Investec plc · LSE:INVP
Investec — H1 FY2020 Earnings Presentation
42 slides from Investec's earnings presentation, Nov 21, 2019
Slide 1: Interim Results Presentation
INTERIM RESULTS PRESENTATION 21 November 2019
Slide 2: 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 3: Agenda
Agenda 1. Overview––Fani Overview FaniTiti, Titi,Joint JointGroup GroupChief Executive Chief Officer Executive Officer 2. Financial review – Nishlan Samujh, Group Finance Director 3. Business review Bank and Wealth – Fani Titi Asset Management – Hendrik du Toit, Joint Group Chief Executive Offic
Slide 4: Overview
OVERVIEW
Slide 5: Client franchise businesses have made solid progress with strong net inflows
Our client franchise businesses have made solid progress as evidenced by strong net inflows and growth in assets under management, loan book and customer deposits. The challenging environment and continued investment in our platforms as well as a series of strategic actions have impacted our operati
Slide 6: Six months under review
Six months under review Solid operational performance against challenging backdrop Results in line with pre-close trading update Adjusted operating profit* of £373.6mn (1.7% down; in line in neutral currency) 4.0% decrease in adjusted EPS to 28.9p Basic EPS down 10.5% impacted by strategic a
Slide 7: Six months under review (cont.)
Six months under review (cont.) Demerger on track – Shareholder Circular expected around the end of this month Decisive action taken in Bank and Wealth business Closure of Click & Invest Closure and rundown of Hong Kong direct investments business Sale of Irish Wealth & Investment business
Slide 8: Backdrop of persistent economic weakness
Backdrop of persistent economic weakness % (yoy) 3.0 UK economic activity 2.5 has faced both domestic Mean: 1.9% (Brexit) and global UK GDP 2.0 headwinds (trade, growth 1.5 industrial slowdown). 1.0 0.5 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD % (yoy) 4.0 South Africa has also 3.5 f
Slide 9: Agenda
Agenda 1. Overview – Fani Titi 2. Financial review––Nishlan Financial review Nishlan SamujhGroup Finance Director Samujh, 3. Business review Bank and Wealth – Fani Titi Asset Management – Hendrik du Toit 4. Sustainability – Hendrik du Toit 5. Demerger – Hendrik du Toit 6. Closing and Q&A 9
Slide 10: Financial Review
~My, Out of the Ordinary Invest
Slide 11: Snapshot of group financial performance
Snapshot of group financial performance Adjusted operating profit* and adjusted EPS** down 1.7% and 4.1% respectively Key metric Cost to Dividend ROE CET1 ratio income ratio cover Targets Group 12% to 16% < 65% > 10% 1.7x to 3.5x Sep-19 Limited: 11.6% 13.1% 67.3% plc: 10.7% 2.6x *Operating profit
Slide 12: Divisional adjusted operating profit performance
Divisional adjusted operating profit* performance Specialist Bank Wealth & Investment Asset Management (AM) Sound performance from lending Positive net inflows and Substantial net inflows franchises AUM growth and supportive markets Lower investment banking fees Technology spend and Grow
Slide 13: Key earnings drivers
Key earnings drivers Growing client base across the businesses £’bn 177.9 180 167.2 Third party AUM up 155 6.4% to £177.9bn Third party 130 105 Net inflows of £3.5bn assets 80 under 55 30 management 5 -20 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Sep-19 Asset Management Wealth & Investment Other* £’bn
Slide 14: Operating income
Operating income Solid client franchises £'mn Total operating income 1,330 11.9 18.3 down 1.8% 1,310 (2.2) 1,290.8 (10.8) Trading income down Operating 1,290 1,267.9 – Prior period gains on income 1,270 UK sub-debt (40.1) analysis 1,250 restructure and ▲4% ▲2% ▼2% ▼13% ▼38% 1,230 translation gai
Slide 15: Operating costs
