Investec Plc · LSE:INVP
Investec — FY2024 Earnings Presentation
64 slides from Investec's earnings presentation, May 23, 2024
Slide 1: Results presentation for the year ended 31 March 2024
Results presentation for the Month Yearyear ended 31 March 2024
Slide 2: Agenda
Agenda 01 Overview 02 03 04 05 Financial review Geographic review Geographic review Closing and Q&A Fani Titi Nishlan Samujh UK & Other Southern Africa Fani Titi Group Chief Group Finance Ruth Leas Cumesh Moodliar Group Chief Executive Director Executive Investec Bank plc CEO Investec Bank Ltd CEO 2
Slide 3: Overview
Agenda Overview Fani Titi Group Chief Executive 3
Slide 4: Years of heritage. Two anchor geographies. One Investec
years of heritage. Two anchor geographies. One Investec 1 country 11 countries 1974 18 People 7500+ People 2024 £bn IW&I UK 1980 1986 2002 2010 2018 2022 Rathbones 125 Capital Demerger combination Markets of IAM Management Day succession Share Buy Back programme 100 commenced Net core loans Acquired
Slide 5: Key takeaways
Key takeaways Earnings momentum Deep client franchises, Strong capital Returns to shareholders continues diversified earnings generation well within target +100% £'bn 563.9 78.1 39.6 414.3 14.6% 32.2 30.9 Current target range: 12 - 16% 24.9 37.8 20.9 8.3% 12.4 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Mar-
Slide 6: Results highlights
Results highlights Adjusted earnings per share Adjusted operating profit Cost to income 78.1p £884.5mn 53.8% (Mar-23: 68.9p) (Mar-23: £818.7mn) (Mar-23: 54.7%) 13.4% ahead of prior year 8.0% ahead of prior year Up 30.8% in Rands Up 23.7% in Rands Credit loss ratio Return on equity Net asset value pe
Slide 7: Geographic highlights
Geographic highlights UK & Other SA ▼ 3.2% Loan book £16.6bn ▲ 6.4% £14.3bn (▲ 5.7% in Rands) ▼ 8.0% Deposits £20.8bn ▲ 8.7% £18.8bn (▲ 0.4% in Rands) ▲ 5.5% FUM £107.6bn Rathbones Group plc FUMA* £20.9bn (▲ 13.0% in Rands^) Adjusted ▼ 2.7% operating profit £455.5mn ▲ 20.6% £429.0mn (▲ 12.5% in Rand
Slide 8: Investec's commitment to sustainability: our pathway to net zero
Investec’s commitment to sustainability: our pathway to net zero Three channels of impact 1 Meet our fossil fuel exposure commitments 2 Driving sustainable and transition finance activities 3 Influencing and advocating for our clients and suppliers to effectively pursue decarbonisation Milestones: T
Slide 9: Financial review
Agenda Financial review Nishlan Samujh Group Finance Director 9
Slide 10: Subdued growth environment...
Subdued growth environment... 20 9 South • SA economy expected to expand 1.1% y/y in Africa 6 2010 – 2019 or pre- calendar year 2024 vs 0.6% in 2023 pandemic Mean: 1.7% GDP 3 • Electricity outages in Q1 2024 were growth substantially below Q1 2023 0 • GDP growth for 2025 calendar year expected (3) t
Slide 11: ...persistent market volatility...
