Investec Plc · LSE:INVP
Investec — IMF Breakfast 2017
30 slides from Investec's conference presentation, October 2017
Slide 1: Investec Annual IMF Breakfast 2017
8 Investec Investec Annual IMF Breakfast 2017
Slide 2: An overview of Investec
§ fg 8 Investec : An overview of Investec
Slide 3: About Investec
About Investec Summary “We strive to be a DISTINCTIVE SPECIALIST BANK AND ASSET Established in 1974 Mission MANAGER driven by commitment to our core philosophies and values” Today, efficient integrated international business platform employing over 9 700 people Three principal regions: Purpose
Slide 4: Three distinct businesses focused on well defined target clients
Three distinct businesses focused on well defined target clients Operating profit before tax* Corporate / Institutional / Government ASSET MANAGEMENT 100% (Operating completely independently) • Investment management services to 90% external clients 80% 70% SPECIALIST BANKING • Advisory 60% • Transac
Slide 5: Key earnings drivers
Key earnings drivers £’bn 175 150 125 Asset Management Third party 100 assets under Wealth & Investment management^ 75 50 Other 25 - Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 £’bn 30 120% Customer accounts 25 100% Customer accounts 20 80% (deposits) and Core loans and advances to 15 60% customers lo
Slide 6: Stable capital and low leverage
Stable capital and low leverage For the six months to 30 September 2017 for both Investec plc and Investec Limited: Capital ratios are expected to be within the group’s target total capital adequacy range The common equity tier 1 ratio is expected to remain slightly below the group’s target of 1
Slide 7: Resulting in a balanced business model
Resulting in a balanced business model Balanced between capital light and capital intensive activities £’mn Third party assets and 1 400 Net interest, investment advisory 1 200 and trading income £1,284mn 1 000 £1,002mn 800 600 Net annuity fees and 400 commissions of £965mn 200 Net interest income o
Slide 8: Investec DLC: Salient features
Investec DLC: Salient features POUND EARNINGS Mar-17 Mar-16 % change Operating profit* before tax (£’mn) 599 505 18.5% Core loans to customer deposits 78.0% 73.6% 6.0% Credit loss ratio 0.54% 0.62% 13.0% Adjusted EPS**^ (pence) 48.3 41.3 16.9% Total shareholders’ equity (£’mn) 4 809 3 859 24.6% Cost
Slide 9: Update given to the market on September 2017
Update given to the market on 15 September 2017 The geopolitical environment has been challenging with much uncertainty prevailing in our two core geographies. The uncertainties arising from the complexity of Brexit continue, while the South African political environment remains unsteady in the ru
Slide 10: An overview of the South African (SA) economy
An overview of the South African (SA) economy
Slide 11: Overview of SA economy
Overview of SA economy Snapshot of SA Contribution to SA’s GDP Rating agency and market views Population: 55.7mn Real GDP: US$300.0bn (R3,071.7bn) Long-term Foreign Long-term Foreign Long-term Foreign Contribution to SA’s GDP Currency Debt Currency Debt Currency Debt Agricultures, Baa3 BB+ BB+ f
Slide 12: Overview of SA economy: Low economic growth
Overview of SA economy Low economic growth The agricultural sector has benefited from favourable weather conditions in maize producing regions of the country compared to last year But perceived heightened political and policy uncertainty has weighed on consumer and business confidence, entrenchi
Slide 13: Inflation has moderated and declined to within the target range
Overview of SA economy Inflation has moderated and declined to within the target range in Q2 2017 A key influencing factor has been food price disinflation, as favourable weather conditions have improved the maize supply prospects Weak domestic demand and the lagged effects of past rand apprecia
Slide 14: Moderate decrease in interest rates
Overview of SA economy Moderate decrease in interest rates After raising interest rates by a cumulative 200bp since 2014, the SA Reserve Bank reduced rates in July 2017 by 25bp The SA Reserve Bank is proceeding with caution owing to upside risks (that include the rand) to the inflation outlook
Slide 15: Rand exchange rate has experienced a period of appreciation
Overview of SA economy Rand exchange rate has experienced a period of appreciation Owing to portfolio inflows to emerging markets amid the hunt for yield The Rand remains vulnerable to future changes in the US monetary policy stance, domestic political developments as well as a risk of a possibl
Slide 16: Narrowing current account deficit largely due to a stronger trade position
Overview of SA economy Narrowing current account deficit largely due to a stronger trade position Favourable trade dynamics have aided the narrowing of the current account deficit SA’s export performance has strengthened in line with the lift in commodity prices and global demand. Concurrently,
Slide 17: JSE has outperformed emerging market peers