Operating costs Stable cost to income ratio £'mn Costs down 1.0% 850 841.8 – Normalised premises 840 833.5 3.3 0.1 3.7 charges and cost Cost 830 (2.1) (0.9) containment (12.4) analysis 820 810 ▼28% ▲7% ▼0.3% ▼1% ▲0.2% ▲27% 800 Sep-18^ Premises and Equipment Personnel Business Marketing Depreciatio
Slide 16: ECL charges
ECL^ charges ECL impairment charges in line with prior period £’mn 70 ECL impairment charges of £31.0mn (Sep-18: £31.0mn) 60 Annualised credit loss 50 ratio below long-term average at 0.23% 40 (Sep-18: 0.34%) Total ECL charge by 31.0 31.0 30 Resilient credit geography performance across 20 div
Slide 17: Group equity returns
Group equity returns Return on Equity Dividend and dividend cover £’mn pence times 4,500 18% 35 4.0 4,300 4,225 17% 30.1 3.5 4,122 30 28.9 Target range: 1.7x-3.5x 4,100 16% Target range: 12-16% 3.0 3,900 15% 2.7 25 2.6 14.2% 2.5 3,700 14% 3,500 13.1% 13% 20 2.0 3,300 12% 1.5 15 3,100 11% 11.0 11.0 1
Slide 18: Bank and Wealth – return on equity
Bank and Wealth – return on equity Committed to FY2022 target of 12% – 16% ROE UK Specialist Group Bank and SA Specialist Bank1 IWI SA and UK4 Bank3 Costs Wealth4,5 27.2% 10.7% 13.9% 13.1% 12.6% 10.1% 8.1% 7.5% 6.5% ROE -29.6% n.m. SA Bank ex Investment Total UK Bank ex Banking Total Wealth & Invest
Slide 19: Balance sheet
Balance sheet Sound capital position 7.3% Group capital summary Leverage ratio 7.4% as reported 7.6% CET 1 ratio above 10% target, total capital ratios within target range of 14%-17% 11.6% CET 1 ratio^ 11.6% Solid leverage ratios, comfortably ahead of 6% target Investec 10.5% FIRB* approach ad
Slide 20: Agenda
Agenda 1. Overview – Fani Titi 2. Financial review – Nishlan Samujh 3. Business review Business review Bank and Wealth – Fani Titi Asset Management – Hendrik du Toit 4. Sustainability – Hendrik du Toit 5. Demerger – Hendrik du Toit 6. Closing and Q&A 20
Slide 21: Business Review
BUSINESS REVIEW
Slide 22: Bank and Wealth – overview
Bank and Wealth – overview A diversified mix of businesses Geography Division Sep-19 Sep-19 21% Operating income down 47% 4.0% to £959.3mn Operating 53% income 79% UK and Other Southern Africa Wealth & Investment Specialist Bank 15% 34% Adjusted Adjusted operating operating profit* down 4.2% to 66%
Slide 23: Specialist Banking SA – performance overview
Specialist Banking SA – performance overview Resilient performance with costs well contained R’bn R’bn Total deposits Net core loans and advances Core loans up 0.9% to R273.7bn 341.6 349.2 Customer 300 271.2 273.7 350 Private client book growth accounts 250 300 offset by net repayments in (deposit
Slide 24: Specialist Banking UK and Other – performance overview
Specialist Banking UK and Other – performance overview Lending franchises performed well given macroeconomic environment £’bn £’bn Total deposits Net core loans and advances Core loans up 2.7% to £10.8bn Customer 12 10.5 10.8 14 13.1 13.4 Good HNW mortgage book growth accounts 10 12 Reasonable o
Slide 25: Wealth & Investment – performance overview
Wealth & Investment – performance overview Net inflows and higher AUM supported revenue growth £’bn 56.4 60 55.1 AUM increased by 2.3% to £56.4bn Assets 40 Net inflows of £244mn under 20 – £663mn discretionary inflows management 0 offset by £419mn Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Sep-19 SA - Dis
Slide 26: Bank and Wealth – key metrics
Bank and Wealth – key metrics ROE and costs – an area of focus for management 20% 18% Drivers for ROE 16% enhancement 14% Target ROE 12% 11.7% 12.0% Target*: Revenue growth initiatives 10% ROE 10.7% 8% Cost discipline 6% 4% 12% to 16% Optimising capital allocation 2% 0% Greater connectivity
Slide 27: Progress on our strategic objectives
Progress on our strategic objectives Capital Discipline Growth Initiatives Cost Management Connectivity Digitalisation • Reduce SA equity • Good traction in UK • Reviewed subscale • One Place TM (SA Bank SA: investment portfolio: Private Bank: operations: and Wealth) – Strategies underway – Mortgage
