Investec plc · LSE:INVP
Investec — FY2011 Earnings Presentation
44 slides from Investec's earnings presentation, May 19, 2011
Slide 1: Results presentation for the year ended 31 March 2011
Results p presentation For the year ended 31 I 03 I 2011
Slide 2: The year in review
The year in review Out of the Ordinary® 6 Investec Specialist Bank and Asset Manager 2
Slide 3: Mixed operating environment
Mixed operating environment Equity markets Exchange rates 120 12.0 +12 0% +12.0% 11 5 11.5 110 Rand/£ +5.4% 11.0 ed to 100 100 +0.7% 10.5 Rebase 90 10.0 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 80 1.24 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 1 20 1.20 JSE FTSE ASX Euro/£ 1.16 Intere
Slide 4: Focused on reshaping the business
Focused on reshaping the business Strong operational performance from 5 of 6 core divisions 2011 with overall results constrained by the slow recovery of non- performing loans ► Positioned the group as a specialist bank and asset manager ► Focused on realigning the business model by building our non
Slide 5: Realigning the business model
Realigning the business model P iti Positioned d the th group as a specialist i li t bank b k and d assett manager Capital light and fiduciary ►Build third party funds under management ►Clear differentiation of Asset markets and products Management Principal Wealth Management Transactions Specialist
Slide 6: Good progress in building capital light revenues
Good progress in building capital light revenues Third party assets and Proprietary risk capital 1,400 advisory £1 150 mn £805 mn 1,200 1,000 Net interest (35% of (41% Net fees and (£'mn) 800 income of total) of commissions of 600 £681 mn total) £788 mn 400 Other 200 00 Principal ((24% of of - trans
Slide 7: Strong contribution from asset management and wealth management businesses
Resulting in strong contribution from asset management and wealth management businesses Contribution to group earnings 31 Mar-11 Contribution to group earnings 31 Mar-10 Asset and wealth management Asset and wealth businesses management 25.3% businesses 38.6% Specialist banking b i businesses Specia
Slide 8: Specialist banking impacted by increase in impairments and defaults
Specialist banking impacted by increase in impairments and defaults ► The uncertain pace of economic recovery has Defaults and core loans slowed the improvement in the level of non- 8% performing loans and defaults have continued 20 to increase 7% 18.8 ► Credit loss charge increased from 1 1.16% 16%
Slide 9: Moving through the impairment cycle
Moving through the impairment cycle ► We believe W b li we are moving i th through h th the cycle l and d expectt tto see a reduction d ti iin impairments during the 2012 financial year Impairments 350 300 250 Private Banking £'mn n 200 150 Capital Markets 100 Other 50 0 2007 2008 2009 2010 2011 9
Slide 10: Delivered a stable group performance
Delivered a stable group performance Mar 11 Mar-11 Mar 10 Mar-10 % Change Operating profit* before tax (£’000) 434 406 432 258 0.5% Operating profit* before tax and impairment losses 752 636 718 839 4.7% on loans and advances (£’000) Attributable earnings* earnings (£ (£’000) 000) 327 897 309 710 5
Slide 11: Supported by core earnings drivers
Supported by core earnings drivers Third party assets under management Customer accounts (deposits) and loans 100 Up 20% 30 88.9 Up 11% 25 24.4 80 20 18.8 60 £'bn £’bn 15 £ £ 40 10 20 5 0 0 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 Other Wealth and Investment* Asset Manag
Slide 12: And a sound capital and liquidity position
And a sound capital and liquidity position Capital position Cash and near cash balances Capital adequacy ratio 11,000 Investec Bank 17.6% (Australia) Limited 19.2% 16.8% Investec plc 15.9% 10,000 Average 15.9% Investec Limited 15.6% 0% 5% 10% 15% 20% 25% £'mn 9,000 31-Mar-11 31-Mar-10 Tier 1 ratio I
Slide 13: Financial Targets
Financial Targets ROE and EPS targets g difficult to achieve in this environment X Mar-11 (Target: > 20%) Mar-11 mes) end 11.2% 2.5x 1.7 – 3.5 tim coveer Divide ROE E (Target: Mar-10 Mar-10 13.5% 2.8x X Mar-11 Adjusted** EPS Mar-11 ((Target: 14--17% RPI) Ltd: 15.9% acy ((4.2%)) al growtth 10%> U
