160 139 108 120 80 40 0 1994 1996 1998 2000 2002
Slide 85: Systems and Infrastructure
Systems and Infrastructure • Focused on aligning the IT Organisation with the Group Matrix • Key issue is to cut down on diversity and duplication • Global IT Management Committee in place to address these issues
Slide 86: Corporate Citizenship
Corporate Citizenship • Established a separate Social Investment Division • Concentrate on entrepreneurial projects that are sustainable and empower people • Entrepreneurial impact: > Business Place > Rural schools initiative > CIDA City Campus > The Cradle Project
Slide 87: Looking Forward
Looking Forward 2 Investec
Slide 88: Looking Forward
Looking Forward Investec will continue to pursue its strategy to be one of the world’s leading specialist banking groups through an emphasis on: > Reinforcing a specialised and focused approach > Pursuing growth opportunities > Leveraging group skills across product and geography > Perpetuation of I
Slide 89: Investec Group Ltd Analyst Presentation 2002
Investec Group Ltd Analyst Presentation 2002