…persistent market volatility... Markets FY2023 FY2024 85 000 5 000 80 000 4 500 75 000 4 000 70 000 3 500 65 000 60 000 3 000 Apr-22 May-22 Jun-22 Aug-22 Sept-22 Oct-22 Dec-22 Jan-23 Mar-23 Apr-23 May-23 Jul-23 Aug-23 Oct-23 Nov-23 Dec-23 Feb-24 Mar-24 JSE – LHS FTSE – RHS Closing rates Average rat
Slide 12: ...and a weakening GBP / ZAR exchange rate
…and a weakening GBP / ZAR exchange rate Exchange rate GBP/ZAR FY2023 FY2024 26.00 24.00 22.00 20.00 18.00 16.00 Apr-22 May-22 Jun-22 Aug-22 Sept-22 Oct-22 Dec-22 Jan-23 Mar-23 Apr-23 May-23 Jul-23 Aug-23 Oct-23 Nov-23 Dec-23 Feb-24 Mar-24 Closing rates Average rates Currency £1.00 Mar-24 Mar-23 % c
Slide 13: Global interest rates
Global interest rates USA 10-year treasury bonds (%) 5 4 • Global interest rates peaked in Q3 2023 3 • Inflation is trending towards target in many December jurisdictions 2019 • Market expectations biased towards higher for 2 longer rates 1 0 Apr- Jul- Oct- Feb- May- Aug- Dec- Mar- Jun- Oct- Jan- Ap
Slide 14: UK and SA interest rate history
UK and SA interest rate history UK Bank rate (%) SA prime rate (%) 10 25 8 20 6 15 Mar 24: Mar 24: 5.25 11.75 10 4 5 2 0 0 Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- 92 95 98 00 02 04 06 09 11
Slide 15: Strategic execution
Strategic execution Significant strategic actions taken over the past two years Completion of combination between Investec Wealth & Disposal of property management companies to Burstone Investment UK ('IW&I UK') and Rathbones Group plc* Group Limited (formerly Investec Property Fund (IPF)) and Creat
Slide 16: Earnings drivers
Earnings drivers 39.6 39.6 £'bn Diversified core loan book 30.4 30.9 UK & Other 19.8 20.9 Private Banking SA CIB* & Other 14% 17% Mar-23 Mar-24 FUM - SA Loans Deposits £30.9bn FUM for IW&I SA Net core loans 5.5% 1.7% SA Private 14.2% in neutral currency 6.1% in neutral currency Banking UK & Other 33
Slide 17: Unpacking Group performance
Unpacking Group performance NII benefitted from growth in average lending books and higher average rates £’mn Mar-24 Mar-23 % change Net interest income (NII) 1 339 1 267 5.6% NIR growth reflects diversified revenue streams, underpinned by Non-interest revenue (NIR) 747 719 3.8% continued client acq
Slide 18: Technology investment to fuel our growth
Technology investment to fuel our growth STRATEGIC PRIORITIES WHAT WE ARE DELIVERING • Continue to personalise client digital experiences across our web and Deliver out of the mobile channels Run Business Investment ordinary experiences for • We’re modernising our core platforms for scale and growth
Slide 19: Solid underlying performance
Solid underlying performance Adjusted operating profit* largely driven by strong performance from our client franchises £’mn SA^ ▼ 3% (▲ 13% in ZAR) UK & Other^ ▲ 21% ▲ 8% 1 000 103 900 (8) (6) (11) 4 3 800 (19) 700 884.5 600 818.7 500 ▼ 5% ▲ 13% in GBP ▲ >100% in GBP ▲ 34% ▼ 10% ▼ 35% ▲ 10% in ZAR
Slide 20: Group Investments
Group Investments Group Investments pillar consists of equity investments held outside the Group’s banking activities Carrying Income % £’mn value yield Holding Ninety One 159 7.1% 10.0% Burstone Group (formerly IPF) 61 7.5% 24.3% The Bud Group Holdings 180 3.2% 36.4% (formerly IEP) Equity investmen
Slide 21: ROE and ROTE
ROE and ROTE ROE GROUP ROTE 14.6% 16.5% 17.3% 17.3% 15.7% 12.8% SA UK & Other SA UK & Other Average allocated equity Average allocated tangible equity 40.2% 59.8% 45.2% 54.8% £1 828mn £2 714mn* £1 820mn £2 205mn 21 * Average equity of £2 714mn includes the average gain on combination of Rathbones Gr
Slide 22: Net Asset Value
Net Asset Value Underpinned by strong earnings growth and gains from strategic actions Net asset value per share Tangible net asset value per share Pence Pence 650 650 32 600 78 -7 600 3 -33 550 -16 550 -10 500 500 -77 450 450 400 400 564 564 350 507 350 477 300 300 250 250 200 200 Mar-23 Adjusted N
Slide 23: Capital and liquidity
Capital and liquidity Group cash and near cash £’bn 16.4bn Group liquidity summary 18 • Strong liquidity positions to support growth 16 Min 11.5bn • Loans to customers as % of customer deposits of 77.4% (Mar 23: 76.1%) 14 Average Max Capital summary 12 18.0bn • CET1 ratio well in excess of >10% targ