Slide 14: Operational review
Operational review Out of the Ordinary® 6 Investec Specialist Bank and Asset Manager 14
Slide 15: Divisional performance
Divisional performance Operating profit* by business for 31 Mar-11 Asset Management g 52 6% 52.6% Wealth and Investment 56.2% Property Activities 42.5% Private Banking >100% Investment Banking 62.1% Capital Markets 35.1% •Before goodwill, acquired intangibles and before taxation but after non-contro
Slide 16: Asset Management
Asset Management (29.3% of group) Overview of p performance % Mar-11 Mar-10 change ► Good investment performance (always the Operating profit* 127.3 83.4 52.6% priority) (£’mn) Assets under 58.8 46.4 26.7% ► Assets under management increased 27% management (£’bn) to £58.8bn with strong net inflows o
Slide 17: Asset Management Outlook
Asset Management Outlook ► Our long term strategy remains unchanged and we are committed to managing our clients’ money to the highest standard possible ► We now have a globalised client footprint with seven distinct and scaleable investment capabilities ► Business and earnings momentum is positive
Slide 18: Wealth and Investment
Wealth and Investment (9.3% of group) Overview of p performance % Mar-11 Mar-10 change UK Operating profit* (£’mn) 40.4 25.9 56.2% ► Benefited from higher funds under management and the acquisition of Funds under 29.4 25.8 14.0% Rensburg Sheppards plc resulting in the management^^(£’bn) consolidatio
Slide 19: Wealth and Investment Outlook
Wealth and Investment Outlook UK ► Performance dependent on level of equity markets ► To achieve net organic growth of funds under management of 5% per annum ► Rensburg Sheppards to adopt Investec brand from June 2011 South Africa ► While equity markets have improved, the economic outlook remains un
Slide 20: Property Activities
Property Activities (11.0% of group) (7.2% of group) Overview of p performance % (£ ) Mar-11 Mar-10 change ► Performance supported by continued Operating profit* (mn) 47.7 33.5 42.5% enhancement of the investment property portfolio tf li iin South S th Africa Af i ► Post year end, listed the Investe
Slide 21: Property Activities Outlook
Property Activities Outlook South Africa ► The business has a substantial pipeline of development and re-development projects ► Good reception to the launch of the new property fund ► Building funds under management Australia ► With property fundamentals stabilising, we are well positioned in curren
Slide 22: Private Banking
Private Banking (0% of group) Overview of p performance % (£ ) Mar-11 Mar-10 change ► Managed to maintain revenues during a very Operating income (mn) 399.6 390.5 2.3% difficult period Operating profit* (mn) (91.4) 37.1 (>100%) ► Profitability down as a result of Loan book (bn) 13.3 12.9 3.0% ► Low
Slide 23: Private Banking Outlook
Private Banking Outlook UK ► We have taken a number of steps to strengthen the business ► Activity levels are slowly being restored and we are starting to gain momentum as private clients get back on their feet ► Significant initiatives to underpin growth, e.g. plans to launch transactional banking
Slide 24: Private Banking Strategy
Private Banking Strategy gy ► We recognise that we got caught in the final phases of the bull market and have had to rethink our strategy for this business ► The entrepreneurial and high net worth clients who took on too much leverage have been impacted by the financial crisis ► As a consequence we
Slide 25: Investment Banking
Investment Banking (15.5% of group) (15.5% of group total) Overview of p performance % (£) Mar-11 Mar-10 change ► Good result overall with mixed Operating profit* pre performance across geographies and consolidated investments 86.7 62.5 38.7% b i business activity ti it (mn) Investments required to
Slide 26: Investment Banking Outlook
Investment Banking Outlook ► Outlook predominantly driven by equity markets ► In South Africa, activity levels are rising and there is a fair amount of corporate activity ► The brand is now well established in the UK and we are ready to take advantage of opportunities t iti ffrom increased i d secon
Slide 27: Capital Markets