Overview of SA economy JSE has outperformed emerging market peers SA equities has outperformed emerging markets consistently since financial crisis JSE relative to MSCI Emerging Markets Index 1400 1200 1000 Rebased to 100 800 600 400 200 0 JSE (US$) MSCI Emerging Markets JSE (Rands) Dow Jones Sour
Slide 18: A number of shortcomings may limit SA competitiveness going forward
Challenges A number of shortcomings may limit SA competitiveness going forward SA ranked 61st out of 137 countries in the World Economic Forum’s 2017/18 Global Competitiveness Index (2016/17: 47th) SA slipped down 14 places down, primarily due to the low economic growth environment, high unemplo
Slide 19: Political risks remain, impacting business and consumer confidence
Challenges Political risks remain, impacting business and consumer confidence Lower inflation‚ lower interest rates and higher real wage income growth are expected to provide some support for consumption RMB business confidence index and FNB/BER consumer confidence index* 100 40 Index Index 90 30
Slide 20: Rating downgrades impacting the cost of money and eroding confidence
Challenges Rating downgrades impacting the cost of money and eroding confidence There is still the possibility of a rating downgrade from Moody’s and S&P later this year S&P Local currency long term rating S&P Foreign currency long term rating AAA AAA AA+ AA+ AA AA Investment Grade AA- AA- Investm
Slide 21: Unemployment a key structural challenge
Challenges Unemployment a key structural challenge 16 million jobs are spread across multiple industries out of a labour force of 22 million The public sector, previously the main source of employment growth in the economy, is likely to continue to shed jobs as fiscal constraints intensify Break
Slide 22: Fiscal sustainability threatened by lack of reform of state owned enterprises
Challenges Fiscal sustainability threatened by lack of reform of state owned enterprises Government debt and contingent liabilities have more than doubled since the financial crisis Reform of SA’s state owned enterprises is needed along with strong leadership and governance “Operational ineffici
Slide 23: SA growth forecasts have fallen sharply
Challenges SA growth forecasts have fallen sharply SA potential growth has fallen from 3.5% in 2013 to 1-1.5% currently Global fundamentals have offered some relief but SA constraints remain a stumbling block SA Reserve Bank GDP forecasts from the MPC Statements 2015 2016 2017 2018 2019 4.0 SA i
Slide 24: Defending monetary policy and the independence of the central bank
Building on our strengths Defending monetary policy and the independence of the central bank “The ‘tragic rise of poverty’ had coincided with rising inflation and weakening growth and the case for the existing framework is very strong… inflation targeting makes sense for South Africa as it helps to
Slide 25: Judicial independence
Building on our strengths Judicial independence The Judiciary remains independent, maintaining the separation of powers doctrine from the Executive and Legislative authorities. Chief Justice Mogoeng Constitutional Court “Let us avoid anything that has the ability to compromise the independence of
Slide 26: Business has become more proactive
Building on our strengths Business has become more proactive Economies only thrive with a strong private sector We need to create confidence to drive private investment and growth Private sector has created 3.5mn of the total 4.0mn that employment increased between 1994 – 2016* CEO Initiative
Slide 27: All members of society coming together
Building on our strengths All members of society coming together Organisations, civil society groups, business leaders, prominent individuals, South African citizens coming together to hold government leaders accountable to the Constitution and the values they have pledged to uphold as representat
Slide 28: We need to take advantage of favourable global conditions
Opportunities We need to take advantage of favourable global conditions We need to move our economy away from the heavy reliance on primary production and drive the industrialization programme Create export processing zones by providing tax and export incentives and limiting red tape which will
Slide 29: The outcome of the ANC National Conference in December is critical
Closing remarks The outcome of the ANC National Conference in December is critical The conference elects new leadership and the ideological direction in which the ANC will proceed It informs the socio-economic scenarios that will follow and determines the future of SA for the next 10-15 years 30
Slide 30: Conclusion
Conclusion South Africa urgently needs a new social pact that transcends ideologies and backgrounds. One that rebuilds trust and reframes the challenges facing our country within the lens of shared values. It needs to unite under a common goal and tackle the problem with innovative thinking, and