Investec Plc · LSE:INVP
Investec — FY2010 Earnings Presentation
21 slides from Investec's earnings presentation, May 2010
Slide 1: Results presentation for the year ended 31 March 2010
Results presentation For the year ended 31 I 03 I 2010 Snapshot of the year 2
Slide 2: Improved operating environment
Improved operating environment Strong rise in equity markets Stable interest rate environment Equity indices Interest rates 160 10 8 140 6 100 120 Rebased to 1 +/-42% 4 % 100 2 80 0 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 JSE FTSE ASX JIBAR-3
Slide 3: Strengthened our capital position and enhanced liquidity
Strengthened our capital position … Capital adequacy and Tier 1 ratios Capital adequacy 30 3500 Basel I Basel II Capital Tier 1 31 Mar-10 adequacy 3000 ratio 25 ratio 2500 Investec Limited 15.6% 12.1% 20 2000 Investec Bank Limited 15.5% 11.7% 15 1500 (£'mn) Investec plc 15.9% 11.3% (%) 10 1000 Inves
Slide 4: Building customer deposits; growth in assets under management
… through building customer deposits Customer accounts (deposits) • Focused effort to diversify our deposit base 25 Up 51`% 21.9 • Additional customer deposits raised across 20 th group over the the th year was £7.3bn £7 3b 15 14.6 12.1 £‘bn 10.7 10 8.7 6.5 5 0 2005 2006 2007 2008 2009 2010 7 Signif
Slide 5: Impairments and defaults up but peaking; stable performance
Impairments and defaults up but peaking Defaults and core loans • The slower pace of economic recovery has 3.98% 20 caused a delay in the improvement of non- 4% 17.9 performing loans 3% 15 • We have, however, seen an improvement towards the end of the financial year 2% 10 £'b n 1.16% 1% 5 0% 0 Mar-0
Slide 6: Financial targets; Business model review
Financial targets … ROE and EPS targets difficult to achieve in this environment ROE Dividend cover (Target: > 20%) (Target: 1.7 – 3.5 times) Mar-10 Mar-09 Mar-10 Mar-09 13 5% 13.5% 14 8% 14.8% 2 8x 2.8x 3 3x 3.3x Adjusted* EPS growth Capital adequacy (Target: 10%> UK RPI) (Target : 14-17%)
Slide 7: Strategic focus to build recurring revenue base
Strategic focus to build recurring revenue base Total operating income* 1800 1,657mn 1600 Operating income from associates 1400 1200 Principal transactions 1000 £'mn n 800 600 Net fees and commissions income 400 200 Net interest income 0 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Recurring income as a % of
Slide 8: Evolving business model
Evolving business model • Broadly defined, we operate in two distinct spaces, specialist banking and asset management. • We live in a world where the market requires a high degree of transparency and the appropriate management of conflicts of interest. • Within specialist banking, we offer a broad r
Slide 9: Evolving business model; Operational review
Evolving business model Capital intensive C it l light Capital li ht and d fiduciary fid i and proprietary Asset Management Specialist Banking Asset Wealth Principal Advisory Market making Management Management transactions Structured Lending transactions Transactional Specialist funds banking • Bui
Slide 10: Divisional performance; Asset Management
Divisional performance Operating profit* by business for 31 Mar-10 Group Services S i & Other 7.3% Asset Management 19.3% Private Wealth^ Capital £432mn 6.0% Markets Property 41.4% Activities, 7 7% 7.7% Private Banking, Investment 8.6% Banking 9 6% 9.6% •Before goodwill, non-operating items, taxatio
Slide 11: Asset Management outlook; Private Wealth
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 wide distribution footprint and seven distinct and scaleable investment capabilities • Business and earnings momentum is positive •
Slide 12: Private Wealth outlook; Property Activities
Private Wealth (formerly Private Client Portfolio Management & Stockbroking) Outlook • On 30 March 2010, we reached agreement on the terms of a recommended all share offer in which we will acquire the entire issued and to be issued ordinary share capital of Rensburg Sh Sheppardsd plcl nott already l
Slide 13: Private Banking
Private Banking (8.6% of group) Overview of p performance % (£ ) M 10 Mar-10 M 09 change Mar-09 h • Lower operating profit as a result of; Operating income (mn) 390.5 380.9 2.5% o Sharp decline in activity levels and credit extension O Operating ti profit* fit* (mn) ( ) 37 1 37.1 80 5 (54.0%) 80.5 (
Slide 14: Investment Banking
Investment Banking (9.6% of group) (15.5% of group total) Overview of p performance % (£) M 10 Mar-09 Mar-10 M 09 change h • Good result overall with mixed Operating profit pre consolidated investments 62.5 46.5 34.4% performance across geographies and ((mn)) b i business activity ti it Agency and A
Slide 15: Capital Markets
Capital Markets (41.4% of group) Overview of p performance % (£) Mar-10 Mar-09 change • The division was able to produce a solid Operating profit* (mn) 179.2 141.4 26.7% performance benefiting from: o Reasonable but reduced levels of Loan book (bn) 4.5 4.8 (6.1%) activity across the advisory busines
Slide 16: Group Services and Other Activities; General
Group Services and Other Activities (7.3% of group) Overview Operating profit* profit % • Central Funding performed well benefiting (£) Mar-10 Mar-09 change from: International Trade 7 17 7.17 7 22 7.22 (0 6%) (0.6%) o The purchase of the group’s debt in the Finance (mn) UK o Improved return on inve
Slide 17: Strategy and outlook: Building our franchise
Strategy and outlook 33 Building our franchise … Benefit from a balanced p portfolio of businesses % contribution to operating profit* (E l di G (Excluding Group S Services i and d Oth Other A Activities) ti iti ) 100% 90% Capital Markets 80% Investment Banking 70% 60% Private Banking 50% 40% Proper
Slide 18: Building our franchise: align business model, operational efficiency
Building our franchise … Continually y align g the business model 1,200 1,000 800 (£''mn) 600 400 200 - 2002 2003 2004 2005 2006 2007 2008 2009 2010 Third party assets and advisory Net interest income and principal transactions Net interest income and principal transactions after impairments Third p
Slide 19: Building our franchise: clients, brand and revenue drivers
Building our franchise … Focus on clients and building g the brand • Strengthen existing client relationships • Provide distinctive products and an increased breadth of services to clients 37 Building our franchise … Focus on our revenue drivers • Generate high quality income through diversified rev
Slide 20: Maintain quality of balance sheet; Capture the opportunities
Building our franchise … Maintain q quality y of balance sheet • Continue to diversify funding sources and reduce reliance on wholesale funding • Manage risk and maintain credit quality Gearing ratios Core loans to capital ratio 14 8.0 13.8 6.2 5.8 5.4 60 6.0 (times) 13.5 4.0 13 12.9 2.0 0.0 12 5 12
Slide 21: Outlook
Outlook • We have built our capital, liquidity and third party assets under management over the period under review. • The foundation is now in place for further growth both in our non capital intensive asset management businesses as well as our core specialist banking businesses. businesses • Altho