Slide 24: Geographic review – UK & Other
Agenda Geographic review – UK & Other Ruth Leas Investec Bank plc CEO 24
Slide 25: Strategic positioning
Strategic positioning Building scale & relevance by bringing the best of Investec to every client relationship and interaction DELIVERING A UNIQUE BREADTH OF CAPABILITIES IN THE MID-MARKET “Hi-tech & Hi-touch” Private Private Private Client Companies Equity Enhanced by the strategic partnership with
Slide 26: Results highlights
Results highlights Revenue Operating costs Cost to income £1 188.1mn £645.3mn 54.4% (Mar-23: £1 026.3mn) (Mar-23: £581.8mn) (Mar-23: 56.7%) 15.8% ahead of prior year 10.9% ahead of prior year Credit loss ratio Adjusted operating profit Return on tangible equity 58bps £455.5mn 15.7% (Mar-23: 37bps) (
Slide 27: UK & Other adjusted operating profit up 20.6%
up 20.6% UK & Other adjusted operating profit £455.5mn 2023: £377.8mn Adjusted operating profit £'mn Mar-24 Mar-23 % change Wealth & Investment 66.9 74.6 (10.3)% Specialist Banking 406.2 303.4 33.9 % Group Investments 11.7 18.1 (35.3)% Group costs (29.2) (18.2) 60.6 % Total 455.5 377.8 20.6 % Note:
Slide 28: Specialist Banking
Specialist Banking Loan growth largely underpinned by client activity across diversified lending portfolios Net core loans Net core loans grew by 6.4%to £'bn 20 £16.6bn 16.6 15.6 • Corporate lending grew 8.6% diversified across 15 multiple asset classes • HNW mortgage lending reported growth of 4.3%
Slide 29: Specialist Banking
Specialist Banking Profitability supported by diversified revenue streams Operating income 18.8% £'mn increase 1 200 1 109.5 NII increased 13.2% driven by: • Larger book built over the last four years 1 000 933.7 • Diversified lending books • Higher interest rates 800 Deal fees and other income Non-
Slide 30: Specialist Banking
Specialist Banking Further improved cost to income ratio £'mn 1 250 Cost to income ratio improved 1 109.5 to 1 000 933.7 55.6% (Mar-23: 60.4%) 750 616.1 563.6 30.0 Operating costs increased 9.3%: Operating Income* 500 60.4% • Increase in variable remuneration in line with 586.1 Operating costs perfo
Slide 31: Unpacking the credit loss ratio
Unpacking the credit loss ratio Credit loss ratio (core loans) bps 80 69 56 58 CLR 60 increased to 40 37 58bps (Mar-23: 37bps) in line with guidance provided in 20 17 November 2023 0 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 ECL impairment charges ECL charges £'mn increased to 100 80 76 86 £86.1mn 71 (Mar-
Slide 32: Balance sheet ECL provisions
Balance sheet ECL provisions £'mn 180 150 111 120 48.0% 75 Stage 3 90 Stage 2 3.1% Stage 1 60 33 32 30 39 10.3% 43 0 Mar-23 Mar-24 Mar-23 Mar-24 Stage 1 0.29% 0.30% ECL coverage ratio % Stage 2 2.4% 2.4% Stage 3 21.9% 20.9% Total coverage 1.0% 1.2% 32
Slide 33: Wealth & Investment UK adjusted operating profit
Adjusted operating profit* Wealth & Investment UK £66.9 million Combination with Rathbones successfully completed end of 1H2024 • 1H2024 / pre combination : IW&I UK reported adjusted operating profit (post-tax) of £35.9mn (10.8% above 1H2023) • 2H2024 / post combination: £31.0 million post-taxation
Slide 34: Growth opportunities
Growth opportunities Clear set of scalable opportunities to deliver growth Areas of focus Scale & relevance Increase market share of our established, diversified client Unique breadth of mid-market capabilities franchises Key market for our clients Grow and remain on the front-foot in Continental Eu
Slide 35: Geographic review – Southern Africa
Agenda Geographic review – Southern Africa Cumesh Moodliar Investec Bank Limited CEO 35
Slide 36: Strategic positioning
Strategic positioning A distinctive banking and wealth management business creating sustainable, long-term value for our stakeholders Key client groups and our offering Corporate / Institutional / Government / Intermediary Private Clients (HNW / High Income) / Charities / Trusts Specialist Banking W
Slide 37: Results highlights
Results highlights Revenue Operating costs Cost to income R21.1bn R11.2bn 53.0% (Mar-23: R19.6bn) (Mar-23: R10.3bn) (Mar-23: 52.7%) 7.7% ahead of prior year 8.3% ahead of prior period Credit loss ratio Adjusted operating profit Return on equity* -4bps R10.1bn 17.3% (Mar-23: 9bps) (Mar-23: R9.0bn) (M