Slide 28: Bank and Wealth – conclusion
Bank and Wealth – conclusion Committed to achieving our FY2022 performance targets Positioned for long-term sustainable growth − Deep and growing client franchises − Differentiated propositions to private and corporate clients − Well capitalised, lowly leveraged with strong liquidity − Generates
Slide 29: Asset Management – performance overview
Asset Management – performance overview Momentum remains positive £’bn AUM increased by 8.4% to 120.8 111.4 £120.8bn 120 £3.2bn net inflows spread across Assets 80 client regions and investment under strategies management 40 Positive market and currency movements 0 Mar-15 Mar-16 Mar-17 Mar-18 Ma
Slide 30: Asset Management – net flows
Asset Management – net flows Solid net flow performance Net flows by asset class (£’mn) Net flows by geography (£’mn) 2,243 2,034 1,856 1,660 1,624 1,135 976 784 636 708 586 313 118 114 73 36 16 Equities Fixed Income Multi-Asset Alternatives Third party funds on advisory (236) platform Americas Asia
Slide 31: Asset Management – new brand
Asset Management – new brand 31
Slide 32: Asset Management – strategic priorities
Asset Management – strategic priorities Strategic priorities Continue to invest across our investment platform Grow Advisor and Institutional business Embrace and enhance the Sustainability trend Achieve a successful demerger and listing Everything we do is for the long term and for our clie
Slide 33: Agenda
Agenda 1. Overview – Fani Titi 2. Financial review – Nishlan Samujh 3. Business review Bank and Wealth – Fani Titi Asset Management – Hendrik du Toit 4. Sustainability––Hendrik Sustainability Hendrikdudu Toit, ToitJoint Group Chief Executive Officer 5. Demerger – Hendrik du Toit 6. Closing and Q
Slide 34: Sustainability
Out of the Ordinary
Slide 35: Sustainability – the challenge of our generation
Sustainability – the challenge of our generation We measure up, but want to do more External Group ESG rankings / ratings received since 1 April 2019 8th in the global diversified financial services sector Top 30 in the FTSE JSE responsible investment index Included in the FTSE UK 100 ESG Sele
Slide 36: Sustainability – the challenge of our generation: our actions
Sustainability – the challenge of our generation Our actions Specific actions in Asset UN CEO Alliance on First bank in South Africa and 1 of Management Global Investment for the 8 banks in the UK to sign up to the Task Force for Climate Related • ESG integration Sustainable Development (GISD) Discl
Slide 37: Agenda
Agenda 1. Overview – Fani Titi 2. Financial review – Nishlan Samujh 3. Business review Bank and Wealth – Fani Titi Asset Management – Hendrik du Toit 4. Sustainability – Hendrik du Toit 5. Demerger –– Hendrik Demerger Hendrikdu duToit, ToitJoint Group Chief Executive Officer 6. Closing and Q&A 3
Slide 38: Demerger
DEMERGER
Slide 39: Demerger update
Demerger update Simplifies and focuses the Group Builds on existing linkages between Specialist Banking and Wealth & Investment businesses Demerger benefits Focus enables improved cost discipline Enhances Asset Management alignment with stakeholders Shareholder Circular Published around th
Slide 40: Agenda
Agenda 1. Overview – Fani Titi 2. Financial review – Nishlan Samujh 3. Business review Bank and Wealth – Fani Titi Asset Management – Hendrik du Toit 4. Sustainability – Hendrik du Toit 5. Demerger – Hendrik du Toit 6. Closing and Closing andQ&A Q&A 40
Slide 41: Closing and Q&A
CLOSING AND Q&A
Slide 42: Two independent businesses poised for long-term growth and value creation
Committed to stakeholder value Two independent businesses poised for long-term growth and value creation 42