Capital Markets (55.7% of group) Overview of p performance % (£) Mar-11 Mar-10 change ► The division was able to produce a strong Operating profit* (mn) 242.0 179.1 35.1% performance as a result of: ► Good levels of activity across the Loan book (bn) 4.8 4.5 7.2% advisory and structuring business ►
Slide 28: Capital Markets Outlook
Capital Markets Outlook ► SA ► Clean portfolio ready to benefit from a recovery in the SA economy ► UK ► Continue to build a balanced business model where we can benefit from both primary and secondary market activity ► Well positioned to grow significantly from current levels as market conditions i
Slide 29: Group Services and Other Activities
Group Services and Other Activities Overview Operating profit* profit % ► Central Funding impacted by the (£) Mar-11 Mar-10 change following: International Trade 91 9.1 72 7.2 26 4% 26.4% ► Lower levels of interest rates Finance (mn) ► Weaker performance from equity investments held within the South
Slide 30: General
General ► Operational effective tax rate* down from 20.6% to 15.5% due to the resolution of matters for which a provision was previously held ► Weighted shares from 686.3mn to 759.8mn ► Goodwill impairments ► Goodwill impairment of £6.9mn ► Largely relates to Asset Management businesses acquired in
Slide 31: Operational efficiency
Operational efficiency ► Cost to income ratio was 61 61.7% 7% (below our internal target of <65%) Breakdown of costs Efficiency ratio £'mn Mar-11 Mar-10 Difference 2,200 Operating income* Operating costs 1,213.3 957.2 256.1 2,000 CAGR: 13.6% Less depreciation on operating leased assets (16 4) (16.4)
Slide 32: Realigning the specialist bank
R li i the Realigning h specialist i li bank 32
Slide 33: Strategic focus remains the same
Strategic focus remains the same To facilitate the Creation of Wealth and the Management M t of Wealth 33
Slide 34: Positioned the group as a specialist bank and asset manager
Positioned the group as a specialist bank and asset manager To its predominantly Provides investment management global institutional client services i base Asset anager ma Provides investment To: management services and A P i t clients Private li t independent financial planning advice Charities Tru
Slide 35: Globalised the asset management business
Globalised the asset management business Capabilities and organisational structure 35
Slide 36: Globalising the wealth management businesses
Globalising the wealth management businesses Wealth and Investment UK, Europe and Other South Africa Rensburg Sheppards ► During the year, we merged the Private Bank’s wealth management business with Investec ► Acquisition effective from 25 June 2010 Private Client Securities Private Bank Wealth Man
Slide 37: The focus now is on creating a single Specialist Bank
The focus now is on … … Creating C ti a single i l Specialist S i li t Bank B k Purpose ► To create a single bank mindset and structure with client need and demand at the core of our offering ► To be more effective for our clients How ► By creating a more appropriate business structure in order to m
Slide 38: Outlook
Outlook Out of the Ordinary® 6 Investec Specialist Bank and Asset Manager 38
Slide 39: Capture opportunities in Africa
Capture opportunities in Africa … 39
Slide 40: Continue to focus on clients and the brand
Continue to focus on … clients and the brand 40
Slide 41: Continue to focus on remaining competitive
Continue to focus on … remaining competitive
Slide 42: Outlook
Outlook ► We W are seeing i good d momentum t in i th the b businesses i A Asset t Management M t G Growing i Wealth and Investment Growing Property Activities Stable but down from high base Private Banking Recovering Investment Banking Growing Capital Markets Growing 42
Slide 43: Well positioned to benefit from future growth
Well positioned to benefit from future growth ►Looking g ahead,, regulatory g y uncertainties remain and we will continue to maintain excess levels of liquidity and capital until there is further clarity. However, we expect earnings to benefit from continued momentum in our businesses and the normal
Slide 44: Results presentation for the year ended 31 March 2011
Results p presentation For the year ended 31 I 03 I 2011