Slide 38: SA adjusted operating profit up 12.5%
Adjusted operating profit up 12.5% SA adjusted operating profit R10 097mn FY2023: R8 975mn R'mn Mar-2024 Mar-2023 % change Wealth & Investment 871 672 29.6% Specialist Banking 9 516 8 667 9.8% Group Investments 63 (50) >100.0% Group costs (353) (314) (12.4%) Total 10 097 8 975 12.5% 38
Slide 39: Specialist Banking
Specialist Banking Loan growth supported by increased corporate and private client lending Net core loans Net core loans R'bn up 5.7% to R343.7bn 400 344 350 325 • Growth of 6.7% in corporate lending portfolios across several lending specialisations 300 • Private Client loan book up 5.6% loan book w
Slide 40: Specialist Banking
Specialist Banking Continued operating income momentum from client franchises R'bn 20 Revenue 18.1 18 17.2 5.7% 16 increase 14 • NII increased 9.2% driven by: 12 Deal and other fees • Higher average interest earning assets Investment and associate • Elevated interest rate environment 10 income Tradi
Slide 41: Specialist Banking
Specialist Banking Cost growth reflects inflationary pressure and investment for growth R'bn 20 Cost to income 18.1 ratio of 18 17.2 16 48.4% (Mar-23: 47.8%) 14 Operating costs increased 7.2% 12 48.4% 47.8% • Higher personnel expenses due to inflationary salary 10 Operating Income* increases, higher
Slide 42: Unpacking the credit loss ratio
Unpacking the credit loss ratio Credit loss ratio (core loans) bps 60 50 40 36 ECL impairment charges on 30 loans subject to ECL decreased 18 resulting in a net recovery of 20 9 4bps, driven by: 10 0 0 -10 -4 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 • Recoveries on previously impaired loans • Model driven
Slide 43: Balance sheet ECL provisions
Balance sheet ECL provisions R'mn 3 600 3 000 2 400 1 893 0.7% Stage 3 1 800 1 879 Stage 2 Stage 1 1 200 623 59.9% 250 600 761 15.2% 645 0 Mar-23 Mar-24 Mar-23 Mar-24 Stage 1 0.25% 0.20% Stage 2 3.8% 3.0% ECL coverage ratio % Stage 3 21.3% 15.4% Total coverage 1.01% 0.81% 43
Slide 44: Wealth & Investment
Wealth & Investment Strong financial performance in a challenging operating environment Funds under management Adjusted operating profit Operating margin R’bn R’mn 501.3 29.9% 500 900 871 30% 435.1 27.3% 201 400 750 672 200 600 20% 300 300 450 200 235 300 10% 100 150 0 0% Mar-20 Mar-21 Mar-22 Mar-23
Slide 45: Growth opportunities
Growth opportunities Clear set of scalable opportunities to deliver growth Areas of focus The opportunity Our distinction Accelerate Private Banking c.500k individuals with income > #1 Private Bank and Wealth Manger in SA client acquisition R800k in SA1 as voted by Euromoney & FT for 11 years Contin
Slide 46: Closing and Q&A
Agenda Closing and Q&A Fani Titi Group Chief Executive 46
Slide 47: Taking stock
Taking stock Consistent execution of our strategy underpinned the achievement of all our medium-term targets £’mn FY20 FY21 FY22 FY23 FY24 Adjusted EPS - pence per share 33.9 28.9 55.1 68.9 78.1 Sustained earnings growth Total operating income 1807 1 641 1 990 1 986 2 085 Total costs 1 186 1 165 1 2
Slide 48: Revised medium-term targets – to 31 March 2027
Revised medium-term targets – to 31 March 2027 Committed to deliver returns above our cost of capital Strategic execution over the last five years has resulted in structural improvement in Group performance Leading us to revise our post Rathbones combination targets by 200bps IW&I UK combination wit
Slide 49: Financial outlook
Financial outlook FY25 guidance based on current economic forecast and expected business activity levels Revenue momentum is expected to continue, underpinned by book growth, stronger client activity levels and success in our client acquisition strategies, partly offset by expected cuts in rates Gro
Slide 50: In closing
In closing We are a focused business with deep client franchises Our client franchises have scale and relevance in our chosen markets Strong capital generation to support growth and returns to shareholders Clear set of scalable opportunities to deliver sustainable growth We are dedicated to our purp
Slide 51: Thank you
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Slide 52: Appendix
Appendix 52
Slide 53: Proviso
Proviso • Please note that matters discussed in today's presentation may contain forward looking statements which are subject to various risks and uncertainties and other factors including, but not limited to: – changes in the political and/or economic environment that would materially affect the In
Slide 54: Revised medium-term targets / FY2027
Revised medium-term targets / FY2027 Current Group targets Revised Group targets Current Group targets (RAT adjusted) UK & Other SA Group UK & Other SA Group UK & Other SA Group ROE 11-15% 15-18% 12-16% 9-13% 11-15% 10-14% 16-20% 13-17% ROTE 13-17% 16-20% 14-18% Cost to income < 67% 50-55% < 63% < 6
Slide 55: Macro-economic scenarios – 31 March 2024
Macro-economic scenarios – 31 March 2024 At 31 March 2024 Base case average 2024 – 2029 Downside 2 Macro-economic scenarios Downside 1 cautious easing, % 2024/2025 2025/2026 2026/2027 2027/2028 2028/2029 Upside Base case inflation severe recession UK GDP growth 1.0 2.0 1.6 1.6 1.6 1.9 1.6 (0.1) 0.2
Slide 56: Investec
Investec Our purpose is to create Investec is a distinctive bank and We are a people backed business, enduring worth wealth manager, operating in two our distinction is embodied in our core geographies entrepreneurial culture Partner for the long term, guided by Rich heritage in Private Banking, Sup
Slide 57: Our strategic objectives
Our strategic objectives Growth Objectives Continued execution with Accelerate and scale Further develop connected discipline to drive growth initiatives client eco-systems across optimisation of returns business units & geographies Underpinned by Deepening our entrepreneurial culture (Out of the or
Slide 58: A distinctive banking and wealth management business
A distinctive banking and wealth management business creating sustainable, long-term value for our stakeholders Funds under management Principal geographies Total Employees Core loans Customer deposits IW&I SA Rathbones Group plc 2 c.7 500+ £30.9bn £39.6bn £20.9bn FUMA*: £107.6bn Key client groups a
Slide 59: Divisional highlights
Divisional highlights UK & Other Southern Africa Specialist Bank Specialist Bank Loan book Deposits Loan book Deposits grew by 6.4% to grew by 8.7% to up 5.7% to up 0.4% to £16.6bn £20.8bn R343.7bn R450.4bn Continued client acquisition and Adjusted operating profit Elevated corporate credit Adjusted
Slide 60: Diversified, quality revenue mix across geographies and businesses
Diversified, quality revenue mix across geographies and businesses By Geography By Division 1% 9% Mar-24 Mar-24 Operating income^ 43% up 5.0% to £2 085.2mn 57% 90% 2% 11% Adjusted operating profit* 48% up 8.0% to £884.5mn 52% 87% Southern Africa UK and other Wealth & Investment Specialist Banking Gr
Slide 61: Strong UK & Other loan growth
Mar-23 Mar-24 £'mn HNW & Other private client lending Property Corporate & Other Lending 5 500 5 000 4 889 4 500 4 000 Strong UK & Other 3 500 loan growth 3 000 2 655 2 500 2 473 Net core loans up 6.4% 2 268 2 000 1 500 1 394 to £16.6bn 1 000 824 • Good activity in corporate client lending 651 672 p
Slide 62: Investec Limited net core loan growth
Mar-23 Mar-24 R'bn HNW & Other private client lending Property Corporate & Other Lending 120 Investec Limited net core loan 100 96 growth 80 78 77 Net core loans up 60 58 5.7% to R343.7bn 40 • Strong growth in corporate lending portfolios driven by increased corporate credit demand across several le
Slide 63: Sustainability highlights
Sustainability highlights Operate responsibly, finance and invest in a sustainable future, and maintain our competitive sustainability position OUR IMPACT SDGs SUSTAINABLE FINANCE Net-zero commitments • Raised $56.5mn through our Global Sustainable Equity Fund at 31 March 2024 (since launch in Mar-2
Slide 64: Net-zero climate impact roadmap
Net-zero climate impact roadmap We acknowledge that climate change is material and poses significant risks, and opportunities, including its ability to generate value for stakeholders over time. We recognise and support the aims of the Paris Agreement goals. We are committed to achieve net-zero emis